Cyprus cried “double standards” after the European Commission said its citizenship for investment scheme could help organised crime gangs infiltrate the bloc or be a conduit to money laundering and corruption.
The warnings were included in a report published on Wednesday by the European Union’s executive, which also focused on Malta and Bulgaria.
“Investor citizenship and residence schemes pose risks for the Member States and the Union as a whole, including in terms of security, money laundering, corruption, circumvention of EU rules and tax evasion,” said the report.
Although individuals who purchase citizenship and residence in EU states can do it for legitimate reasons, the commission said the risks are further compounded by shortcomings in the transparency and governance of such schemes.
Malta, Cyprus and Bulgaria are the only members of the 28-member bloc which run schemes selling citizenship, while 20 countries, including those three, sell residence permits.
The report highlights shortfalls among all three in checking the origins of wealth of individuals who purchased their citizenship. It said these countries also did not allow easy identification of those who bought their passports.
Cypriot President Nicos Anastasiades told reporters on Wednesday that Cyprus was being unfairly singled out by its critics and rival countries looking to attract foreign investment.
“Cyprus has been targeted for reasons that are well known, either due to rivalry or for other reasons…,” said Anastasiades.
He added: “Eventually these double standards must end…we have the strictest criteria of all 20 states offering European citizenship, yet Cyprus is still targeted.”
He said Cyprus had only granted 0.3% of all citizenships granted across the EU.
The study commissioned by Brussels said that the information available on both investor citizenship and residence schemes operated by Member States is “incomplete”.
“For instance, clear statistics on applications received, accepted and rejected are missing or insufficient,” the report said.
It added: “Furthermore, there are no mechanisms to ensure cooperation between the Member States on investor citizenship schemes, notably on security checks.”
Cyprus, Malta and Bulgaria offer wealthy foreigners an EU passport, for investments ranging between around 1 mln euro – 2 mln euro.
Concerns were also voiced about the required “effective” residence in an EU state before granting citizenship.
“The Commission has concerns about the risks inherent in investor citizenship and residence schemes and about the fact that the risks are not always sufficiently mitigated by the measures taken by Member States,” said the report.
Cyprus has long denied it is selling-off EU passports and has recently tightened its procedures for its investment scheme like capping applications to 700 annually.
Nicosia feels it is attracting unfair criticism becaise of its links to Russian money.
Brussels said it will monitor the steps taken by Member States to ensure transparency and good governance in the implementation of the schemes.
“With a view to address, in particular risks of infiltration of non-EU organised crime groups in the economy, money laundering, corruption and tax evasion.”
The Commission said it will monitor wider issues of compliance with EU law raised by the schemes and it will “take necessary action, as appropriate”.
