29/09/20

MALTA: EU Commission ‘will analyse’ new citizenship by investment scheme.

As published on independent.com.mt, Tuesday 29 September, 2020.

The European Commission is still to analyse Malta’s new citizenship by investment scheme, a Commission spokesperson indicated to The Malta Independent, stating that it ‘will’ be doing so.

Earlier this year, a spokesperson for the Parliamentary Secretariat for Citizenship told The Malta Independent that the individual Investor Programme (IIP) had reached its 1,800 capping and is coming to an end. The IIP, often referred to as a citizenship by investment scheme, proved to be controversial, not least because of the choice of Henley and Partners as the leading concessionaire. The scheme was attacked both locally and abroad, with critics saying it allowed dubious individuals to acquire an EU passport. The government has always insisted that rigorous due diligence processes are in place.

In July, Parliamentary Secretary Alex Muscat had said that The Individual Investor Programme (IIP) will be replaced by a new residency plan that can lead to citizenship. Under the new system, Muscat had said, only individuals who first manage to obtain a Maltese residence permit will be allowed to apply for citizenship. There are two ways to do this. Individuals can apply after a one-year residency period if they invest €750,000 or more. Applicants would have to pay €600,000 if they apply after a three-year residency period. Additional requirements are also needed, such as a property purchase of €700,000 or a minimum property rent of €18,000 annually. "The already rigorous due diligence process will be strengthened further to ensure that we attract good natured citizens who have acquired their wealth in a lawful way,” Muscat had said, while adding that the new system aims to create a more genuine link to Malta.

The European Commission has been relatively vocal about citizenship by investment schemes. In her first State of the Union address, European Commission president Ursula von der Leyen highlighted that golden passports are amongst the list of European values which “are not for sale”.

In addition, Politico in 2019 reported that "golden visas" and "golden passports" have raised concerns over security and money laundering. It also reported that a new group of experts will be set up to create a system of information exchange “and develop a common set of security checks for investor citizenship schemes,” Politico wrote.

The Malta Independent contacted EU expert and former MEP candidate Peter Agius who earlier on expressed concern about Malta becoming the weakest link of Schengen Security System due to the anonymity of beneficiaries. Agius said that pressure in Brussels is mounting on citizenship sales as national citizenship equates to European citizenship. Agius insisted that when Malta joined the Schengen area in 2007, it complied with all criteria for Malta to be an external border of the EU. “That compliance is now being contested, as Malta is granting citizenship to individuals who may be of highest repute, but are unknown and unverifiable to security services in the rest of Europe,” he said.

“The anonymity and the lack of any possibility to verify a genuine link of the applicant with the Maltese islands is the root of the problem,” Agius insists. “Malta has all the right to assign citizenship by investment, but this should follow a verifiable genuine link between the applicant and the country. The newly publicised reforms do not address these concerns as citizenship can still be achieved after a one year residence, apparently with just 15 days of actual physical presence. Other Member States have doubts about Malta’s ability to secure a proper due diligence especially following recent news of Keith Schembri being arrested on alleged passport commissions. It is unfair and unjust that Malta suffers the bad name of particular individuals. We must address this by opening the system to scrutiny and ensuring a verifiable genuine link for the applicants.” said Agius.

This newsroom also sent a set of questions to the Commission, asking whether they are satisfied with the Maltese government’s wish to see a more genuine link between applicants and Malta, whether Malta should retain such a citizenship scheme, whether there is any action being taken against Malta’s citizenship scheme and whether the common set of security checks has been set up, among other things.

In response, a Commission spokesperson said: “As you may know, the Commission has frequently raised its concerns about investor citizenship schemes and certain inherent risks, in particular as regards security, money laundering, tax evasion and corruption, as mentioned in the Commission’s report of January 2019. While it is for each Member State to lay down the conditions for the acquisition and loss of its nationality, when doing so, they must have due regard to Union law.”

“Commissioner Reynders has been in contact with the three Member States and has raised these concerns directly. Due to the nature of EU citizenship, such schemes have implications for the Union as a whole. The Commission is looking at compliance with EU law, and will introduce infringement proceedings, if judged necessary.”

On the new Maltese scheme, the Commission said that Malta informed the Commission that it envisages a prolongation of citizenship by investment. “In a phone call with Interior Minister Byron Camilleri on 29 June, Commissioner Reynders highlighted our well-known concerns and asked Malta to share the draft proposals on the plans. We will analyse the Maltese scheme and will continue to monitor all investor citizenship schemes in the EU.”

As for the expert group, the Commission said that it established a group of experts from Member States to look at the transparency, governance and security of investor schemes. “The expert group is currently working on a common set of security checks for such schemes.”