Cyprus is high on a list of EU countries red-flagged in a damning international report on Wednesday suggesting its golden visa programme in spite of recent ‘cosmetic’ controls, as it stands, remains at risk of “exposing the EU to the corrupt and the criminal”.
The joint report by Global Witness and Transparency International said that programmes run by some European Union countries to sell passports and residency permits to wealthy foreign citizens pose risks of money laundering as some of the schemes are not properly managed.
Such schemes are currently applied in 13 EU countries: Austria, Cyprus, Luxembourg, Malta, Greece, Latvia, Portugal, Spain, Ireland, Britain, Bulgaria, the Netherlands and France. Hungary has terminated its programme.
According to the report, titled ‘European Getaway – Inside the Murky World of Golden Visas’. Cyprus’ citizenship-by-investment marketing says the island offers “the quickest, most assured route to citizenship of a European country”.
“The statistics seem to support this,” the damning report said. “Cyprus’ passports-for-sale scheme is the most prolific of its kind in Europe, with 3,300 foreign nationals having secured EU passports since 2013.”
It added that prior to the programme’s revamping in 2013, ministers granted Cypriot citizenship on a discretionary basis, in a less formal arrangement. Cyprus has earned a whopping €4.8 billion from its scheme. Cyprus, with a cost for a passport of up to €2m has the potential to attract €1.4 billion annually, which represents about 7.5 per cent of the country’s current Gross Domestic Product (GDP) levels, according to the report.
Analysis of the schemes offered in Cyprus, Malta and Portugal, it added, shows the ways in which “insufficient due diligence, wide discretionary powers and conflicts of interest” could open Europe’s door to the corrupt.
“Specifically, we found that Cyprus and Portugal, in spite of recent reviews and changes in their programmes, do not seem to take into account an applicant’s source of funds or wealth when analysing applications,” said the report.
It said the Cyprus government had acknowledging the existence of “problematic cases” and unveiled a set of reforms in August this year.
The reforms doubled the length of time for assessing applications and introduced an annual cap of 700 on the number of passports for sale. Also, private sector agents are now accredited by and answerable to the Supervision and Control Committee.
These agents are named on a public register and obliged to abide by a code of conduct that requires them to submit a “report of the findings of due diligence review” for every individual they support for citizenship.
“Indeed, so concerned was the government about protecting its reputation, that it created a new code of conduct banning agents from referencing the “sale of passports” or from using the EU symbol or pictures of passports in their marketing material,” the report said.
However according to the two international groups, there is continued cause for concern, particularly as some of the reforms seem to be more cosmetic than substantive.
For example, it remains unclear whether the cap on applications applies only to main applicants or includes dependents. “If the former, the cap of 700 applicants is somewhat disingenuous, for the number of main applicants since the scheme’s establishment has never been higher than 503 a year, a number that is far below the new cap”.
The report also says it remains to be seen if the Supervision and Control Committee will be given the independence, resources and mandate to rigorously apply the code of conduct and to pursue violations. Moreover, while agents appear to be under greater scrutiny, it remains unknown if applicants themselves have been subject to enhanced due diligence, it added.
In May 2018, it was reported that the government would be bringing in agencies that specialise in identifying money laundering to review applications. As of August 2018, however, there has been no confirmation that the government will conduct its own independent and in-depth due diligence checks or take any steps to verify the source and legitimacy of an applicant’s wealth. “This leaves open a critical gap,” the report said.
“Despite their shortcomings, these new changes represent the long overdue recognition that the scheme may have exposed Cyprus and the EU to risky individuals. To prove that their reforms are not mere cosmetics, the Cypriot government must ensure that applicants are subject to enhanced due diligence as a matter of course.”
The two groups said the government must not rely on banks or agents alone to conduct this critical work and that Cypriots, and other EU citizens, deserved to know whether individuals who were successfully naturalised through the scheme prior to August 1, 2018 pose risks to the EU. They call on Cyprus to review past cases and revoke such citizenships if warranted.
It was revealed last year that recipients of Cypriot golden visas included, according to Wednesday’s report, “a veritable ‘who’s who’ of the super-rich of Russia, Ukraine, China, Saudi Arabia and Iran.
Amongst them were the Ukrainians Gennady Bogolyubov and his former business partner Igor Kolomoisky, who together founded PrivatBank and were its largest shareholders until its nationalisation by the Ukrainian government in 2016.
“The fact that this oligarch duo successfully secured Cypriot citizenship broaches the question of whether there had been any red flags in 2010, and if so, whether the government’s risk appetite was such that it had been willing to overlook them,” the report said
“Now that the pair find themselves in court, the next question is whether Cyprus will consider revoking their status, should they be found at fault.”
Oleg Deripaska was also mentioned. The Russian oligarch was granted Cypriot citizenship in 2017, even though his application had allegedly raised questions, at least in the early stages.
According to the report, Deripaska was asked to resubmit his application due to the results of a preliminary inquiry into his affairs in Belgium. The inquiry was dropped in 2016, and his application for a Cypriot naturalisation succeeded.
“The fact that American authorities revoked Deripaska’s US business visa in 2007 on the grounds of alleged ties to organised crime in Russia did not seem to have weighed in on the [Cypriot] Council of Ministers’ decision. But will they change their minds now that Deripaska has been sanctioned by the US Treasury?”
“If you have a lot of money that you acquired through dubious means, securing a new place to call home far away from the place you stole from isn’t just appealing, it’s sensible,” Naomi Hirst of rights group Global Witness told Reuters on Wednesday after the report was issued.
She urged the European Union to set standards for managing the schemes and to extend anti-money laundering rules, applied so far to banks or gaming firms, to all those involved in the visa-for-sale industry. The European Commission is expected to publish a report on schemes in EU countries by
According to Reuters, EU states generated around €25 billion in foreign direct investment in a decade from selling at least 6,000 passports and nearly 100,000 residency permits, the report said using what it called conservative estimates.
“Poorly managed schemes allow corrupt individuals to work and travel unhindered throughout the EU and undermine our collective security,” Laure Brillaud, anti-money laundering expert at Transparency International, told the news agency.