Citizenship-for-Sale Scandal Heats Up as EU Threatens Suits

Malta and Cyprus were issued with a legal ultimatum as the European Union stepped up its crackdown on governments selling citizenship rights to live and work in the bloc.

The two nations may have violated EU law by offering so-called golden passports, or access to their country’s nationality and EU citizenship, in return for a fee, the bloc’s executive authority said on Tuesday.

The duo’s investor-citizenship programs may undermine “the integrity of the status of EU citizenship,” the European Commission said in a statement. Cyprus announced earlier this month it would end its current passport for investment program on Nov. 1.

“When a member state awards nationality, the person concerned automatically becomes an EU citizen and enjoys all rights linked to this status” and “as a consequence, the effects of investor citizenship schemes are neither limited to the member states operating them,” the commission said.

The speaker of the Cypriot House of Parliament Demetris Syllouris resigned last week, after an Al Jazeera report caught him on video offering to help a Chinese businessman with criminal record to get citizenship. Jho Low, a Malaysian linked to the multibillion-dollar 1MDB scandal, was also among the beneficiaries of the scheme offering citizenship to foreign investors.

Cyprus has revised its passport program five times to protect it from possible fraud and “last week the government decided to suspend it in order to reexamine and reintroduce it on stronger basis,” government spokesman Kyriakos Kousios said by telephone. Cyprus is in the process of recalling seven passports and 12 more are under investigation, he said.

Malta’s government said in a statement that its soon-to-be-replaced individual investor program had helped to pay for social housing and healthcare and had also “supported the Maltese economy during the Covid-19 pandemic, saving both lives and jobs.”

‘1,460 Families’

“Since its inception, around 1,460 families have been approved and just over 500 not approved,” the government said, adding that it “will be implementing new residence regulations which may lead to citizenship and which take into consideration the European Commission’s concerns and recommendations.”

The commission will send warnings to Cyprus and Malta, giving the governments two months to provide satisfactory answers. The ultimate step would be a lawsuit at the EU courts.

The EU said that Bulgaria will also receive similar program warning, adding that it had concerns there too and would decide on its next steps after getting the government’s response.

“Golden passports or golden visas are a gateway for organized crime,” said German Conservative lawmaker, Markus Ferber, a member of the largest political group at the European Parliament. “Experience shows that such schemes do not attract investors, but mainly money launderers, tax dodgers and other criminals.”

©2020 Bloomberg L.P.

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