The European Union urged member countries on Wednesday (23 January) to crack down on schemes granting “golden visas and passports” to foreign investors, warning they can bring corruption and money laundering in their wake.
The European Commission, the EU executive, published a report urging members to curb the practice of giving foreigners — often Chinese, Russians and Americans — residency or citizenship in return for investment.
— Andrew Caruana Galizia (@acaruanagalizia) January 23, 2019
“We speak about opening (a) golden gate to Europe for some privileged people who have the money to pay for citizenship or residence,” EU justice commissioner Věra Jourová said at the report’s publication.
“We are looking at it with concern,” Jourová told a news conference in Brussels.
The commissioner said investor residence and citizens schemes, known as “golden visas and golden passports,” should not be a weak link in EU efforts to curb corruption and money laundering.
The report is very factual. When it comes to the golden passport schemes we have identified risks related to security, money-laundering, corruption and tax evasion. And we have concerns regarding the governance and lack of transparency in these schemes. pic.twitter.com/2bNazsyJhK
— Věra Jourová (@VeraJourova) January 23, 2019
The report said wealthy candidates for residency or citizenship do face insufficient security and background checks to prevent them from posing a security risk, laundering money or evading taxes.
EU countries set conditions for granting and withdrawing nationality but must do so with respect for EU law, enforced by the European Court of Justice, officials said.
The bloc’s laws are important as a citizen of one EU country has the right to travel to others, exercise economic activities within the 28-nation internal market, and vote in local and European elections.
“Crime has no borders,” said Jourová, a Czech politician.
The Commission complained that Bulgaria, Cyprus and Malta run schemes granting foreign investors citizenship without requiring them to live in those EU countries or show “genuine connections” to them. Bulgaria rushed to say it will abandon the scheme, the beneficiaries of which are reportedly some 50 individuals.
But Bulgaria is faced with a more serious issue, involving a scheme of state officials providing passports against bribes, to tens of thousands of foreigners.
The Commission also said residence permits pose serious security risks to member states.
.@EU_Commission presents first report on golden passports and golden visa – security and other risks need to be addressed: https://t.co/DKOLKVbT4Y @VeraJourova @Avramopoulos pic.twitter.com/vTKTukIk1a
— Christian Wigand (@ChristianWigand) January 23, 2019
‘Transparency and oversight’
The investor citizenship schemes, known as “golden passports,” offer less strict requirements than those for foreigners seeking to become naturalised citizens.
An EU residence permit gives a third-country national the right to live in the member country and to travel freely in Europe’s passport-free Schengen area.
Britain, Bulgaria, the Czech Republic, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania and Slovakia run these schemes.
The Commission said there was a lack of “transparency and oversight” of the residence schemes, including too few statistics on how many people obtain a residence permit in this way.
The Commission warned “it will take necessary action as appropriate” if member countries fail to comply with EU law and rules on border checks, money laundering and tax avoidance.
It said it will set up a group of experts from member countries to improve the transparency, governance and security of the investor schemes.
The aim is to develop a common set of security checks for investor citizenship schemes by the end of 2019.
The problem of “golden visas and golden passports” has been flagged by non-government organisations.
In October last year, Berlin-based Transparency International and London-based Global Witness called EU citizenship and residency as “just like a luxury good” which “can be bought”.
“By their very nature, golden visa schemes are an attractive prospect for the criminal and the corrupt,” they wrote.
Several EU members have used such schemes to give passports to around 6,000 people and residency rights to around 100,000 people in the past decade, securing about €25 billion of foreign direct investment in return, the NGOs said.
They said Spain, Cyprus, Portugal and Britain are the countries that have received the most investment in return for visas. Spain received €976 million annually compared to €498 million in Britain.
Sven Giegold MEP, Greens/EFA spokesperson on economic and financial affairs commented:
"Golden visa schemes pose a serious threat to our security and the fight against corruption in the EU. The Commission's proposal is half-hearted and was presented only at the insistence of the European Parliament. This is incomprehensible given the serious allegations that passports and residence permits in Malta and Cyprus have yielded high profits with little scrutiny. Binding security checks and mandatory lists are not enough, especially in countries with weak rule of law. Member states should halt their golden visa and passport programmes immediately.
Anti-corruption watchdogs Transparency International and Global Witness warned that the report from the Commission falls short of the urgent action needed to clean up the shady industry.
“The tide is turning on the golden visa industry with the EU recognising the unacceptable security and corruption risks it creates. However, the Commission’s report tells us nothing about what member states actually need to do - now they’ve sounded the alarm, they need to offer solutions,” said Naomi Hirst, Senior Anti-Corruption Campaigner at Global Witness.
“This report firmly puts the spotlight on dubious schemes in member states, which is a good first step.” said Laure Brillaud of Transparency International. “However, we see little incentive for countries like Malta to scrap these lucrative schemes without strong action from international institutions such as the EU.”