Malta’s Individual Investment Programme (IIP) has produced €1.4 billion in the country’s coffers in the last six years. Some of those funds have been utilised in the country’s efforts to mitigate the effects of the COVID-19 pandemic. However, the gains from the golden passports scheme, as various countries labelled the IIP, have come at a steep cost in the form loss of reputation for the country, which has reached a critical point.
The government has now revised the criteria for non-EU nationals to qualify for Maltese residency and eventually citizenship. This followed years of official government announcements stating that the scheme was based on solid criteria meant to prevent abuse.
The EU Justice Commissioner, Didier Reynders, in a video-hearing of the Committee on Civil Liberties, Justice and Home Affairs criticised Malta, Cyprus and Bulgaria for their citizenship-by-investment schemes.
Even if decisions on such citizenship schemes are a national competence, the impact on the whole of the EU is undeniable. A European Parliament delegation had described Malta’s scheme as risking “importing criminals and money laundering into the whole EU”.
Claims have been made of abuse of high-level connections in business and politics to facilitate the application process of those seeking Maltese passports.
It is in this context that the Maltese government made a welcome U-turn when deciding to phase out the IIP.
Prime Minister Robert Abela, whose law firm used to sell Maltese passports before he took power in January, has in the past dismissed calls for the scheme to be terminated.
The main changes in criteria relate to the requirement for applicants for Maltese citizenship having to spend from one to three years living in Malta before they are granted citizenship. The value of property to be bought as an investment to qualify for citizenship has also been doubled.
The government believes that these changes should make this scheme acceptable to other EU member states and presumably to MoneyVal that still has doubts about Malta’s determination to adhere to anti-financial crime regulations. The Malta Chamber of Commerce, Enterprise and Industry, a business lobby, says it is happy with the changes made.
While there is no doubt that the changes in the new citizenship scheme are most welcome, it remains to be seen whether they will close the money-laundering loopholes of the previous scheme. Reynders says that “the Commission insists that the COVID-19 pandemic crisis and its impact on member states’ economies should not be used as a reason to operate risky EU citizenship schemes”.
By approving the rehashed criteria, the government has missed the opportunity to ensure that new applicants for Maltese citizenship will add value to Maltese society beyond the limited financial gain through the sale of a property and the payment of fees.
The new criteria would have benefitted the country more if the granting of citizenship was linked to investment that created new high-quality jobs in enterprises that promoted research and development or the promotion of the green economy.
It remains to be seen whether the European Commission and MoneyVal will consider the new scheme as sufficiently robust to mitigate the risk of money laundering by rogue applicants. Ultimately, the acid test of the reliability of the new citizenship scheme will be the extent of the political will to implement the qualifications criteria meticulously.
Should the new scheme prove to be just a PR rebranding of the old IIP scheme, Malta’s reputation will continue to suffer.