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EU measures to crackdown illegal Golden Visa schemes not adequate, say critics

Golden Visa schemes that sell citizenship and residency to the super rich threaten the EU’s collective security and integrity and attract criminals, the European Commission has warned. Twenty states, including Greece, the United Kingdom, Ireland and Spain, sell residency permits while Malta, Cyprus and Bulgaria currently offer “citizenship for sale” schemes.

For the first time, the Commission issued a report on the issue in which it states that the citizenship schemes are “deliberately marketed and often explicitly advertised as a means of acquiring EU citizenship” with Bulgaria, Cyprus and Malta disregarding Union Law by selling passports without requiring applicants to live in their country.

A day ahead of the report’s release, the Bulgarian government announced they would suspend their citizenship scheme.

The EU urged member states to tighten controls over their Golden Visa programs, warning the schemes can be used by organized crime groups for money laundering, corruption and tax evasion.

The report is expected to make recommendations on how to regulate schemes that allow wealthy individuals to purchase residency or citizenship in exchange for investment.

Criticism

Anti-corruption watchdogs Transparency International and Global Witness warn that the report from the Commission falls short of the urgent action needed to clean up the shady industry.

“The tide is turning on the golden visa industry with the EU recognising the unacceptable security and corruption risks they create. However, the Commission’s report tells us nothing about what Member States actually need to do – now they’ve sounded the alarm, they need to offer solutions,” said Naomi Hirst, Senior Anti-Corruption Campaigner at Global Witness. “It’s now time for Member States to take responsibility for their golden visa schemes and, following Bulgaria’s lead, suspend them until it is clear they are no longer threatening the security of the EU.”

The report states that the Commission will convene a “group of experts” to tackle risks in citizenship schemes and prepare a set of security checks by the end of 2019. But Global Witness and Transparency International say these measures are not adequate for what is needed. The two organisations are calling for stricter due diligence measures and an EU-wide enforcement of these standards.

“This report firmly puts the spotlight on dubious schemes in Member States, which is a good first step.” said Laure Brillaud of Transparency International. “However, we see little incentive for countries like Malta to scrap these lucrative schemes without strong action from international institutions such as the EU.”

The Commission is not the only European body that has expressed concern with golden visas. In a draft report published in September, the European Parliament’s Special Committee on Financial Crimes and Tax Evasion (TAX3) called for the schemes to be phased out.

EU Commission statement:

For the first time, the Commission has presented a comprehensive report on investor citizenship and residence schemes operated by a number of EU Member States.

The report maps the existing practices and identifies certain risks such schemes imply for the EU, in particular, as regards security, money laundering, tax evasion and corruption. A lack of transparency in how the schemes are operated and a lack of cooperation among Member States further exacerbate these risks, the report finds.

Investor Citizenship Schemes (‘golden passports’)

In the EU, three Member States (Bulgaria, Cyprus and Malta) currently operate schemes that grant investors the nationality of these countries under conditions which are less strict than ordinary naturalisation regimes. In these three Member States, there is no obligation of physical residence for the individual, nor a requirement of other genuine connections with the country before obtaining citizenship.

These schemes are of common EU interest since every person that acquires the nationality of a Member State will simultaneously acquire Union citizenship. The decision by one Member State to grant citizenship in return for investment, automatically gives rights in relation to other Member States, in particular free movement and access to the EU internal market to exercise economic activities as well as a right to vote and be elected in European and local elections. In practice, these schemes are often advertised as a means of acquiring Union citizenship, together with all the rights and privileges associated with it.

The Commission’s report has identified the following areas of concern:

·    Security: checks run on applicants are not sufficiently robust and the EU’s own centralised information systems, such as the Schengen Information System (SIS), are not being used as systematically as they should be;

·    Money laundering: enhanced checks (‘due diligence’) are necessary to ensure that rules on anti-money laundering are not circumvented;

·    Tax evasion: monitoring and reporting is necessary to make sure that individuals do not take advantage of these schemes to benefit from privileged tax rules;

·    Transparency and information: The report finds a lack of clear information on how the schemes are run, including on the number of applications received, granted or rejected and the origins of the applicants. In addition, Member States do not exchange information on applicants for such schemes, nor do they inform each other of rejected applicants.

Investor Residence Schemes (‘golden visas’)

Investor residence schemes, while different from citizenship schemes in the rights they grant, pose equally serious security risks to Member States and the EU as a whole. A valid residence permit gives a third-country national the right to reside in the Member State in question, but also to travel freely in the Schengen area. While EU law regulates the entry conditions for certain categories of third-country nationals, the granting of investor residence permits is currently not regulated at EU level and remains a national competence. Currently, 20 Member States run such schemes: Bulgaria, Czechia, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia and the United Kingdom. The Commission’s report has identified the following areas of concern:

·    Security checks: There are certain security obligations under EU law that must be carried out before issuing a visa or residence permit to foreign investors. However, there is a lack of available information on the practical implementation and discretion in the way that Member States approach security concerns;

·    Physical residence requirement: Residence permits obtained by investment, with limited or no required physical presence of the  investor in the Member State in question, could have an impact on the application of and rights associated with the EU Long-Term Residence Status, and may even provide a fast-track to national and thereby EU citizenship;

·    Lack of transparency: The report stresses a lack of transparency and oversight of the schemes, in particular in terms of monitoring and the absence of statistics on how many people obtain a residence permit through such a scheme.

Next steps

The Commission will monitor wider issues of compliance with EU law raised by investor citizenship and residence schemes and it will take necessary action as appropriate. For this reason, Member States need to ensure, in particular, that:

·         All obligatory border and security checks are systematically carried out;

·         The requirements of the Long-Term Residence Permit Directive and the Family Reunification Directive are properly complied with;

·         Funds paid by investor citizenship and residence applicants are assessed according to the EU anti-money laundering rules;

·         In the context of tax avoidance risks, there are tools available in the EU framework for administrative cooperation, in particular for exchange of information.

The Commission will monitor steps taken by Member States to address issues of transparency and governance in managing these schemes. It will establish a group of experts from Member States to improve the transparency, governance and the security of the schemes. That group will be tasked, in particular, with:

·     Setting up a system of exchange of information and consultation on the numbers of applications received, countries of origin and on the number of citizenships and residence permits granted/rejected by Member States to individuals based on investments;

·     Developing a common set of security checks for investor citizenship schemes, including specific risk management processes, by the end of 2019.

Finally, concerning third countries setting up similar schemes, which may have security implications for the EU, the Commission will monitor investor citizenship schemes in candidate countries and potential candidates as part of the EU accession process. It will also monitor the impact of such schemes by EU visa-free countries as part of the visa-suspension mechanism.

PS For one more time the EU proved “inadequate” hen it comes to legislation. it always forgets important features….

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