A damning European Commission report regarding the island’s citizenship-by-investment programme did not portray an accurate picture as it failed to take into account the changes made by the government last year, officials said on Friday.
“The report did not take into account the legal amendments done to the scheme,” said Michalis Michail, chairman of Invest Cyprus, a government-sponsored organisation that promotes investment.
The report makes a reference to the changes, effected in May last year, but due to time constraints they had not been included in the final report.
On Wednesday, the European Commission warned that programmes of EU states, including Cyprus, to sell passports and visas to wealthy foreigners could help organised crime groups infiltrate the bloc and raise the risk of money laundering, corruption and tax evasion.
The warning is contained in the first report the EU executive has produced over the multi-billion-dollar industry of so-called “investment migration”, which allows rich individuals to buy citizenship or residence in countries that put them on sale.
It highlighted shortfalls in the Cypriot and Maltese schemes which do not sufficiently check the origins of wealth of individuals and do not allow their easy identification.
Although legal, these schemes are sometimes run in opaque ways and without sufficient checks on those who acquire passports and visas, the commission said, mostly raising concerns about the programmes in Malta and Cyprus.
“There should be no weak link in the EU, where people could shop around for the most lenient scheme,” the EU justice commissioner Vera Jourova said, warning about the risks of leaving “golden gates” open into Europe. “I dedicated a lot of time to understand Cyprus’ and Malta’s programmes but our doubts remain,” she added.
Among the changes introduced last year was a creation of a registry of service providers like lawyers, accountants, and real estate developers, which have to adhere to a code of conduct. Advertising has been banned although there have been infringements, and a limit of 700 citizenships per year has been set.
The government has also decided to hire companies to carry out due diligence, something that observers point out should have been done from the start.
“It is not convincing when a full diligence process is not carried out,” one observer said.
The Commission says the Cypriot programme lacks transparency
“People obtaining an EU nationality must have a genuine connection to the Member State concerned,” Jourova said. “We want more transparency on how nationality is granted and more cooperation between Member States. There should be no weak link in the EU, where people could shop around for the most lenient scheme.”
The scheme has fetched Cyprus some €4.5bn in the past four years, though a breakdown by sector was not immediately available.
Officials rejected suggestions that people can secure a passport without even showing up. It would take at least two visits to complete the process, sometimes three, they said.
Cypriot authorities also point out that strict measures have been put in place to combat money laundering, making it almost impossible to open a bank account.
Observers suggest the measures came as a result of pressure from the US. In the wake, thousands of companies have left Cyprus and banks closed thousands of accounts, as the Central Bank asked lenders to ditch shell companies.
According to the Economist, Marshall Billingslea, the American Treasury official in charge of tackling money-laundering, visited Cyprus in May 2018 and warned officials to clean up the banks or face catastrophic sanctions.
His office had recently accused ABLV, Latvia’s third-largest bank, of laundering Russian money and starved it of American dollars, forcing it to close.