A report about EU-wide money-laundering and terrorism financing risks has again zeroed in on citizenship schemes like the one operated in Malta.

The controversial scheme, introduced by the Labour government after sweeping to power in 2013, allows passport buyers access to an EU passport against payments and investments totalling over €1 million.

Misuse of such schemes, which the European Commission notes are deliberately marketed as a means of acquiring EU citizenship, together with all the rights and privileges associated with it, create a range of risks for the EU. 

The Commission’s report was highlighted on the Financial Intelligence Analysis Unit’s website this month.

Among the risks identified by the Commission are the possible infiltration of non-EU organised crime groups, as well as money-laundering, corruption and tax evasion possibilities.

Just last week, Identity Malta, the government agency that runs the scheme, confirmed it had initiated the process to withdraw the Maltese citizenship of Mustafa Abdel-Wadood, who has pleaded guilty to fraud and money-laundering in the US.

Another passport recipient, Chinese national Liu Zhongtian, was recently indicted in the United States amid allegations he avoided paying $1.8 billion in aluminium tariffs.

Concern about lack of transparency and governance of the schemes

The Commission says risks associated with citizenship schemes are exacerbated by cross-border rights associated with EU citizenship or residence in a member state. There is also a concern about lack of transparency and governance of the schemes. 

Malta’s scheme has been criticised by the Opposition and international bodies for failing to clearly identify who has bought their passport. 

Another problem with EU citizenship schemes identified by the Commission is that the procedure of screening applicants is often outsourced to private companies, where there is a permanent risk of conflict of interest and corruption.

It also raises fears that competition between European Union countries could result in a race to the bottom over standards of due diligence and transparency. 

In a direct reference to Malta’s scheme, the Commission says Maltese citizenship is popular with wealthy Russians. Saudi Arabians have also invested in the scheme.

It says one Maltese passport buyer, Waleed al-Ibrahim, chairman of the Middle East Broadcasting Centre, was arrested in November 2017 as part of a corruption purge.

The government insists the scheme complies with the highest standards of due diligence.