Passport boss says Malta verifying all sources of millionaires’ wealth

The agency that oversees the sale of citizenship to the global elite has told MaltaToday it is carrying out a due diligence investigation on the sources of wealth declared by the multi-millionaires aspiring for a Maltese passport.

Malta’s Individual Investor Programme has generated over €680 million for the government’s posterity fund, as well as an additional €170 million in property investments.

So far, with a 24% rejection rate to date, it has seen 800 primary applicants (and their families) approved for the Maltese passport since 2014.

“85% of our work today is due diligence,” says IIP chief Jonathan Cardona at news that the European Commission will be issuing recommendations to EU member states that are selling citizenship – namely Austria, Cyprus, Greece, Hungary, Latvia, Lithuania and Portugal.

Vera Jourova, the EU’s commissioner for justice, told the Financial Times that citizenship-for-sale schemes in eight member states will come under scrutiny as part of a wider drive against money laundering and corruption.

She also alluded to worries about the origins of the wealth of Russian applicants for Maltese citizenship – saying that “in cases of any doubt” such people should not have the privilege of citizenship.

While the Commission has no power to ban such the sale of citizenship, the recommendations will probably be used as tool to inform public opinion of the weaknesses of certain citizenship-by-investment schemes.

And while Jourova singles out Malta, EU member states like Greece have issued 8,367 golden visas since 2013 to main applicants and 12,089 to their dependents. While the Chinese are inching ever closer to an absolute majority among applicants, Russians make up close to 15%, and Turks more than one in ten. Iranians – banned from applying for the Maltese passport under the IIP – are also growing in Greek visa numbers.

Yet Jourova was described as being “alarmed” by Malta’s scheme, citing as an example a Russian citizen in senior management, “where salaries aren’t very high — [who] suddenly has the money to buy citizenship in Malta.”

Jonathan Cardona, however, sets much store by the standard that the IIP agency is setting on due diligence.

“Our due diligence team today is almost entirely composed of former risk and compliance officers who worked at major banks, and we have developed a risk matrix that allows us to carry a thorough assessment of whether an application should be finally recommended for approval or not,” Cardona says.

“What that means is that we ask for every single piece of supporting documentation on how applicants’ wealth was created, and that includes banking statements and tax certificates, but also proof of donations or how wealth was inherited, amongst others.”

Cardona says the IIP will confidently welcome scrutiny from the EC, saying the agency already liaises with the Financial Intelligence Analysis Unit to ensure a proper anti-money laundering scrutiny.

“Our four-tier due diligence starts with due diligence checks from both IIP agents and us, with Worldcheck and Exigen DDIQ, and then we proceed to law enforcement checks.

“In the third step, we request background verification reports from Thomson Reuters and Exigen, which use journalists and people on the ground, such as investigators, to build assessments of the people requesting citizenship and also to corroborate the information they have submitted,” Cardona says.

It is after this stage, that the IIP’s ‘risk matrix’ comes into play, with the agency’s due diligence team of risk and compliance officers making a thorough assessment of the voluminous findings.

“We review all the documents and certification, assess the background verifications, hold a peer review, and also a senior management review.”

The risk matrix is itself a seven-step verification process, where the due diligence team grades each one of these steps: verifying the last 10 years of residence of the applicant, corporate companies and offshore set-ups, PEP status, reputation assessments from on-the-ground and open source intelligence, legal affairs, impact analysis – the impact of the applicant on close networks and general society – and gaining clarity on sources of wealth.

“Every source of wealth must be verified,” an IIP risk manager, who is not named to protect the confidentiality of the process, says.

“The due diligence team discusses each applicant’s findings. We ask that every source of wealth be verified and backed up. It can be difficult and of course, it is a tedious process that requires time, cooperation from foreign institutions, and also a question of understanding different cultures and the way wealth is accumulated or passed on from one generation to the other. And we’re always questioning each other’s findings.”

The grading of the risk matrix helps the IIP due diligence team build a risk profile from the application, to finally be able to assess whether an application should be accepted or rejected.

“Today we know from an early stage whether an application will be problematic because of the risk profiles we have developed.”