No sooner had Cyprus moved this week to suspend its scandal-ridden programme that offered EU “golden passports” to rich investors than others began jostling to fill the gap.
“Choose Montenegro citizenship instead of Cyprus!” trumpeted the website of Discus Holdings, an official agent of the Montenegrin scheme, pointing to the visa-free access available to Europe’s 26-country common Schengen travel zone.
Montenegro, which is in talks to join the EU, is among potential beneficiaries after a sting by news network Al Jazeera caught Cypriot politicians vowing to help a fictitious Chinese convicted money launderer with his application for nationality. The affair has highlighted the failure of longstanding EU efforts to regulate citizenship-for-sale programmes — and has raised questions over whether the bloc has the weapons or the will to do so.
“We see that these schemes allow corrupt people — sometimes people who have looted the treasuries of their countries — a safe haven in the EU,” said Eka Rostomashvili, advocacy and campaigns co-ordinator for Transparency International, the anti-graft group. “They also risk corrupting the member states themselves.”
Discus Holdings told the Financial Times the Montenegro initiative helps clients seeking more international mobility to invest in government-approved projects that generate jobs.
Attention has focused on the three EU members — Cyprus, Malta and Bulgaria — that offer full citizenship in exchange for investment. But many other European countries, including France, the UK and Austria, offer “golden visas” granting a right of abode to the wealthy — and a potential path to nationality after a qualifying period of residence.
Cyprus announced it would shelve its scheme after an Al Jazeera undercover documentary this week showed Demetris Syllouris, the speaker of parliament, and Christakis Giovanis, an MP, offering to help the pretend criminal golden passport applicant. Both men have since resigned, while denying any wrongdoing.
The Cyprus exposé has highlighted broader fears over the problems linked to the sale of citizenship and residence, from unsustainable local property booms to money laundering. The Mediterranean island has acquired thousands of new nationals and raised more than €6bn from real estate since the initiative launched in 2013, under which foreigners must pay at least €2m for a property in order to apply for a passport.
A primary concern is the scheme’s attractions for people with questionable financial and political connections. A 2018 Reuters report showed that eight relatives and associates of Hun Sen, Cambodia’s authoritarian prime minister of 35 years, had received Cypriot nationality.
Weeks later, the Cypriot news organisation Politis revealed the country had also given citizenship in 2015 to Jho Low, a Malaysian businessman later indicted by US authorities over an alleged plot to siphon billions of dollars from the country’s 1MDB state investment fund. He has denied any wrongdoing.
Rami Makhlouf, the billionaire cousin of the Syrian dictator Bashar al-Assad, acquired Cyprus citizenship in 2011, only to have it rescinded it in 2013 as the country’s civil war and the regime’s brutal crackdown escalated.
Across the Mediterranean, Malta’s programme has also run into trouble. Police last month arrested Keith Schembri, ex-chief of staff to Joseph Muscat, the former prime minister, as part of a probe into alleged money laundering linked to kickbacks from the country’s golden passport scheme. Mr Schembri has denied any wrongdoing.
The golden passport and residency schemes have also exposed a wider problem for the EU, because applicants can exploit generous rules in specific countries to gain full access to nations that may have tougher checks. Citizenship of an EU state confers the right to move freely through the other 30 countries of the bloc and the largely overlapping Schengen area.
The European Commission has grown increasingly anxious about nationality for investment initiatives. Commission president Ursula von der Leyen last month raised the alarm about golden passports, saying that “European values are not for sale”.
Brussels has said it is considering legal action against Cyprus, Malta and Bulgaria over their schemes. EU officials are now concerned that Cyprus may follow the same route as Malta, which earlier this year announced the scrapping of its previous golden passport programme — only to create a new one in its place.
The Commission has further tried to restrain EU member states by telling them they must take into account all relevant international laws when awarding nationality. These include a 1955 ruling by that UN’s top court that there must be a “‘genuine connection’ between a country and the person it grants citizenship.”
But talks between EU member states with the task of drawing up tougher safeguards for golden passport and visa schemes by the end of last year have fizzled out. Vera Jourova, European commission vice-president for values and transparency, said this month that the proposals they yielded amounted to a “not very convincing” effort to plug a “hole in the EU system”.
“It was a disappointment that there was not enough interest from many . . . member states to have a better chance to see how the passports are granted,” she said. “Because this is a problem of the whole family.”
Additional reporting by Valerie Hopkins in Budapest