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Pierre du Pasquier: Practice of golden passports - Cyprus and Malta in European Union's crosshairs


In October 2020, Cyprus announced the abolition of the golden passports that would come into force on November 1. The announcement was declared after the broadcasting of an investigation, led by Al-Jazeera television channel, on the alleged abuses of this practice (Aljazeera 2020:1). The channel revealed how, during a secret conversation, the Parliamentary speaker of Cyprus and a Chinese investor, with a criminal record, offered the latter to use his influence in getting a Cypriot passport (Reuters 2020:1).


This major scandal came shortly after the European Commission had launched infringements proceedings against Cyprus and Malta to put an end to their golden passports (New York Times 2020: 1). Essentially, the aim of these citizenship loophole schemes is to provide non-European nationals with an official national citizenship status of a European Union country by means of financial incentives. Interestingly, the scheme has already generated 7 billion euros revenue for Cyprus or a quarter of its annual GDP. Under the Cyprus regime, gaining citizenship and by extension European Union (EU) citizenship (Van Ooik, R et al. 2010: 29), one has to invest a minimum of €2,200,000 of which at least € 500,000 have to go towards the purchasing of a main residence, €100,000 are donated to the Cyprus land development corporation and €100, 000 are bequeathed to one of the four following funds: Research and Innovation Foundation, Renewable Energy and Energy Saving Fund, Service of Industry and Technology and the National Solidarity Fund (Nomad Capitalist: 1). The remaining investment lies in the individual’s personal taste. By the same token, after obtaining citizenship, the individual’s entire family becomes eligible for European citizenship status as well.


Prior to the wrongdoings revealed by Al-Jazeera, other investors successfully secured golden passports such as, Jho Low who was wanted in the United States for alleged misappropriation of more than $2,700,000 from the Malaysia Development Berhad, that was designed to further economic development, and Rami Makhlouf, a billionaire cousin of Bashar al-Assad who was granted Cypriot citizenship at the height of the civil war in Syria. Furthermore, another far more prevalent practice, labelled as the investor residence scheme (golden visa), that consists of allowing an investor to acquire a legal residency in a European country which often offers an easy route to citizenship after prolonged residency (Euronews 2020:1). Interestingly, Member States such as, Italy, Spain, Portugal, the Netherlands and the United Kingdom all hold schemes of this nature.


Against this background, the European Commission and Ursula von der Leyen in her State of the Union decided to target these golden passports. The speech commenced by raising awareness of the golden passport’s knock-on effects whilst simultaneously defending European citizenship’s core principles for instance, Ursula von der Leyen stated that “European values are not for sale” (Euractiv 2020: 1). Despite both the Commission and Mrs von der Leyen’s recognition and respect for the Member States discretionary power to set the requirements for gaining citizenship, they did however raise concerns as to the wider issue of whether one should buy their way into the European Union. All the more, they highlight the consequences of the golden passports practice on the European Union’s four freedoms (goods, services, capital and people) which endow a European citizen with the right to move, reside and work freely throughout the Union. Furthermore, a general outcry is felt due to the security implications of these schemes. As witnessed in the cases of Jho Low and Rami Makhlouf, the golden passports appear to allow these individuals to seemingly abuse the EU’s practice and perceive it as an open door to get EU membership.


Moreover, the last downside resides in the involvement of money laundering surrounding the access to these passports. Interestingly, a report from the European Commission asserts that “whilst some Member States require all payments to be made through their national banks which must apply the necessary customer due diligence checks, some legislation does not provide for particular checks” (European Commission 2019: 16). Here, the Commission notably refers to Croatia and Portugal which apply more flexible criteria on foreign direct investment.




Overall, paid citizenship and residence systems are still commonplace in the EU. These practices subject the entire Union to high risks of money laundering, tax fraud and corruption, and also threaten its security. Thus, the EU’s decision to clamp down on two of the most prominent grantors of the golden passports and visas already represents a giant step forward in preventing undesirable individual behaviour on the European territory.


Written by Pierre du Pasquier, Amsterdam Chapter of European Horizons.


Bibliography:


Crutcher, A. (2020). “Is it really the end for Cyprus’s golden passports?”, Aljazeera, October 16:1. Retrieved from https://www.aljazeera.com/news/2020/10/16/is-this-really-the-end-for-cypruss-golden-passports.

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EC) European Commission (2019). Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Brussels: European Commission. Retrieved from https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1706.


Gotev, G. (2020). “Von der Leyen: European values are not for sale”, Euractiv, September 16:1. Retrieved from https://www.euractiv.com/section/justice-home-affairs/news/von-der-leyen-the-european-values-are-not-for-sale/.


Hurst, L. (2020). “Buying EU citizenship: what are golden passports and visas and how do they work?”, Euronews, October 20:1. Retrieved from https://www.euronews.com/2020/10/20/buying-eu-citizenship-what-are-golden-passports-and-visas-and-how-do-they-work.


Kambas, M. (2020). “After outcry, Cyprus suspends its citizenship for cash programme”, Reuters, October 13:1. Retrieved from https://fr.reuters.com/article/cyprus-citizenship-idINKBN26Y22K.


Stevis-Gridneff, M. and Pronczuk, M. (2020). “E.U. Tells Cyprus and Malta to Abandon ‘Golden Passports’”, New York Times, October 20:1. Retrieved from https://www.nytimes.com/2020/10/20/world/europe/cyprus-malta-golden-passports.html.


Van Ooik, R. and Vandamme, T. (2010). European Basic Treaties: Treaty on European Union, Treaty on the Functioning of the EU, Charter of Fundamental Rights of the EU, Treaty of Lisbon. Deventer: Kluwer.


Vojinovic, J. “Cyprus citizenship by investment: the ultimate guide”, Nomad Capitalist. Retrived from https://nomadcapitalist.com/2020/04/23/cyprus-citizenship-by-investment/.









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