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EUROPEAN UNION

‘Shady characters’: Will EU countries now put an end to ‘golden passport’ schemes?

Since Russia's invasion of Ukraine European countries are coming under pressure to end backdoor routes to EU citizenship which are deemed to be unfair and "shady". This week MEPs in the European parliament made their opinions on the scheme clear.

'Shady characters': Will EU countries now put an end to 'golden passport' schemes?
A picture taken on February 14 , 2022 shows national flags of European Union's member countries at the European Parliament in Strasbourg, France. (Photo by FREDERICK FLORIN / AFP)

The European Parliament on Wednesday called for the phasing out of citizenship by investment programmes operated by some EU countries and for EU-wide regulation on so-called ‘golden visas’ offered to wealthy individuals. 

Such schemes pose a threat to European security and democracy as they can be used “as a backdoor” to the EU for “dirty money”, MEPs argued during the debate.

Members of the European Parliament have been calling for the termination of ‘golden passport’ schemes since 2014, but the issue has become more prominent in the context of Russia’s invasion of Ukraine, because of the number of Russian citizens acquiring rights in EU countries through this route in recent years. 

The resolution passed by the parliament with 595 votes to 12 and 74 abstentions says golden passports should be phased out fully. 

The background…

The market of golden passports and visas developed rapidly since the 2008 financial crisis, as countries have sought to incentivise foreign investment

Three EU countries – Bulgaria, Cyprus and Malta – offer citizenship in exchange for a financial investment. Currently, however, Bulgaria is considering a government proposal to end the scheme, Cyprus is only processing applications submitted before November 2020, and Malta has just suspended the processing of applications from Russian citizens.

In addition, 12 EU countries (Cyprus, Estonia, Greece, Spain, Hungary, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands and Portugal) grant residence permits on the basis of investments, the so-called ‘golden visas’. 

Each national scheme has different rules regarding minimum investment requirements, which range between €60,000 in Latvia and €1.25 million in the Netherlands. These can be through property ownership or contributions to public projects. 

A European parliament study estimates that, from 2011 to 2019, the total investment associated to these schemes has been of €21.4 billion. 42,180 citizenship or residence applications have been approved under such programmes and more than 132,000 people have benefited, including family members of applicants. 

Dutch MEP Sophie IN’t Veld, the European parliament rapporteur, said that “when governments are selling passports or visas, what is actually bringing in the cash is… the little blue and yellow logo on them” – in other words, the EU flag.

‘They are designed for shady business, shady money and shady characters’

Getting citizenship of one EU country of course means the freedom to live and work in all 27 member states, so one country’s passport policy affects everyone in the Bloc. 

Benefits include the right to move to other EU countries, exercise economic activities in the single market, vote and stand as candidates in local and European elections, receive consular protection outside the EU and travel visa-free in many other states around the world. 

Residence also ensures economic rights and the possibility to be joined by family members. 

All this bypassing standard citizenship requirements, which typically involve a period of residence and a “genuine connection” to the country, such as family links, or integration conditions, such as speaking the language and knowing the culture. 

“Passports and golden visa schemes are not about attracting any meaningful legitimate investment in the real economy of Europe. They are designed for shady business, shady money and shady characters,” Sophie IN’t Veld said during the debate.

A picture taken on March 8, 2022 shows European Union’s and Ukrainian flags fluttering outside the European Parliament in Strasbourg, eastern France. (Photo by Frederick FLORIN / AFP)

Security risks

In an earlier analysis, the European Commission found that such programmes pose risks regarding security, money laundering, tax evasion and corruption due to weak vetting procedures. 

For instance, EU countries offering citizenship by investment usually request clean criminal records from applicants or their country of origin, which are difficult to verify especially in case of a conflict. But Malta can waive the requirement “where the competent authority considers such a certificate impossible to obtain”. 

Cyprus, which is not part of the border-free Schengen area, is not connected to the Schengen Information System that allows member countries to share security information.

In addition, EU member states consult on applications for short-stay visas issued to citizens from certain third countries, but they do not consult for citizenship by investment programmes and do not inform each other of rejected applications, the Commission noted.

Media investigations also highlighted how the schemes have been linked to corruption and crime. Journalist Daphne Caruana Galizia was murdered in Malta in 2017 following her investigations into corrupt politicians and money laundering through the citizenship by investment programme, MEPs reminded. 

Brexit-backing billionaire Christopher Chandler, born in New Zealand, was reported to have acquired EU citizenship using the Maltese scheme in 2016.

In 2021 Cyprus revoked the citizenship of 39 foreign investors and 6 members of their families, after it emerged that insufficient background checks had been carried out for over half of the 6,779 passports issued under the scheme between 2007 and 2020. 

‘It is not fair to Ukrainians at this point’

The parliament said on Wednesday that these schemes are “discriminatory and lack fairness” as they contrast “dramatically with the obstacles to seeking international protection, legally migrating or seeking naturalisation through conventional channels”. 

MEPs also called on the European Commission to propose, in 2022, EU-wide regulation on residence by investment schemes. These should include stricter background checks on applicants, their family members and the sources of their funds, minimum residence requirements, investments that truly benefit the economy of the country, and proper scrutiny of intermediaries helping people acquiring rights trough these channels.

“It should not be enough to just buy a house or a villa. The investment must be in the real economy and in line with the climate and social objectives of the Union,” said Sophie IN’t Veld. 

