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EU Commission sees crime risks in golden passport and golden visa schemes

January 23, 2019 at 2:31pm
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The European Commission on Wednesday warned that golden passports and visas posed potential security, money laundering, tax evasion and corruption risks and said it was setting up a group of experts from Member States to improve the transparency, governance and security of these schemes.

In a comprehensive report on investor citizenship and residence schemes operated by a number of EU states, the Commission also said that a lack of transparency in how the schemes are operated and a lack of cooperation among Member States further exacerbate these risks.

“There should be no weak link in the EU, where people could shop around for the most lenient scheme,” the EU justice commissioner Vera Jourova said warning about the risks of leaving “golden gates” open into Europe.

The EU cannot ban the schemes but can, however, require changes to the programmes, she added.

Investor Citizenship Schemes (‘golden passports’)

In the EU, three Member States (Bulgaria, Cyprus and Malta) currently operate schemes that grant investors the nationality of these countries under conditions which are less strict than ordinary naturalisation regimes.

In these three Member States, there is no obligation of physical residence for the individual, nor a requirement of other genuine connections with the country before obtaining citizenship, it said..

These schemes are of common EU interest since every person that acquires the nationality of a Member State will simultaneously acquire Union citizenship.

The decision by one Member State to grant citizenship in return for investment, automatically gives rights in relation to other Member States, in particular free movement and access to the EU internal market to exercise economic activities as well as a right to vote and be elected in European and local elections.

In practice, these schemes are often advertised as a means of acquiring Union citizenship, together with all the rights and privileges associated with it.

The Commission’s report has identified the following areas of concern:

  • Security: checks run on applicants are not sufficiently robust and the EU’s own centralised information systems, such as the Schengen Information System (SIS), are not being used as systematically as they should be;
  • Money laundering:enhanced checks (‘due diligence’) are necessary to ensure that rules on anti-money laundering are not circumvented;
  • Tax evasion: monitoring and reporting is necessary to make sure that individuals do not take advantage of these schemes to benefit from privileged tax rules;
  • Transparency and information: The report finds a lack of clear information on how the schemes are run, including on the number of applications received, granted or rejected and the origins of the applicants. In addition, Member States do not exchange information on applicants for such schemes, nor do they inform each other of rejected applicants.

Investor Residence Schemes (‘golden visas’)

Investor residence schemes, while different from citizenship schemes in the rights they grant, pose equally serious security risks to Member States and the EU as a whole, the report said.

A valid residence permit gives a third-country national the right to reside in the Member State in question, but also to travel freely in the Schengen area.

While EU law regulates the entry conditions for certain categories of third-country nationals, the granting of investor residence permits is currently not regulated at EU level and remains a national competence.

Currently, 20 Member States run such schemes: Bulgaria, Czechia, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia and the United Kingdom.

The Commission’s report has identified the following areas of concern:

  • Security checks: There are certain security obligations under EU law that must be carried out before issuing a visa or residence permit to foreign investors. However, there is a lack of available information on the practical implementation and discretion in the way that Member States approach security concerns;
  • Physical residence requirement: Residence permits obtained by investment, with limited or no required physical presence of the  investor in the Member State in question, could have an impact on the application of and rights associated with the EU Long-Term Residence Status, and may even provide a fast-track to national and thereby EU citizenship;
  • Lack of transparency:The report stresses a lack of transparency and oversight of the schemes, in particular in terms of monitoring and the absence of statistics on how many people obtain a residence permit through such a scheme.

The Commission said it will monitor wider issues of compliance with EU law raised by investor citizenship and residence schemes and it will take necessary action as appropriate.

For this reason, Member States need to ensure, in particular, that:

  • All obligatory border and security checks are systematically carried out;
  • The requirements of the Long-Term Residence Permit Directive and the Family Reunification Directive are properly complied with;
  • Funds paid by investor citizenship and residence applicants are assessed according to the EU anti-money laundering rules;
  • In the context of tax avoidance risks, there are tools available in the EU framework for administrative cooperation, in particular for exchange of information.

The Commission will monitor steps taken by Member States to address issues of transparency and governance in managing these schemes. It will establish a group of experts from Member States to improve the transparency, governance and the security of the schemes. That group will be tasked, in particular, with:

  • Setting up a system of exchange of information and consultation on the numbers of applications received, countries of origin and on the number of citizenships and residence permits granted/rejected by Member States to individuals based on investments;
  • Developing a common set of security checks for investor citizenship schemes, including specific risk management processes, by the end of 2019.

Finally, concerning third countries setting up similar schemes, which may have security implications for the EU, the Commission will monitor investor citizenship schemes in candidate countries and potential candidates as part of the EU accession process. It will also monitor the impact of such schemes by EU visa-free countries as part of the visa-suspension mechanism.

The Commission’s report follows the European Parliament resolution of January 16, 2014 which called on the Commission to look into the various national citizenship schemes in the light of European values and the letter and spirit of EU legislation and practice.

The Commission did not provide estimates of the revenues made by EU states who run these schemes.

But a report from campaign groups Global Witness and Transparency International said in October that EU states generated around 25 billion euros in foreign direct investment in a decade from selling at least 6,000 passports and nearly 100,000 residency permits.

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