The Malta Independent 17 July 2018, Tuesday

Government promises ‘most rigorous due diligence process’

Malta Independent Sunday, 13 October 2013, 11:00 Last update: about 5 years ago

In the wake of criticism from some quarters over the government’s intentions to offer Maltese citizenships against a hefty contribution to a National Development Fund of €650,000, government officials involved in the process speaking with The Malta Independent on Sunday have said that those applying for citizenship will be submitted to the “most rigorous due diligence process in the world”.

Moreover, the “vast majority” of the funds raised, estimated at €30 million in the first year alone will go into a ring fenced and accumulative National Development Fund that can be tapped for social projects over the years to come.

Speaking with The Malta Independent on Sunday, government officials involved in the Individual Investor Programme (IIP) stressed that the due diligence to be applied to those applying for Maltese citizenship will be subjected to complete X-ray of applicants’ and relatives’ lives and the source of their riches. 

Such screening will be conducted by Henley and Partners, an international firm chosen by the government for the programme, and once an applicant is recommended by Henley, government agency Identity Malta will apply its own set of screening processes.

After submitting “voluminous” application forms, applicants will be subjected to background checks that will investigate whether they (or anyone in their family) have a criminal record or have any pending criminal actions against them.

Such checks and balances are to include the use of global databases used by most financial institutions with highly specific internet search engine strings to capture any public domain information on the applicant, their families and their companies and additional background verification reports by an international due diligence firm. The aim of the latter is to independently validate the veracity of information provided by applicants through the use of significant resources and experienced personnel in various regions of the world. Additionally, police certificates will be subjected to additional checks with international crime agencies. 

Once the information has been gathered, a risk-weighting exercise will be undertaken by personnel with significant experience in dealing with high net worth individuals and risk management principles will be used to assess each application against an authorised risk-weighted matrix. A report will then be produce d to support each individual assessment and a written recommendation will detail the rationale for either approving or declining an application. At that stage requests for additional information and in some cases a request for a personal interview will be made.

These combined effort, and the lengths the screening will go to, they say, that the system is the “most advanced due diligence programme in the world with no other system coming close to this level of scrutiny”.

Moreover, once a citizenship request is approved, at any point in the future that person will still be subject to scrutiny and, if the government learns they have lied or had omitted information, or have, after acquiring citizenship, acted in any illegal manner or against Malta in any way they will pay the consequences by having their citizenships revoked.


A ring-fenced National Development Fund

Although the National Development Fund that will hold the funds garnered from the programme is still to be formalised, with its terms of governance and accountability still being drawn up, the concept is for the fund to be ring fenced, meaning that it will be financially separated from other government spending and as such the government will not have direct access to it to, for example, help reduce the public deficit or debt.

The vast majority of the funds raised, estimated at €30 million in the first year alone, minus certain processing fees and fees that will be due to the concessionaire, Henley and Partners, will go straight into the fund. The fund will be an accumulative one that will provide a sustainable source of revenue to be tapped into for social projects.

But over and above this initial contribution, the high net worth individuals once they have gained Maltese citizenship could also be approached to bring new business to the country, potentially creating a promising ripple ‘Foreign’ Direct Investment effect. The potential here, the government believes, could far outstrip the €650,000 ‘contribution’ to the fund.


Citizenship without ever visiting the country

The initiative, however, does not come without concerns. And while the government is positive that national security will be observed through its rigorous background checks, there is the ethical matter related to the fact that those acquiring Maltese citizenship will, according to the provisions of the draft bill, be able to acquire Maltese citizenship without ever having set foot in the country.

The reason being that the main requirements listed in the Individual Investor Programme regulations can be met from abroad. The required documents could be sent by post, and the oath of allegiance can, in some cases, be taken in a Maltese embassy.

Additionally, sources speaking with this newspaper expressed security concerns, saying that the mandatory police conduct sheets can be manipulated, as billionaires could potentially bribe the police to issue clean sheets in their home countries.

But since Malta’s passports are biometric, a visit to Malta would be an absolute necessity for a physical passport to be issued.

The IIP regulations state that investors must be 18 years of age, make a contribution to the Maltese economy and meet all requirements. People having contagious diseases, those considered to be enemies of the state and individuals sought by the International Criminal Court or Interpol are barred from applying. Applicants have to produce a clean police record from their respective countries, and also a clean sheet from the Malta Police, stating that they did not commit a crime in Malta.

However, according to sources, rich individuals could manage to buy off the police in their respective countries, and have their conducts ‘wiped clean’. The Bill states that original copies of the documents have to be presented, but it does not state that the applicant has to present them in person. Furthermore, despite saying that background checks will be carried out, the Bill says that “personal interviews may be recommended, but are not to be a mandatory requirement.”

The applicant also has to take an oath of allegiance, but this process can be carried out in Maltese embassies if the ambassador in question is authorized to do so.

Sources with experience in the Foreign Service have expressed concern that this new process meant that the current system will be ‘thrown out of the window’. The current system only grants Maltese citizenship to foreigners who marry Maltese persons or to foreigners who have lived and worked in Malta for over 15 years. The process also incorporates a number of checks and safeguards to combat abuse.

The same sources explain that the Foreign Affairs Ministry used to get a lot of citizenship requests from wealthy foreign individuals. And in many instances, individuals had attempted to bribe ministry officials to obtain Maltese citizenship. 

According to one foreign service source, “Some people might get filthy rich now, by accepting bribes to put in a good word with the authorities and have their applications accepted or the process speeded up. EU citizenship could mean a fortune to some individuals, and €650,000 is nothing for what they can get in return in business opportunities. Some of them are desperate to come into the EU.”

The sources also raised the issue that the minister has the discretion to approve or deny an application, and said that in other countries where ministers were directly involved, there were always serious allegations of nepotism.


Residency v citizenship

There is a clear difference between residency and citizenship. A residency permit entitles you to work, travel and study in that country. It does not, however, grant you the right to vote. Residency permits are also time limited.

Citizenship grants you the acknowledgement as a legal member of the community, and the right to vote. It is good for a lifetime and cannot be revoked unless a very serious crime against the state is committed.

In the case of Malta, or any other EU member state, owning a national passport means owning an EU passport that entitles you to exercise the right of free movement in the European Economic Area. By presenting a passport, ID card or citizenship certificate, one is permitted to enter and reside in the EEA without a visa. A Maltese passport will grant you unfettered access to 163 destinations and has recently been described as the ninth best passport to own, according to a recent study by Henley and partners.


No harmonised EU law on the issue

But despite the fact the government will, in effect, be selling not only Maltese citizenship but, by default, European Union citizenship as well, the European Commission has confirmed with this newspaper that it has no problem with the programme.

Contacted this week, a spokesperson for Home Affairs Commissioner Cecilia Malmstrom told The Malta Independent on Sunday: “Conditions for entry of third-country national investors into the EU are currently not harmonised under EU law. It is up to the member states determine the conditions of entry and stay of third country national who wish to invest in the country.”

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