EU warns of crime risks from governments’ sales of passports, visas

The European Commission warned on Wednesday that programs of some EU states to sell passports and visas to wealthy foreigners could help organized crime groups infiltrate the bloc and raise the risk of money laundering, corruption and tax evasion.

The warning is contained in the first report the EU executive has produced over the multi-billion-dollar industry of so-called “investment migration,” which allows rich individuals to buy citizenship or residence in countries that put them on sale.

Although legal, these schemes are sometimes run in opaque ways and without sufficient checks on those who acquire passports and visas, the Commission said, mostly raising concerns about the programs in Malta and Cyprus.

Brussels warned of risks for the entire bloc as passports and residence permits issued by one country of the 28-nation union give unhindered access to most other member states.

This causes “possible security risks such as money laundering, terrorist financing, corruption and infiltration of organized crime,” the EU Commission said in the report, confirming a Reuters story earlier this week.

In the EU, Malta, Cyprus and Bulgaria are the only countries who sell their citizenship, issuing “golden passports” in return for investments ranging between around 1 million and 2 million euros ($2.2 million).

Twenty EU states, including those three, sell residence permits, or “golden visas,” to foreigners willing to invest in their new host countries, with a range of between nearly 15,000 euros ($17,000) in Croatia and over 5 million euros in Luxembourg and Slovakia.

Bulgaria, which is not part of the EU’s border-free Schengen area, said on Tuesday it would stop its passports selling program, a day after Reuters reported on the Commission’s warnings citing a draft document.

The Commission’s assessment is “fundamentally misguided” and fails to understand how the industry works, Henley & Partners, the firm which set up the Maltese scheme, said in a statement.

It added that the commission ignored the “significant” economic benefits of investment migration schemes.

Golden gates

The Commission did not provide estimates of the revenues made by EU states who run these schemes.

But a report from campaign groups Global Witness and Transparency International said in October that EU states generated around 25 billion euros in foreign direct investment in a decade from selling at least 6,000 passports and nearly 100,000 residency permits.

The Commission’s report said that both schemes posed risks, but underlined the shortfalls of programs run in Malta, Cyprus, which do not sufficiently check the origins of wealth of individuals who purchased their citizenship, and do not allow their easy identification.

They also circumvented EU rules that require “effective” residence in an EU state before granting citizenship, the report said.

“There should be no weak link in the EU, where people could shop around for the most lenient scheme,” the EU justice commissioner Vera Jourova said warning about the risks of leaving “golden gates” open into Europe.

To tackle these risks, Brussels said it will set up a group of experts that will recommend by the end of the year a common set of security checks for passport-for-sale programs.

Jourova said the EU cannot ban the schemes but can, however, require changes to the programs. The report, which came five years after the EU Parliament urged the commission to act, did not recommend any legislative change or sanctions.

“The Commission’s report tells us nothing about what member states actually need to do – they’ve sounded an alarm, and yet offered no solution,” said Naomi Hirst of Global Witness.

[Reuters]