It is “very difficult for small countries whose revenue streams depend on this… I understand it is painful but it is not fair to European citizens, and Ukrainians at this point,” the rapporteur said.

Despite the vote in the European parliament EU powers on this issue remain limited because the rules on the acquisition of citizenship are defined at national level rather than in Brussels. 

The European Commission, however, has already launched a legal action at the European Court of Justice against Cyprus and Malta because “the granting of EU citizenship for pre-determined payments or investments without any genuine link with the member states concerned undermines the essence of EU citizenship”.

What about Russian nationals obtaining golden status?

Russian nationals account for 45 percent of those who have acquired citizenship in EU countries using this route, followed by Chinese nationals and people from the Middle East (15 percent for each group). Chinese investors account for over half of residence permits issued in this way.  

In consideration of Russia’s invasion of Ukraine, the European Parliament also appealed EU countries to stop operating citizenship and residency by investment schemes for Russian nationals with immediate effect and to re-assess whether those who benefited in the past have links to the Putin regime. 

In the first round of sanctions against Russia, the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and the United States committed to “limit the sale of citizenship… that let wealthy Russians connected to the Russian government become citizens… of our countries and gain access to our financial systems.”

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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ITALIAN ELECTIONS

EU sees trouble but no breakdown if Italy’s far right takes power

The potential emergence of a far-right government in Italy has put the European Union on alert for disruptions, with fears that unity over the war in Ukraine could be jeopardised.

EU sees trouble but no breakdown if Italy's far right takes power

Brothers of Italy leader Giorgia Meloni and the League’s Matteo Salvini are slated to be the big winners in Sunday’s general election on a firmly “Italians First” agenda, in which officials in Brussels largely play the role of the bogeyman.

The biggest worries concern the economy.

Italy’s massive debt is seen as a threat to European stability if Rome turns its back on the sound financing championed by outgoing prime minister, Mario Draghi, a darling of the EU political establishment.

A victory by nationalists Meloni and Salvini would follow fast on an election in Sweden where the virulently anti-migration and eurosceptic Sweden Democrats entered a ruling coalition, just months before the Scandinavian country is due to take over the EU’s rotating presidency.

READ ALSO: Giorgia Meloni’s party will likely win the elections – but will it last?

But officials in Brussels said they would not jump to conclusions about Italy, cautiously hanging on to reassurances made by key right-wing players ahead of the vote.

Giorgia Meloni delivers speech at party rally

Brothers of Italy leader Giorgia Meloni (Rear C on stage) delivers a speech on September 23, 2022 in Naples. (Photo by Andreas SOLARO / AFP)

“This is not the first time that we risk confronting governments formed with far-right or far-left parties,” said European Commissioner Didier Reynders, a veteran of EU politics.

“Let voters choose their elected representatives. We will react to the actions of the new government and we have instruments at our disposal,” he added.

That was echoed by Commission head Ursula von der Leyen, who warned that Brussels had “tools” to deal with errant member states.

“My approach is that whatever democratic government is willing to work with us, we’re working together,” she said.

Anti-immigration League leader Matteo Salvini condemned the EU chief’s comments on Friday, calling them “squalid threats”.

‘Benefit of the doubt’

Italy has huge amounts of EU money on the line. It is awaiting nearly 200 billion euros in EU cash and loans as part of the country’s massive share of the bloc’s coronavirus recovery stimulus package.

In order to secure each instalment, the government must deliver on a long list of commitments to reform and cut back spending made by previous administrations.

EXPLAINED: Is Brothers of Italy a ‘far right’ party?

“To do without the billions from the recovery plan would be suicidal,” said Sebastien Maillard, director of the Jacques Delors institute.

“We will give them the benefit of the doubt,” said an EU official, who works closely with Italy on economic issues.

and right-wing parties Brothers of Italy (Fratelli d'Italia, FdI), the League (Lega) and Forza Italia at Piazza del Popolo in Rome, ahead of the September 25 general election.

(From L) Leader of Italian far-right Lega (League) party Matteo Salvini, Forza Italia leader Silvio Berlusconi, leader of Italian far-right party Brothers of Italy Giorgia Meloni, and Italian centre-right lawmaker Maurizio Lupi on stage on September 22, 2022 during a joint rally of Italy’s coalition of far-right and right-wing parties. (Photo by Alberto PIZZOLI / AFP)

“We will judge them on their programme, who will be the finance minister. The names being mentioned are people that we in Brussels are familiar with,” the official added.

READ ALSO: Political cheat sheet: Understanding the Brothers of Italy

However, when it comes to Russia, many fear that Hungarian Prime Minister Viktor Orban will find in Italy a quick ally in his quest to water down measures against Russian President Vladimir Putin.

A longtime friend of the Kremlin, Salvini has promised that he will not try to undo the EU sanctions. But many believe that his government will make the process more arduous in the coming months.

Whether the war or soaring inflation, “what we are facing in the coming months is going to be very difficult and very much test European unity”, said Fabian Zuleeg, chief executive at the European Policy Centre.

The likely election result in Italy is “not going to help in making some of these hard decisions”, he added.

READ ALSO: TIMELINE: What happens on election day and when do we get the results?

France’s European affairs minister, Laurence Boone, pointed to the headache of the far-right’s unpredictability.

“One day they are for the euro, one day they are not for the euro. One day they support Russia, one day they change their minds,” she told French radio.

“We have European institutions that work. We will work together. But it is true that it is worrying,” she added

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