The Ad-Hoc Committee has been investigating the Cyprus Investment Programme’s applicants retrospectively. The Attorney General too is investigating foreign investors – what have the findings been thus far? What lies ahead for the CIP and for the European golden visas?
It seems that the discussions at Parliament in Cyprus have been filled with heated debates and ardent finger pointing from those for and those against the Cyprus Investment Programme (CIP). Just a few weeks ago, the Minister of Finance sought to defend the citizenship by investment scheme’s net benefit to the country citing that about 3,000 construction industry jobs had been generated through the Cyprus Investment Programme and almost 1.7 % of the 18.4% GDP growth during the 2016-2019 period was attributed to it.
Countering these purported benefits, opponents of the investment migration programme highlighted how several cases had been identified where the investor had paid EUR 2 Million for a property that had not even been constructed yet or worse, was registered for a considerably lower amount. The notorious “Cyprus Papers” fiasco that made headlines around the world and caused havoc in Cyprus has drawn substantial international attention and EU criticism.
Retrospectively reviewing the Cyprus Investment Programme’s applicants
As a result of the Al Jazeera allegations – the Cypriot government appointed an Ad-Hoc committee led by the Cyprus Securities and Exchange Commission chairwoman Ms Kalogirou, to analyze all the citizenship by investment files issued from 2012 to present date. Parallelly, the Attorney General of Cyprus also appointed a separate committee to investigate the naturalisation of foreign investors under the watchful eye of Myronas Nicolatos, former Supreme Court President.
What did the Ad-Hoc Committee find?
So far the Ad-Hoc Committee under Ms Kalogirou has examined select high-risk files and found 7 individuals applications to be contentious as those involved did not in fact meet the citizenship by investment programme’s criteria.
Furthermore, it is reported that over the past two years or so about ~15% of the pending applications have evidence of ‘possible money laundering, forgery, fraud, tax evasion or bribery.’ It is unclear why these cases pinpointed by the Audit Office have not yet been rejected though – whether the evidence was not sufficient or if they were just pending full processing. The independent committee appointed by the Attorney General is yet to conclude their findings and report.
As of June 2020, Cyprus has had in place all due process and legal framework to revoke passports that retrospectively do not meet the necessary criteria or which merit being revoked due to criminal activity/AML issues.
In light of the Ad-Hoc’s committes findings thus far they have put forward a few recommendations to the Attorney General for cases which could be deemed worthy of revocation. Most of these cases are individuals who are currently wanted in their home countries.
Under Public Scrutiny
Faced with various questions on the integrity of the Cyprus Investment Programmes handling over the past years, Minister of Interior, Mr Nouris sustained that whilst numerous cases might not have been approved under the present rules of the CIP, they were in order at the time they were granted. Nouris also informed that there is a classified dossier that is under review by the House speaker which addresses the “Cyprus Papers” key allegations.
“It’s one thing to say that citizenship was given to someone who should not have got it, and quite another to say that the applicant was accused subsequently…in one instance, six months after naturalisation.”
Minister of Interior, Mr. Nouris
In recent findings by the audit office, it was reported that dozens of cases had been marked as Urgent under the Minister’s orders – which heightened fears around the lack of transparency and risk of corruption in the Cypriot citizenship programme. Nouris retorted that those urgent cases had been marked as such because they pertained to major investment and it was in the best interest of the country to expedite these files.
Read more: Cyprus Investment Programme Suspended: Angels and Demons (Updated)
European Values are not For Sale
“European values are not for sale.” These were the words of the President of the European Commission, Ms Ursula von der Leyn at the State of the Union Address.
“I will continue to defend it and the integrity of our European institutions – be it about the primacy of European law, the freedom of the press, the independence of the judiciary or the sale of golden passports.”
President of the EC, Ms. Ursula Von der Leyen
This sentiment it seems has been growing and gaining a large following in recent years with numerous MPs in Europe voicing their aversion to golden visa and golden passport programmes. Arguing that these Golden Visa programmes jeopordize the greater good of the European Member states, many MPs in Europe are citing Article 4.3 of the Treaty of the European Union which states that all Member States should work in collaboration and not hinder the Union’s objectives.
Treaty of the European Union
Article 4.3
Pursuant to the principle of sincere cooperation, the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties.
The Member States shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union. The Member States shall facilitate the achievement of the Union's tasks and refrain from any measure which could jeopardise the attainment of the Union's objectives.
Threats are being made as to whether EU Member States can be taken to court for having these investment migration programmes operating as, according to critics, they open the doors to great AML risks as due diligence standards are not being adhered to.
If Cyprus, Malta, Bulgaria, Spain, Portugal, Greece etc… were to be taken to court, all or one of these – this could ring a death bell for an important proportion of the investment migration industry. It would dampen the trust that foreign investors have in this legal avenue to global mobility and wealth planning and negatively impact the economies of host countries who offer these programmes.
A summoning to court by the EU would also – in a rather ironic way – also be a major blow to the rule of law.
To the principle of sovereignty.
The right to dictate what occurs within one’s own borders – a quintessential principle of international law. A principle that extends to the right to grant and revoke citizenship to individuals deemed worthy by one’s own government and under one’ own laws.
Whilst it is widely agreed by all stakeholders in the investment migration industry and the wider public that enhanced due diligence is of paramount importance there is a fine line between the European Union disciplining and guiding its Member States and it dictating its laws. A fine line that is becoming increasingly blurred.
The future of the European Golden Visa
Will the dilution or discontinuation of European golden visas or golden passports mean the end of the industry? No.
As the flow of funds from wealth hubs around the world will just be re-directed to other regions of the world. As reported in the SCMP “For Chinese clients, as long as the new passport can provide travel convenience or help to move wealth abroad, the demand will always be there.”
As in any other market – there is an appetite for the supply of global mobility solutions. There is an avid interest from foreign HNWIs keen to invest in funds and real estate, mitigating the risks of having ‘all their eggs in one basket’ at home. Investor immigrants also have the added benefit of obtaining a second residency or citizenship in many jurisdictions that offer these programmes. In terms of supply – there is an abundance of golden visa and citizenship by investment programmes from New Zealand to Canada, Grenada to Cyprus, Jordan to Malaysia.
The questions that lie ahead for the European Commission and EU Member States are –
- Should foreign investment from investment migration be deflected to other regions?
- Can this FDI be regulated at a national level to a satisfactory enough point that the EU’s integrity and AML legal frameworks are fully adhered to and respected?
- What specific changes need to be applied?
Actionable discussions need to be had by all stakeholders in Europe from the private and public sector, as pointing fingers across parliaments and boardrooms will only result in heated political debates and zero outcomes.
