EU Warns Cyprus Golden Visas Open Door for Criminals

Italy's Foreign Minister Enzo Moavero, second right, shakes hands with the Netherlands' Foreign Minister Stef Blok, right, next to Spain's Foreign Minister Josep Borrell, second left, and Cyprus' Foreign Minister Nikos Christodoulides during an European Foreign Affairs Ministers meeting at the European Council in Brussels, Monday, Jan. 21, 2019. (AP Photo/Francisco Seco)

The sale of so-called Golden Visas, allowing rich foreigners to buy residency permits and European Union passports, has special risks in several countries, including Cyprus, which doesn’t require purchasers to even step foot there, the European Commission warned.

Bulgaria, Cyprus and Malta offer passports to investors without any real connections to the countries by paying between 800,000 and 2 million euros ($909,000 to $2.3 million) with the visas likely helping organized crime groups infiltrate the EU and launder money.

Cyprus is still fighting a reputation for being a tax haven for tax cheats and criminals from other countries wanting to hide their money and has come under withering criticism for the Golden Visas being offered without, critics said, proper vetting of who’s getting them.

Twenty EU states offer visas in exchange for investment: Britain, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, France, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia and Spain.

Investment can range from 13,500 euros to over 5 million euros ($15,350 to $5.7 million) in the form of capital and property investments, buying government bonds, one-time payments to the national budget or certain donations to charity.

Cyprus toughened up vetting procedures last year after it was accused of running a “passports-for-cash” scheme. It said passport numbers would be capped at 700 a year.

The Mediterranean island introduced the scheme in the wake of a 2013 financial crisis that brought the country to the brink of bankruptcy and forced it to accept a multibillion-euro rescue program from creditors. One Cyprus lawmaker has estimated that the scheme generated around 4.8 billion euros ($5.4 billion) between 2013 and 2016.

EU countries have welcomed in more than 6,000 new citizens and close to 100,000 new residents through golden passport and visa schemes over the past decade, attracting around 25 billion euros ($28 billion) in foreign direct investment, according to anti-corruption watchdogs Transparency International and Global Witness.

In a first-ever report on the schemes, the EU Commission said that such documents issued in one country can open a backdoor to citizenship or residency in all 28 states.

Justice Commissioner Vera Jurova said golden visas are the equivalent of “opening the golden gate to Europe for some privileged people.”

“We want more guarantees related to security and anti-money laundering. We expect more transparency,” she told reporters in Brussels.

In December, 2018, Cypriot President Nicos Anastasiades defended the program and said the finger should be pointed at other countries for doing the same.

The program lets wealthy investors from other countries have residency permits allowing travel within the European Union of which Cyprus is a member but which the Paris-based Organisation for Economic Co-operation and Development (OECD) said are being used for criminal means, including tax evasion as the country is fighting a reputation for being a tax hideout haven.

“It cannot be that Cyprus is being targeted, with this criticism being echoed by certain advocates within Cyprus for political expediencies,” Anastasiades said in an interview with TV One channel.

“There was much clamoring for publishing the lists of the providers, and they were given. And where was all the attention focused? On my former law firm,” he said.

He said of the thousands of applications for the citizenship-by-investment program filed by various companies and law firms on behalf of foreign nationals, only 41 were filed by the former firm which nears his name.

Anastasiades stated: “There is an intense targeting of Cyprus from certain quarters. The total citizenships granted via the scheme from 2013 to August 2018 did not exceed 4,700. This represents just 0.3 per cent of the total citizenships granted by other EU member states.”

He added: “I hear some saying that you [Cyprus] are allowing some people to acquire Cypriot citizenship at the expense – supposedly – of the security of the EU. But in Cyprus there has never been any act of terrorism. It is not in my country that acts of terrorism occur.

Cyprus and Malta, where a journalist investigating corruption and money laundering was murdered, were the only European Union countries on an OECD blacklist after the group analyzed more than 100 residence and citizenship by investment schemes.

Cyprus offers two types of schemes: citizenship by investment, naturalization of investors by and residence by investment. According to the OECD the schemes offered by Cyprus and 20 other countries “potentially pose a high-risk to the integrity of CRS.”

“Potentially high-risk CBI/RBI schemes are those that give access to a low personal tax rate on income from foreign financial assets and do not require an individual to spend a significant amount of time in the jurisdiction offering the scheme,” the report said.

In July 2018 there was a warning that wealthy foreigners who can buy so-called Golden Visas to get residency permits in Cyprus – without living there but able to reside in other European Union countries – could find themselves in a bind if the government decides to grant companies or individuals selling investments the right to operate as licensed advisers.

That came from a stakeholder, Akis Kyradjis, Vice President at Arton Capital, who told the Cyprus Mail that they risk being exposed to malpractice and fraud.

“This is like allowing the producers of medicines to act as doctors as well,” said Kyradjis, whose company advises the rich about residency and citizenship matters.

“We find it hard to believe that the government will make Cyprus the only country in the world to declare officially that it allows conflict of interest in providing professional services to investors,” he said.

Ironically, the government, which is aggressively pushing for affluent foreigners to buy the visas, has barred agencies from promoting them.

Kyradjis said that while the government had taken measures to reduce the risk of abuse in other areas, it had not taken a final decision over the licenses.

Applicants are required to present clean criminal records although Cyprus is still fighting a reputation as a haven for tax cheats and money launderers, and they must sign an agreement that they will avoid conflicts of interest between their organizations, clients, business associates and other professionals.

The scheme, introduced in 2014, has been updated with measures regulating the business of the Golden Visas, with investors required to put at least 2 million euros ($2.34 million) into real estate or a company or in shares.

They can invest 2 million euros in securities offered by investment companies licensed by the Cyprus Securities and Exchange Commission, or a combination of both parts.

 

(Material from the Associated Press was used in this report)