More on EU debates and tightening:

Europe is not quite the same since Russia’s invasion of Ukraine. European reaction to the war is in many ways strengthening the old seams of the EU project and, since its outbreak, one of the moral contradictions facing EU member states in recent years, the sale of citizenship, is now being tackled with much greater consensus.

Following the 2008 financial crisis, which hit southern European economies particularly hard, a number of countries, such as Portugal in 2012 and Spain in 2013, decided to set up schemes to enable the purchase of residence visas for “international investors”, that is, third-country nationals with sufficient purchasing power to secure the right to reside in the EU against payment, providing them with the key to full European citizenship within just a few years. Greece, Ireland, Italy, Malta and Cyprus soon went down the same route. They were followed not long after by the Netherlands, Bulgaria, Estonia, Latvia and even Luxembourg.

In countries such as Bulgaria, Malta and Cyprus, these ‘golden visa’ programmes, technically known as ‘residence by investment’ schemes (RBI), were accompanied by the so-called ‘golden passport’ programmes, which speed up the whole process and offer direct access to ‘citizenship by investment’ (CBI). After years of pressure from Brussels, Bulgaria and Cyprus have committed to ending CBI. Malta, however, has not, so it is still possible to buy an EU passport within a matter of a year.

“The main beneficiaries of both systems have been Chinese oligarchs and Russian oligarchs,” Spanish MEP and former justice minister Juan Fernando López Aguilar, who chairs the European Parliament’s Committee on Civil Liberties, Justice and Home Affairs, tells Equal Times. In many cases, he insists, “they are mafiosi and corrupt individuals who launder the wealth, illicitly acquired in their countries of origin, by buying the privilege of residing in Europe and acquiring property in Europe, which has nothing to do with investment, and much less with creating jobs – all they have to do is buy mansions, yachts and real estate, which is what they do.”

RBI programmes were defended at the time as a way of attracting investments into countries such as Spain and Portugal.

“In both cases they were adopted at the time of conservative governments, which [against a backdrop of economic crisis] introduced legislative measures to, in practice, make money from granting residence rights, even though they are not linked to any actual investment and there are no checks on that investment. So we are clearly faced with issues that impact on European money laundering legislation,” the MEP summarises.

In October 2020, at the request of the European Parliament, the European Commission referred Malta and Cyprus to the European Court of Justice, alleging that their CBI programmes violated several fundamental articles of EU law.

The European Parliament also called on the Commission in March 2022 to prepare legislation banning ‘golden passports’ (CBI) across the EU and to set very strict conditions on ‘golden visa’ (RBI) schemes, with “stringent background checks” on applicants. And, adds López Aguilar, “with mandatory checks against all the databases shared by the EU-LISA agency, which reports regularly to the committee I chair, so that not only people who acquire this residence permit, but also all their direct first-degree relatives can be examined, and with the express obligation to consult and notify all member states, so that they can raise objections [on a case-by-case basis] to any person seeking residence in another member state.”

Investment migration and due diligence

These schemes are not, however, a European invention. There is a whole network of companies specialising in advising wealthy individuals interested in paying for a visa or residence permit in the 30 or so countries around the world that offer them, from small island nations in the Caribbean to economic giants such as the US, the UK and Canada, where the first such programmes were launched in 1986.

It is from Canada that Eric Major, the ‘father’ of the Malta Individual Investor Programme originally hails. Now a founding member and CEO of one of these firms – Latitude RCBI Consultancy – he assured Equal Times that these CBI schemes are a very useful tool for small or economically distressed countries, and that it would be senseless to disregard that.

Major defends the Maltese CBI scheme as an example of how best to regulate so-called “migration by investment”, a global market that generated 21.4 billion euros between 2011 and 2019 through CBI and RBI schemes.

“The US is still the country that approves the most ‘golden visas’ at around 10,000 people a year, while Portugal approved about 1,500 last year, Spain about 1,000,” says Major. “Depending on the size of the family being considered, the cost (of Maltese citizenship) will typically range between €900,000 at the low end, and €1.2 to €1.3 million.” It is “an injection to the National Development and Social Fund,” he adds, which finances “schools, roads and hospitals”. Malta, he explains, receives some 400 applications a year, of which around 250 are approved. “That is around 250 families; that means less than 1,000 people a year. And in the grand scheme of things, that’s 1,000 people who give on average a million euros each. So, you have an island nation that receives €200 million a year with this programme and that is particularly transformative for a small country, and all the more so in a post-Covid world.”

For Major, whose views are fairly representative of those of the Investment Migration Council, what MEPs are raising “are absolutely acceptable issues and need to be addressed”, as “some countries are doing better than others”. He argues that Malta offers an example of what could be satisfactory controls, which were inspired by practices in the banking sector. He refers to this as “four-tier due diligence”, whereby the state has to verify the good moral character of the applicants and the provenance of the funds provided through recourse to international banking databases, the law enforcement agencies of the countries in which they have resided and reports from firms specialising in data verification and risk analysis – all paid for by each applicant as part of the conditions of the programme.

For the European Parliament, however, this is not enough. “Malta and Cyprus keep in place these tools that are supposed to attract foreign investment but [they] have inevitably led to corruption and the laundering of illicitly obtained capital, without the slightest doubt,” says López Aguilar, who hopes that the ECJ will ultimately invalidate these programmes “based on their incompatibility with European law.”

For citizenship scholar Dimitry Kochenov, professor at the Institute of Democracy at the Central European University (CEU) in Budapest, the possibility of such a ruling is not so clear. As he explains to Equal Times, in Europe “citizenship has always been regulated, by default, at the national level, and there is no legal basis for regulating it at the supranational level”, so he does not believe that CBI programmes could be banned. “With residence, it is different, because there is a legitimate legal basis in the treaties by which the EU can legislate to harmonise residence rules and laws in the member states.”

Kochenov, himself a Dutch citizen of Russian origin, fears that the European Parliament’s measures against Russian beneficiaries of these programmes may be counterproductive. “The majority of the oligarchs on the sanctions list did not receive their European passports by investment, because there are plenty of other fully lawful ways,” he explains, as seen with Roman Abramovich, who became Portuguese based on his descent from the Sephardic diaspora. And then there are those who “have acquired citizenship in Europe, or the Caribbean, or elsewhere, because they wanted to escape Putin’s regime rather than support it,” such as Pavel Durov, the creator of the messaging app Telegram, who after refusing to collaborate with the FSB was able to flee Russia by buying citizenship of the Caribbean micro-state of Saint Kitts & Nevis. In 2021, he also acquired Emirati and French citizenship.

“To say that every person who comes from Russia and naturalises in the EU is potentially suspect ignores the simple fact that Russia is not a democracy” and that “many of the people who flee the country need to naturalise elsewhere because there is simply no other way”, so “naturalisation precisely enables their fight with the regime and their opposition to the war in Ukraine”, insists Kochenov.

López Aguilar believes that “this has to be filtered on a case-by-case basis, with all the guarantees required,” so that no one can make wrongful claims. The European Parliament’s intention is not to act against legitimate migration, but to close the door to international criminals and corrupt individuals who have been exploiting these schemes in the EU. And the war is acting as “an accelerant” in this regard, prompting the European Commission to strongly defend and adopt the EP’s proposals to strictly regulate ‘migration by investment’. “If we want to hurt Putin, we have to hurt the Russian oligarchs,” he concludes. “And if we want to hurt the Russian oligarchs, we have to put an end to this.”