Red flag raised over ‘passport for sale’ risks

Programmes of some EU states 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 European Commission said on Wednesday.

The warning is contained in the EU executive’s first report on the multibillion-dollar industry of “investment migration”, which allows rich individuals to buy citizenship or residence in countries that put them on sale.

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.

Brussels warned of risks for the entire EU as passports and residence permits issued by one country of the 28-nation bloc give unhindered access to most other member states.

This causes “possible security risks like money laundering, terrorist financing, corruption and infiltration of organised crime”, the commission said.

Malta, Cyprus and Bulgaria are the only EU countries which sell their citizenship, issuing “golden passports” in return for investments ranging between around ß1m and ß2m (R15.74 and R31.48m)

Twenty EU states, including those three, sell residence permits, or “golden visas”, to foreigners willing to invest in their new host country, with a range of between nearly ß15,000 (R236,000) in Croatia and more than ß5m (R78.6m) in Luxembourg and Slovakia.

Bulgaria, which is not part of the EU’s border-free Schengen area, said on Tuesday it would halt its passport-selling programme.

Cypriot President Nicos Anastasiades accused Brussels of double standards, saying Cyprus was being unfairly targeted and that it applied the strictest criteria for such schemes in the EU.

The Maltese government said it had already addressed many of the concerns.

Henley & Partners, the firm which set up Malta’s scheme, said the commission assessment was fundamentally misguided and ignored the programme’s economic benefits.

The commission did not provide estimates of the revenues made by EU states which run these schemes.

A report from campaign groups Global Witness and Transparency International said in October that EU states generated around ß25bn (R394bn) in foreign direct investment in a decade from selling at least 6,000 passports and close to 100,000 residency permits.

The commission’s report said Malta and Cyprus did not sufficiently check the origins of wealth of persons who bought citizenship and did not allow for their easy identification.

They also circumvented EU rules that require “effective“residence in an EU state before granting citizenship, it said.

Brussels said a group of experts would recommend by the end of 2019 a common set of security checks for passportfor-sale programmes.

EU Justice Commissioner Vera Jourova said the EU cannot ban the schemes but can require changes.

Naomi Hirst of Global Witness said: “The commission’s report tells us nothing about what member states actually need to do – they’ve sounded an alarm, and yet offered no solution.”