The European Parliament yesterday rang yet another death knell for Malta’s manna from heaven Individual Investor Programme, with its rapporteurs yesterday calling for a phasing out of such schemes wherever they are present in the EU.
The EP’s Financial Crimes, Tax Evasion and Tax Avoidance committee, following the publication of the report yesterday, will discuss the issues raised further before taking a vote on it. After that, the European Parliament will also take as vote.
The wheels are very slow-moving indeed, but moving they are.
The European Parliament, which had voted so overwhelmingly against Malta’s IIP scheme way back when, only to have been overruled by the European Commission, is simply not letting the matter go. And that is because, to most MEPs’ minds, this is an issue that hits at the very heart of what European identity, and security is all about.
Sooner or later, push will come to shove and Malta will be forced to cancel or drastically temper the programme. That is happening, and very quickly indeed.
Yesterday’s draft report calls for the phasing out of all golden visa and citizenship schemes, as the potential economic benefits do not offset the serious money laundering and tax evasion risks they present.
It calls on all member states that have them to phase them out immediately and, in the meantime, calls on member states to properly ensure that enhanced Customer Due Diligence is carried out, as required by the Fifth Anti-Money Laundering Directive (AMLD5), which Malta has not yet signed onto yet.
It also called on the Commission to itself rigorously monitor and continuously ensure the proper implementation and application of Customer Due Diligence until they are repealed in each Member State.
The draft report would also see the MEPs calling on Member States to prevent conflicts of interest that ‘might arise when private firms which assisted the government in the design, management and promotion of these schemes, also advised and supported individuals by screening them for suitability and filing their applications for citizenship or residence’.
This appears to be a number of direct broadsides on the scheme being operated by Henley and Partners.
These findings, reading between the lines, are nothing less than a succession of slaps in the face for Malta in particular.
Hot on the heels of yesterday’s report the European Commission is expected to soon issue a report about citizenship selling schemes, with the vast majority of Europeans either taking great exception to or recoiling in horror over the prospect of one member state effectively selling European citizenship and all that comes with it to the highest bidders.
Malta is one of 10 countries in the world that allows foreign citizens to outright purchase citizenship, and the issue, with time, will not earn us any bragging rights but, rather, an anchor around our collective neck. We are being branded as a country where just about anything is for sale, even that which citizens of any country should held dearest.
According to the OECD, such schemes can be potentially misused to hide their assets offshore by escaping reporting under the OECD/G20 Common Reporting Standard (CRS). Potentially high-risk schemes [such as that of Malta, which was just one of three EU member states named and shamed], the OECD said, “are those that give access to a low personal income tax rate on offshore financial assets and do not require an individual to spend a significant amount of time in the location offering the scheme”.
The OECD’s findings are bound to have ramifications, as the organisation points out, ‘Financial Institutions are required to take the outcome of the OECD's analysis of high-risk schemes into account when performing their CRS due diligence obligations’.
The Maltese government has proffered explanations and protestations but, at the end of the day, it is understood that the people at the OECD do not issue such findings on mere whims. In fact, Malta was also yellow-carded for its lax Residence and Visa Programme.
Should Malta persist in this folly until the 11th hour, and perhaps even after that, it is the country’s reputation that will suffer most, as it is already suffering, at the end of the day.
And that is something that no one can put a price tag on.