Prime Minister Robert Abela declared early into his premiership that he would retain Malta’s Golden Passport scheme – the so-called Individual Investor Programme. In the last seven years the programme has earned Malta over €700 million, which have been placed into the National Development and Social Fund (NDSF). Projects eligible for funding under the NDSF include education, health (for example, dealing with the consequences of COVID-19), and any “initiative for the benefit of future generations”.
Malta’s golden passport scheme has come under intense scrutiny. It may be worth placing this relatively modest programme in a wider context. According to a report by Transparency International a year ago, which examined 17 countries in Europe with golden visa schemes, in the last 10 years the European Union has welcomed more than 6,000 new citizens and about 100,000 new residents through various golden passport schemes.
Spain, Hungary, Latvia, Portugal and the United Kingdom have granted the highest number of golden visas – more than 10,000 each – followed by Greece, Cyprus and Malta. The top-earning countries were Spain (which, on average, received €976 million annually), Cyprus (€914 million annually), Portugal (€670 million annually) and the United Kingdom (€498 million annually). In comparison, Malta’s €718 million over the last seven years is modest. Cyprus has raised about €4.8 billion through the sale of citizenship during the same period.
However, the analysis has highlighted how the schemes offered by Malta, Cyprus and Portugal exercise insufficient due diligence in their oversight, with wide discretionary powers and conflicts of interest “which can open Europe’s doors to the corrupt investor”.
Cyprus and Portugal do not appear to take into account an applicant’s source of funds or their wealth when considering applications. Bulgaria Cyprus and Malta are accused of disregarding EU law by selling passports without requiring applicants to live in their country. But, interestingly, in Europe as a whole, only Malta and Austria publish lists of new citizens or residents.
Although a four-tier due diligence process is in place in Malta, government officials overseeing the individual investor programme enjoy wide discretion when deciding on an applicant’s eligibility.
Those who have criminal records, or are subject to criminal investigation, may still be considered on grounds of ‘special circumstances’.
By their very nature, golden visa schemes are an attractive prospect for the criminal and the corrupt. Clearly, the risk profile of applicants should demand the highest due diligence and the strongest measures to protect the integrity of Malta and the EU.
Member states have a collective obligation to ensure the safety of their citizens and the integrity of European security
In spite of this, recent scandals show that applicants are not being as carefully scrutinised as they should be. The recent case, in a different context, of multi-billionaire Isabel dos Santos, shows that in many cases only lip service has been paid to the legal obligation for applicants to be subjected to robust due diligence procedures.
Given the high success rates of applicants, some EU member states are not particularly strict about the checks and controls conducted on applicants. Hungary, Latvia and the United Kingdom, in particular, were found to have granted residency under such schemes to over 90 per cent of their applicants.
These three countries serve as a salutary warning of the social, political and reputational risks of golden visas. The Hungarian programme was terminated with allegations that individuals with dubious countries had gained EU residence, while Latvia and the United Kingdom had to place brakes on their schemes and considered revoking residency of a significant number of people.
The last EU Commission published a long-awaited report in 2019, which failed to propose EU-wide due diligence standards. Indeed, it shifted most of the responsibility back to member states – the very organisations that have the least incentive to end or even tighten up on the oversight of these lucrative schemes.
There exist no common eligibility and procedural standards across the EU, and there should be. It is critical to harmonise the sale of citizenship across the EU and to ensure that high standards of transparency and due diligence are implemented everywhere.
Member states have a collective obligation to ensure the safety of their citizens and the integrity of European security, which is directly affected by the level of risk they are willing to tolerate when approving applicants for golden visas.
Clearly, golden passports haven’t lost their glitter. But, if the prime minister intends this country to retain the individual investor programme, it behoves Malta to ensure that when the next pressure to stop countries selling EU rights – such as freedom of movement to the criminal and corrupt – it has got its house fully in order.
The European Union has hitherto implicitly appeared to accept that golden passports are here to stay but it is highly likely to return to the issue. If Malta’s individual investor programme is to survive the re-examination of this scheme, it must ensure that two key steps to make it acceptable are taken.
First, there must be considerable improvement in enhanced due diligence oversight procedures, operational integrity and transparency. The discretionary powers and conflicts of interest which currently exist – opening Europe’s doors to corrupt investors – must be firmly shut.
There should be no discretion allowed on so-called grounds of ‘special circumstances’ in the case of those who have criminal records or are subject to criminal investigation. And secondly, the sale of golden passports without any obligation for applicants to live in Malta is against EU law and must be changed.