The European Commission will, according to Reuters, be publishing a report tomorrow which warns that scheme in European Union states that sell citizenship or residence to wealthy individuals could help foreign organised crime groups infiltrate the union and increase the risk of money launder, corruption and tax evasion.
Although individuals who purchase citizenship and residence in EU states can do it for legitimate reasons, the commission said the schemes posed “risks of infiltration of non-EU organized crime groups in the economy, money laundering, corruption and tax evasion.”
Out of the 28 nation EU bloc, only Malta, Cyprus and Bulgaria run schemes selling citizenship whilst a total of 20 (including the aforementioned countries) also sell residence permits. The investments required to buy a passport in these three states ranges from €1 million to €2 million.
The report said, according to Reuters, that there were shortfalls among all three countries in checking the origins of wealth of individuals who purchased their citizenship. The countries also did not allow easy identification of those who bought their passports.
They also circumvented EU rules that require “effective” residence in an EU state before granting citizenship, the report said.
The Commission also took aim at EU state programs to sell national residence permits to foreigners, saying that these posed similar risks as citizenship schemes. In fact the document raises doubts about several schemes such as that of Portugal, where residence can be granted to foreigners who stay in the country for just seven days a year and where no checks on the origin of wealth and payments made my foreigners who acquire such a resident permit are made.
The Commission said in the report it will set up a group of experts that will recommend by the end of the year measures to counter the risks caused by these schemes.
The Malta Independent on Sunday earlier this year reported that a number of prominent Russian businessmen had bought Maltese citizenship throughout 2017, including Vadim Vasilyev – the vice-president of French football team AS Monaco – and various other mining and oil moguls, along with various Turkish families; some of which hailing from the billionaire Sabanci family.
In reply, Henley and Partners said that while the concerns outlined in the report are understandable, most are unfortunately fundamentally misguided and reflect an inherent lack of understanding of how the investment migration industry actually operates, and of the rigorous due diligence and other know-your-client processes and protections in place to prevent any abuse or criminal activity.
"Worryingly, there appears to be a lack of integration between separate EU departments in the context of producing this report, as well as a complete absence of engagement with both the recognized industry association, the Investment Migration Council (IMC), and legitimate firms in this field, such as Henley & Partners," a statement said.
Henley & Partners said it is also concerned that the research undertaken by the European Commission in producing this report is lacking when it comes to the important consideration of the significant value created by well-managed and structured investment migration programs. There are multiple objective sources that demonstrate not only the value of the liquidity injection itself, but the wider benefits in terms of driving foreign direct investment (FDI) into European nations like Malta, Greece, Latvia, Spain or Portugal.
These programs create genuine societal advantage not just through increased government revenue, employment creation and enhanced infrastructure spending, but through the generation of new opportunities across all levels of society. Nonetheless, one issue on which Henley & Partners and other leading investment migration firms, as well as many governments, are in fundamental alignment with the European Commission is the need for enhanced communication and integration between different government departments, and even between the EU and EU member states.
One need only to look at the challenges the UK has faced with its Tier 1 Investor Visa program to understand that there is a real need to improve communication and cooperation. Multiple government departments should be engaging constantly around this issue, both internally and externally with international stakeholders, be they (supra) governmental or commercial, in order to ensure that there are no gaps or opportunities for nefarious agents to exploit the processes and systems in place, the firm said.
"The analysis and conclusions reached by the report, and the misunderstandings therein, shows it is vital that the European Commission takes up the numerous invitations extended by our firm and other legitimate operators, as well as the IMC, to engage in mutually beneficial information- sharing and dialogue, as is standard in other industries. It is obvious that it is not possible to produce credible policy solutions and recommendations without the engagement of the industry," Henley and Partners said.