Last week, Al Jazeera’s (AJ) Investigative Unit reported that it had obtained over 1,400 confidential, leaked Cypriot government documents which revealed that, between 2017 and 2019, almost 2,500 people from more than 70 countries paid to become citizens of the Republic of Cyprus via the government-run Cyprus Investment Program (CIP).
The revelation, dubbed ‘The Cyprus Papers’, shows that the scheme paved way for numerous convicted criminals, fugitives, and politically exposed persons (PEPs) and their families to gain access to the European Union (EU), all the while evading law enforcement and sanctions in their country of origin. The investigation highlights that the lack of scrutiny, transparency, and due diligence in the governance of such programs—often known as golden visa schemes—has left the bloc not only vulnerable, but essentially defenseless against high levels of corruption, tax evasion, and money-laundering.
Before diving into what the EU can do about such a hazard, it is important to understand what these investor-driven immigration schemes entail, and the risks associated with them. Simply put, these initiatives allow foreign individuals to obtain citizenship or residence rights in a country through investment or a flat fee. The CIP, which is a citizenship-by-investment (CBI) scheme, allowed people to buy a Cypriot passport and by extension become an EU citizen in exchange for a minimum investment of 2.15 million euros ($2.5 million) in the country. Cyprus has raked in more than 4.8 billion euros since the inception of CIP in 2013, selling more than 5,500 passports.
There is, of course, absolutely nothing illegal in acquiring new citizenship. Several countries offer such services; they form a means for states to attract additional foreign direct investment (FDI). EU citizenship offers the allure of visa-free travel to multiple nations and mobility within the bloc, better education and job opportunities, and political and economic stability. Between 2009 and 2019, EU member states earned approximately 25 billion euros through such measures and gained 6,000 new citizens and around 100,000 new residents. However, the problem with turning a passport into a commodity on the market is that it can be used by dubious individuals to escape accountability from their countries of origin, and can pose risks of corruption and financial crime in the host nations.
According to a 2019 report by the OECD Anti-Corruption and Integrity Forum, the most common risks associated with citizen- and resident-by-investment (RBI) schemes center around money laundering, tax evasion, and corruption. Insufficient measures to verify the source of applicants’ wealth and invested funds can allow individuals or entities to misuse such schemes for laundering money or hiding funds obtained illegally. In the case of Cyprus, for instance, although having a clean record was a pre-requisite to be eligible for a ‘golden’ passport, the responsibility to prove this lay with the applicants themselves. The dire implications of these limited background checks became clear in AJ’s investigation of the leaked documents, which showed that several individuals had been granted citizenship despite their criminal indictments, convictions, and sanctioning.
The documents also point to the presence of dozens of politically exposed persons (PEPs) on the list, which has only exacerbated concerns about increased economic crime within the bloc. PEP is internationally recognized as a category of individuals who are more prone to corruption, money laundering, and bribery because they or their family members hold some form of government position and have access to public resources and funds. Some names from the 2,500 made public by AJ include:
- Pham Phu Quoc, who represents Ho Chi Minh City in the Vietnamese Congress,
- Former Russian Deputy Minister for Economic Development Igor Reva,
- Rahman Rahmani, speaker of Afghanistan's Lower House of Parliament,
- Mohammed Jameel, who sits on the Saudi Arabia General Investment Authority,
- Apurv Bagri, who currently chairs a committee of the Dubai Financial Services Authority, and
- Yang Huiyan, Asia’s richest woman and daughter of Yeung Kwok Keung, who is a member of the Chinese People’s Political Consultative Conference (CPPCC), the top political consultative body to Beijing.
Though the Cyprus papers do not present proof of any wrongdoing by any individual PEP, they raise serious questions about why someone entrusted with a prominent public function in their own country would seek foreign citizenship for themselves and their families. Anti-corruption campaigners and experts have said that these schemes prove useful to individuals to protect their wealth and assets accumulated through dubious means over the years by moving them to places beyond the jurisdiction of their own countries.
It’s worth noting that the EU is actually aware of the risks posed by these cash-for-status schemes. As of 2019, such programs existed across 20 countries (of which Malta, Cyprus, and Bulgaria offered passports in exchange for investments while others issued residency permits), and the EU Commission even released a report in early 2019 claiming that such initiatives pose “risks to security, including the possibility of infiltration of non-EU organized crime groups, as well as risks of money laundering, corruption, and tax evasion”. Currently, however, member states apply different criteria to determine eligibility for such schemes, and more often than not, governments are actually unaware of the full details of who is allowed into their territories.
Though EU justice commissioner Didier Reynders has previously mentioned that the bloc will evaluate whether a “legislation is needed to fight against the abuse of golden passports”, and pressed countries to engage in more comprehensive background checks of applicants and be more transparent about their internal processes, progress has been slow and changes mostly cosmetic. In December 2019, the British government announced that it would suspend its tier 1 visa scheme—which provides a fast-track route to settlement for people willing to invest millions in the UK—while new rules were being formulated. However, the government failed to follow through on that promise and has not offered any updates on its commitment to reform the system yet.
In July this year, the Cypriot government also announced that it was tightening its laws regarding the CIP and that it would commit to total transparency. It further promised to strip some naturalized Cypriots of their citizenship if they are found guilty of serious wrongdoing. Unfortunately, critics point that these changes do not effectively address the problem at hand, since they are not retroactive, in that they don’t include provisions to revoke citizenship from those who received it before the new legislation came into force. The response from the EU has been limited as well, and the bloc has set up a group of experts to create a common set of security checks and guidelines for such schemes, without any real move towards formulating a proper formal European law that would help address these concerns and curb the sale of EU citizenship rights.
This can perhaps be attributed to the fact that the urgency of the matter has not fully been understood, or worse, is being ignored. Experts have argued that most of such ‘golden visa’ schemes are directed towards passive investors, and are shrouded in so much secrecy that the impact is understood only when a scandal erupts and hits the headlines—much like the Cyprus papers. However, the EU must pay heed to the alarms sounded and take the matter seriously if it is committed to protecting the continent’s interests and security. In the absence of a robust EU law, common approval frameworks, and stringent compliance monitoring governing these schemes, they will remain open for abuse and continue to serve as a gateway for corruption and financial crime in the bloc. Addressing the risks associated with such programs has become even more pertinent in the wake of the harsh economic fallout from the COVID-19 crisis, since they could adversely impact other investments that will be key for the economic recovery of member states and the EU as a whole.