Passports-for-sale lobby defends ‘Malta standard’ after Brussels threatens clampdown

A lobby acting for countries involved in the lucrative sale of citizenship and ‘golden visas’ has defended Malta’s Individual Investor Programme’s reputation over statements from Brussels to prepare stringent guidelines on the sale of EU passports.

The European Commissioner for Justice Věra Jourová announced her intentions to bring forward a report on citizenship-by-investment to the Autumn, which will seek to issue new, more stringent guidelines, believing that the granting of citizenship poses a serious security risk.

The Commissioner said Brussels was preparing to crack down on EU governments, including Malta and Cyprus, that award citizenships to rich people from outside the bloc, over concerns of so-called dirty money from Russia.

Jourova said eight member states will come under tougher scrutiny from Brussels as part of a wider drive against money laundering and corruption.

She also mentioned her worries about the origins of the wealth of Russian applicants for Maltese citizenship. “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. They are granting citizenship for the whole of Europe.”

But the Investment Migration Council, a lobby representing the business of selling citizenship, disputed her claims.

“The IMC shares and understands the Commissioner’s concerns in respect of the security of EU citizens [but] the governance, due diligence and transparency of applicants under the Citizenship-by-Investment provisions in Austria, Malta and Cyprus – the three most active countries in the EU in this field – are 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,” CEO Bruno L’ecuyer said.

Around 700 to 1,000 passports are sold by EU member states every year to so called ‘high net worth individuals’. The IMC says this represents 0.1% of the 994,800 people who obtained an EU citizenship in 2016.

But the sale of passports remains controversial: in Malta, the sale of a passport for €650,000 comes with the mandatory acquisition of a property and government stocks, factors which critics say have driven up property prices.

The IMC said it will seek a meeting with Jourová to show her the security measures in place “and highlight the societal impact the industry has on local economies and their citizens.”

“Citizenship-by-Investment applications are 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 said.

Malta’s sale of citizenship was praised by Peter S. Vincent, a director of the border management think-tank Borderpol and Thomson Reuters Special Services general counsel, who said the IIP “could become the standard industry model not just for the EU but globally, in terms of commitment to governance.”

“Having been exposed to the industry for a few years now, I can honestly say that as a former security and counterterrorism professional, the citizenship by investment programs of the EU are not a security threat to the European Union,” Vincent said.

The IMC’s chief executive said programmes such as the IIP, which contributes a direct percentage to Malta’s annual budget as well as a posterity fund, “permits governments, particularly of smaller countries, to reduce deficits and invest in vital infrastructure to diversify and future-proof their economies.”

Similar citizenship schemes to Malta’s also exist in Cyprus, Austria, Greece, Hungary, Latvia, Lithuania and Portugal.

Jourova said that member states are free to set their own criteria for citizenship, but the Commission is expected to fault government schemes for not carrying out enough due diligence on applicants and the sources of their wealth.

Jourova said she was especially alarmed by Malta’s scheme, in which an individual can gain citizenship in return for a €650,000 contribution to the country’s development fund and the purchase or lease of property, as well as investments of at least €150,000 in stocks and bonds. Family members can be added for an additional fee of €25,000 to €50,000 per person.

“It is a big concern when a Russian citizen who has worked his whole life in middle or senior management – where salaries aren’t very high – suddenly has the money to buy citizenship in Malta,” the commissioner said.

Malta’s scheme, in place since 2014, has brought €590 milion to the country from more than 700 investors, according to Identity Malta. The list of the global elite brought to Malta includes Boris Mints, the Russian billionaire owner of investment company O1 Group, and Arkady Volozh, the founder of Yandex, Russia’s biggest search engine.​