It was revealed this week that a top IIP agent (armed with two licences) has been secretly recorded by a French TV news programme, brazenly boasting of his close relations with the Prime Minister and the Parliamentary Secretary for Citizenship.
The secret recording revealed how such a top agent boasted of a 100 per cent success in their passport applications. It is no surprise that they have garnered a substantial share of the market and can afford to place substantial resources to market. (One hankers after another rags to riches story). The fly in the ointment was when this agent bragged that even passport applicants with a criminal record may enjoy a safe passage using their services. Trust us: we rely on close friendship and patronage with top brass at Castille.
Eventually, the agent denied all allegations, saying that the media had misinterpreted their views possibly due to a wrong translation. On the local scene, one is aware that 170 IIP agents have signed and paid an annual licence to promote the IIP scheme yet none of them have openly and brazenly admitted having a revolving door policy with Castille.
This video has now gone viral and has created much bad blood among practitioners who, over the years, have worked hard to uphold the high standard of the jurisdiction. All this has come to light when faced with questions by the Moneyval report on the AML due diligence and transparency. In fact, most IIP agents face uphill struggles and stiff competition from other, much cheaper, EU countries offering citizenship by investment such as Portugal, Greece, Ireland and Cyprus. The latter offer much easier terms to naturalise applicants hailing from outside the EU.
It is an open secret that, recently, Malta has lost the Asian market as the latter prefers to invest in cheaper property schemes for residence and passport packages introduced in Turkey. Therefore, with the damage that has been inflicted on our financial services reputation, it comes as no surprise that the Opposition Leader has suggested that every passport brokered by the IIP agent involved must be investigated. The government has now temporarily suspended the agent’s licence and has asked the scheme regulator to look into every application in which the agent has been involved. It is to be hoped that transparency prevails and that the allegations prove to be false, although the reputational damage can only be remedied if a serious internal review is carried out. When contacted by the media, the police were noncommittal on the subject of opening an investigation.
All the while, Malta gets the flak from the Opposition benches and the EU that passports may be issued to people of dubious character. The irony is that – as the sole concessionaire – Henley & Partners organises global conferences which are all personally addressed by the Prime Minister. The latter rebuts criticism, saying that such an inaugural service is free. Needless to say, no such patronage is on offer to the rest of unremunerated agents who, under their own steam, also fund such events.
The Opposition is now woken up to the fact that Henley & Partners does not pay for first class travel and the accommodation expenses of top members of government to ceremoniously open their shows. It dawned on the Opposition that tax-payers are footing the travel bill, yet Henley continues to collect eight per cent on all its revenue from passports. Magnanimously, the Prime Minister, showers positive comments every time he addresses delegates at Henley & Partners’ global events.
He proudly announces that Malta’s due diligence structure is next to the gold standard. Not so salubrious was a report published by Transparency International and Global Witness 2018. It looked at various aspects of the schemes offered by Cyprus, Malta and Portugal and the flaws or loopholes in each, stressing that “insufficient due diligence, wide discretionary powers and conflicts of interest” could open Europe’s door to the corrupt. Every time the media ups the ante, the MIIPA – in its circulars – tells the agents to fulfil their calling to properly sift all applications. It officially reminds them that, as representatives of the industry, they have a duty to rebut incorrect information that reaches the public sphere and it frequently revises internal application forms to collect more details.
Given the rude awakening resulting from the French TV interview, one is curious to know the breakdown of successful applications and rejection rate of each agent. Don’t hold your breath – this is kept secret. Some of the IIP regulator’s comments are worth mentioning here. He laments that all local institutions, whether financial or not (including banking) must not continuously put at undue risk the running of the IIP scheme. Applicants may rely on a benefactor to make the investment on their behalf. It is noted that, while the benefactor is thoroughly checked on a declaration of sources of wealth and funds, the law (as it stands now) does not require enhanced due diligence on the part of the benefactor.
In conclusion, nobody harbours any doubts that the passport scheme has enriched the country with extra capital flows, as each passport generates about €1.5million to the Sovereign fund.
Up to October 2018, Malta had issued over 2,027 passports. One awaits the publication of the internal review and hopes that the French TV saga has served to jolt the administration to play contrite. Perhaps it has galvanised the government to reward genuine attempts by a coterie of unpaid agents in their drive to attract bona fide applicants. Remember competition is getting so tough.
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The writer is a partner in audit and business advisory firm PKF