Brussels is planning to crack down on EU countries including Cyprus that award citizenships to rich third-country nationals amid growing concerns over dirty money from Russia, the Financial Times reported on Sunday.
The FT quoted EU Commissioner for Justice, Vera Jurova, as saying that such schemes in eight member states will come under tougher scrutiny from Brussels as part of a broader drive against money laundering and corruption.
“In cases of any doubt, a person should not have the privilege of citizenship,” Jourova told the Financial Times. “We have no power to ban such a practice but we have an obligation to put high requirements on the member states to be careful.”
The EU states with “citizenship by investment” schemes include Malta, Cyprus, but also Austria, Greece, Hungary, Latvia, Lithuania and Portugal.
In March, the European Commission announced its intention to scrutinise the golden visa programmes of member states after anti-corruption watchdog Transparency International said that such schemes undermined the EU’s fight against corruption and money laundering.
Leaked documents showed that the Cypriot scheme attracted mainly candidates from Russia, Ukraine, the Middle East, and South and East Asian countries, many of which are considered high-risk jurisdictions in terms of money laundering.
In 2017, 503 foreign investors acquired a Cypriot passport and a further 510 family members.
Five years ago, the island took drastic measures to improve its legislation and regulations against money laundering.
Three months ago, it also launched a PR campaign to improve its image abroad, tarnished by reports in the past linking it to the legalisation of illicit funds.
In July, the committee supervising Cyprus’ ‘golden visa’ programme unveiled the registry of service providers, which includes 255 companies and individuals.
The registry includes 133 lawyers, law firms, advocates and legal services providers, 20 administrative service providers, 19 accounting, auditing and tax service providers, 19 real estate and land development companies, and other corporate, citizen and migration service and consultancy providers.
The Committee of Supervision of the Cyprus Investment Programme, as it is officially known, was set up in June and was tasked with overseeing the implementation of the programme.
The registered service providers will have to compete for the up to 700 visas per year the government will grant to non-Cypriots investing at least €2 million on the island.
Registered service providers are required to comply with a code of conduct which bans them from actively advertising the Cypriot passport as a product and need to apply specific anti-money laundering practices, including know-your-customer’s-customer.
The registry includes all four major auditing firms and law firms linked to active politicians, such as Nicos Chr. Anastasiades & Partners LCC, linked to President Nicos Anastasiades, and Tassos Papadopoulos & Associates LLC, linked to Diko chairman Nicolas Papadopoulos
Later on Monday, the Investment Migration Council (IMC) the worldwide association for investor immigration and citizenship-by-investment, that brings together the leading stakeholders in the field and gives the industry a voice, responded to Jurova’s comments.
Bruno L’ecuyer, IMC chief executive said its members were compliant to a comprehensive code of ethics and professional conduct, that addresses any issue pertaining to security.
Significant time and capital is spent by professional firms and governments to ensure the tightest levels of security and background checks were carried out by European and global security agencies, he said.
Citizenship-by-Investment applications were also vetted against current EU anti-money-laundering and financing of terrorism legislation and must adhere to legal and regulatory obligations that individual EU states have adopted in line with EU law.
“It ensures the highest levels of corporate governance and due diligence is in place to prevent any security concerns,” L’ecuyer added.
He said the IMC shared and understood the Commissioner’s concerns in respect of the security of EU citizens but believes that the governance, due diligence and transparency of applicants under the provisions in Austria, Malta and Cyprus – the three most active countries in the EU in this field – were not a security threat to the EU, given that very strict due diligence procedures and background checks on applicants are in place in those countries.
The IMC said the scheme was is very small in terms of applications – approximately 700 to 1,000 per year.
By comparison, it said, according to Eurostat, in 2016 a total of 994,800 people obtained citizenship of an EU-28 Member State, meaning citizenship-by-investment accounted for around 0.1 per cent of the total of new EU citizenships granted each year. The IMC said it would welcome a meeting with Commissioner Jourova to discuss her concerns.