On September 19, the European Commission gave Malta two months to scrap its Individual Investment Programme, known as the ‘golden passport’ scheme, or else face legal action before the European Court of Justice. This scheme was launched in 2014 by the administration of disgraced former Labour prime minister Joseph Muscat and allowed wealthy third-country citizens to obtain a lifelong Maltese citizenship in return for around €1 million in money and investments.
This legal action is expected to have a negative impact on Malta’s economy, an economy that has already been significantly affected by its recent year-long placing on the grey list.
Malta has obstinately disregarded the EC’s repeated warnings to end its golden passport scheme that grants successful applicants the right to unimpeded travel, work and settlement in all 27 EU member states, Norway, Lichtenstein, Iceland and Switzerland, access to the EU’s internal markets and visa-free travel to over 167 countries, including the US and Canada.
The EC believes the passport-for-sale scheme, from which Malta has controversially raised €1.1 billion, breaches EU law since it poses serious risks of infiltration in the EU bloc by non-EU organised crime groups, thus opening the door to corruption, money laundering and tax evasion.
Those who have mainly benefitted from the Maltese passport scheme include hundreds of Russians, Chinese and Saudis and their families. These included members of the Saudi royal family and Russian oligarchs linked to the Kremlin, among them persons who obtained their wealth through improper and unlawful means.
From documents that were revealed last year by the Daphne Caruana Galizia Foundation it became known that a loophole enabled applicants to fulfil their contractual obligation of leasing a property for a minimum of five years as proof that they had a genuine link to Malta as the naturalising country, despite leaving such a property empty. Apart from apartments, applicants are known to have even rented hovels and garages.
Russian, Chinese and Saudis have spent less than three weeks in Malta to secure their Maltese passport, despite being expected by the EC to spend at least 183 days in the country during the 12 months preceding the issuing of their citizenship.
Applicants used the few days spent in Malta to have a holiday, pick up their residency card, open a bank account and fulfil other requirements.
An individual from the United Arab Emirates arrived in Malta in the morning and left nine hours later during which time he also took his oath of allegiance.
In practice, applicants were not even required to step foot on Maltese soil and the leasing of a property was considered as sufficient proof of residency.
Malta’s golden passport scheme has put Europe’s security at considerable unnecessary risk- Denis Tanti
Prime Minister Robert Abela, who, together with his wife, Lydia, was listed as an accredited agent for the golden passport scheme, like many other landlords took advantage of phantom rents to prospective passport buyers and collected thousands of euros by renting out his villa in Żejtun built in an outside development zone to prospective Russian passport applicants.
The due diligence processes that applicants were supposed to pass to ensure that they were of good reputation and character was put into serious doubt after the government agency Identity Malta was given the discretion of deciding whether to do away with a police certificate for the purpose of ensuring that an applicant had a clean criminal record.
Instead, it could opt to simply rely on an affidavit made by the applicant himself to that effect.
Similarly, Identity Malta was given the sole and absolute discretion to make recommendations to the justice minister for the approval of a citizenship to an applicant with a criminal record or who was subject to criminal investigations or else had provided false information.
Maltese citizenship was granted to a number of third-country nationals accused or found guilty of fraud and money laundering, which raises serious doubts on the meticulousness with which Identity Malta carried out the stipulated four-tier diligence checks on applicants either directly or through the concessionaire, Henley & Partners. On its part, the government refused to reveal the names of those who received citizenship through the scheme.
On October 20, 2020, the EC launched infringement procedures against Malta and Cyprus through a letter of formal notice urging both countries to end their respective passport-for-sale schemes.
Cyprus and Bulgaria eventually scrapped their schemes, leaving Malta the only EU country to have such a programme.
In an effort to appease the EC, two years ago, the government replaced its Individual Investment Programme by a residency plan that introduced a number of conditions required to be satisfied by applicants, the most stringent of which was that applicants needed to be granted residence in Malta prior to being given citizenship.
These conditions had evidently done little to allay the concerns of the EC, which advanced its infringement procedures against Malta on June 9, 2021 by sending another letter of formal notice about potential legal steps.
This was followed by a reasoned opinion that the commission sent to Malta on April 6. After considering Malta’s reply as not satisfactory to address its concerns, the commission proceeded with its legal action.
The commission is not only insisting on an end to golden passport schemes, but it has also urged EU states to immediately withdraw citizenship granted to Russians and Belarusians hit by EU sanctions for supporting the war in Ukraine.
In the event that the ECJ finds Malta to be in breach of EU law and it chooses not to comply with its ruling, Malta would have to face hefty financial penalties imposed as a deterrent.
The government is treading on dangerous ground by its stubbornness in continuing to implement its golden passport scheme.
Malta needs to re-establish trust in its relationship with the EU that has been undermined by actions of Muscat’s government.
The first step required to be taken by Malta to show its loyalty to the EU would be that of terminating its golden passport scheme, a scheme that has put Europe’s security at considerable unnecessary risk over the past years.
Denis Tanti is a former assistant, director at the health ministry.