Cyprus' Golden Visa program offering residency permits to rich foreign investors that let them travel through the European Union was among 21 that the Paris-based Organisation for Economic Co-operation and Development (OECD) said are being used for criminal means, including tax evasion, with the country still fighting a notorious reputation for being a tax hideout haven.
Cyprus and Malta, where a journalist investigating corruption and money laundering was murdered, were the only European Union countries on the OECD black list, said the Cyprus Mail. The OECD analyzed more than 100 residence and citizenship by investment (CBI/RBI) schemes offered by jurisdictions committed to the OECD/G20 Common Reporting Standard (CRS).
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.
The other countries on the list were Antigua and Barbuda, The Bahamas, Bahrain, Barbados, Colombia, Dominica, Grenada, Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, the United Arab Emirates and Vanuatu.
A joint report by Global Witness and Transparency International said programs run by some EU countries to sell passports and residency permits to wealthy foreign citizens pose risks of money laundering as some of the schemes are not properly managed.
The programs are available in 13 EU countries: Austria, Cyprus, Luxembourg, Malta, Greece, Latvia, Portugal, Spain, Ireland, Britain, Bulgaria, the Netherlands and France. Hungary has terminated its programme.
According to the report, titled ‘European Getaway – Inside the Murky World of Golden Visas’. Cyprus’ CBI marketing says the island offers “the quickest, most assured route to citizenship of a European country”.
“The statistics seem to support this,” the report said. “Cyprus’ passports-for-sale scheme is the most prolific of its kind in Europe, with 3,300 foreign nationals having secured EU passports since 2013,” earning the country some 4.8 billion euros ($5.5 billion).
In July, 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 also invest 2 million euros in securities offered by investment companies licensed by the Cyprus Securities and Exchange Commission, or a combination of both parts.