EU issues weak admonition of golden passports but pledges further scrutiny

A report by the European Commission on the sale of citizenship by countries like Malta has declared that Brussels will “continue monitoring” the schemes through a group of experts from EU member states. 

The report focused on a comparison of golden passport schemes in Malta, Cyprus and Bulgaria, but offered a watered-down conclusion from fears last year that Commissioner Vera Jourova would come down hard on the sale of EU citizenship. 

Even though Brussels cannot stop member states from extending citizenship to the global rich who will pay for it, the report still echoed Jourova’s original complaint that such schemes “pose risks for the Member States and the Union as a whole, including in terms of security, money laundering, corruption, circumvention of EU rules and tax evasion” and complained of “shortcomings in the transparency and governance of such schemes.” 

And yet by its own admission, the report did not look at the tax aspects of the schemes, indeed declaring that “per se, the use of these schemes does not equal tax evasion”, saying only that there could be “room for abuse” for the purposes of tax evasion. 

Brussels said it will now aim for a common set of security checks for investor citizenship schemes for 2019, including specific risk management processes that take into account security, money laundering and corruption risks. 

But the report fell short of a condemnation of any scheme, Malta’s included. Instead it complained about incomplete information on statistics, or a lack of mechanisms to ensure cooperation between member states on security checks for the elite buyers of the golden passports. “Given the inextricable link between such schemes and the acquisition of EU citizenship and associated rights, the lack of transparency and cooperation is troubling,” the report said. 

Brussels said it will set up a group of experts to address specific risks posed by citizenship schemes and issues of transparency, exchange of information and statistics, as well as consultations on applicants from high-risk countries and those rejected for security risks. 

The report focused on the sole three EU countries selling citizenship and not simply residence visas, namely Bulgaria, Cyprus and Malta which introduced their programmes in 2005, 2007 and 2013 respectively. 

In Bulgaria, an overall investment of €1 million is requested under its fast-track investor citizenship scheme. In Cyprus, a minimum investment of €2 million is necessary, together with ownership of property in Cyprus. In Malta, a contribution of €650,000 must be paid into a national investment fund, together with an investment of €150,000 and a requirement to own or rent property in Malta (worth €350,000 or rented at €15,000 annually for five years). In Cyprus and Malta, additional investments for family members are required. 

The report was clear in declaring that applicants in each scheme do not need to have resided in practice in the country: in Malta, the applicant must be physically present twice, once to provide biometric data for the e-Residence Card and once to take the oath of allegiance; they are then encouraged to establish further voluntary links with Malta, by for example donating to charitable organisations, taking out membership of a local sports club or paying income to the Maltese Inland Revenue. 

The study also found scarce rules on security protocols for investor citizenship but highlighted Malta’s own due dilegence system. 

“The Maltese authorities consult Interpol and Europol databases as part of a four-tier due diligence process covering: know-your-client due diligence checks by the agent and Identity Malta’s IIP unit... clearance by the police authorities; a check for completeness and correctness of the application and verification of the documents submitted; and an outsourced due diligence check whereby Identity Malta commissions two reports from international companies on every IIP application. 

“The study was not able to obtain information about any use made by the Maltese authorities of EU databases, including the Schengen Information System (SIS). On the other hand, Malta excludes nationals of certain countries and persons subject to travel bans imposed by the United States from applying for citizenship under its scheme. No information was available on the Maltese policy concerning persons subject to EU restrictive measures.” 

Identity Malta confirmed for the purposes of the study that the due diligence definitions and procedures of the Anti Money Laundering Directive are followed in the four-tier process of due diligence it uses. 

Malta is also the only scheme with a regulator, which publishes annual reports, which are subject to parliamentary scrutiny. But the report claimed that under none of the three investor citizenship schemes is information systematically available about the number of applications received under such schemes, refusals or country of origin of foreigners who successfully obtain citizenship via this route – information that is actually available in the regulator’s reports. 

Malta also had the highest cap on applications at 1,800, while Cyprus took in 700 every year and Bulgaria imposed no cap.