Cyprus to strip dozens of citizenships after admitting flaws in investment scheme
Cyprus has started a process to rescind the citizenship of 26 individuals who obtained a Cypriot passport through the country’s investment scheme
by Massimo Costa
Cyprus has started a process to rescind the citizenship of 26 individuals who obtained a Cypriot passport through the country’s investment scheme.
The Mediterranean island has admitted its scheme had flaws, following an October Reuters report which uncovered a list of Cambodian high-ranking officials, including the chief of police, finance minister, and relatives of the prime minister, who had bought Cypriot citizenship. The passports were bought using wealth held overseas.
The Cypriot scheme has also come under fire for granting citizenship to Jho Low, a Malaysian financier sought by Malaysian, Singaporean and US authorities in connection with the 1Malaysia Development Berhad scandal.
Family members or allies of Cambodia’s leader, including the police chief who has been instrumental in clamping down on dissent, and its finance minister, received Cypriot citizenship in 2016 and 2017.
Apart from accusations that everyone involved in the scheme failed to carry out proper due diligence in certain cases, detractors have also accused President Nicos Anastasiades over the fact that the law firm bearings his name is also involved in securing 41 out of 4,000 citizenships.
His son-in-law, Yiannis Misirlis, is also a developer and deputy chairman of LBDA, the Cypriot Land and Building Development Association, which has defended the government’s investment for citizenship programme.
In a statement, LBDA sought to emphasise the programme’s decisive contribution to the growth of the economy and the creation of long-term conditions of prosperity.
It said criticising the scheme hurt the country’s credibility and endangered everything that had been achieved in the past few years.
According to the association, the programme contributed to the creation of “tens of thousands of jobs across many sectors of the economy” virtually affecting every household.
The law firm involved in the Cambodian case belongs to the father former transport minister Marios Demetriades.
Cypriot interior ministry data showed that the firm was involved in 137 applications between 2014 and 2018, a period during which Marios Demetriades was a member of the cabinet that approved them.
Nationality granted “mistakenly” would be revoked if “errors” were uncovered in Mr Low’s case and others, President Anastasiades said on Monday.
No obligation for physical residence under Cypriot scheme
Cyprus has earned about €6bn from issuing about 4,000 passports under the scheme since it was launched in 2013 to help the economy recover from a banking sector collapse.
Those seeking to obtain citizenship from Cyprus through its investment programme have no obligation to physically reside in the country before, during or after the application process. They are only required to visit Cyprus once to obtain a permit of permanent residency.
Cyprus bills itself as offering the quickest route to citizenship of a European country, promising visa-free travel to over 170 countries and access to freedom of movement in the EU.
Its scheme – which was first launched in 2013, in the midst of fiscal-banking crisis which crippled the island’s economy – requires an investment of €2 million in either real estate, or in alternative investment funds, the purchase of or participation in a Cypriot company, or a mix of all the options.
It also requires a donation of €75,000 to the government’s research and development fund and another €75,000 to the Land Development Corporation. Moreover, a property worth at least €500,000 has to be held in perpetuity, although this property can be added to the €2 million portfolio if the investment is done purely in real estate.
Within merely six months of such an investment, an applicant can be granted a Cypriot passport.
The Maltese programme
Conversely, Malta’s IIP scheme, launched in 2014, requires that applicants provide evidence of a “genuine link” with Malta, supported by written approval from Identity Malta. Citizenship can only be granted after 12 months from the effective date of the commencement of the genuine link, with candidates also having to commit to a minimum physical presence in Malta before such granting.
To be eligible for Maltese citizenship under the IIP scheme, main applicants must make a €650,000 payment to the government. They have to also lease a property for a minimum of €16,000 a year, or purchase one worth at least €300,000. They are further required to acquire €150,000 worth of stocks, bonds, debentures, special purpose vehicles or other investments.
Applicants or dependents, moreover, have to undergo a “fit and proper” test, and cannot have a criminal record or be facing pending charges related to charges such as terrorism and money laundering.
From the date of initial residency, a passport takes 12 months to be issued. During the 12-month residency requirement, IIP agents may still submit citizenship applications. However, citizenship will only be granted after the 12-month period from the acquisition of residency.
A Maltese passport allows visa-free travel to over 166 countries, and the right to live, work and study in all EU and EFTA member states.
The EU has responded to growing criticism of golden visa schemes across the bloc by setting up an expert group to recommend improvements to their “transparency, governance and security”. This would include tougher safeguards against tax evasion and corruption.
Maltese scheme ‘one of the leading programmes worldwide’
When contacted by BusinessToday, citizenship parliamentary secretary Julia Farrugia Portelli said that while certain quarters will always be unjustly critical, Malta’s Individual Investor Programme was praised and acknowledged as one of the leading investment programmes worldwide by others.
“The IIP Agency has been at the forefront to implement a rigorous due diligence process, which has constantly developed along the years. It employs significant background checks and hence the process is rather lengthy.” she said. “It is the only programme to have a four-tier due diligence process which results in a 22% refusal rate one of the highest, if not the highest, in the industry.”
Farrugia Portelli said that Malta is the only country in which such programme is controlled by an independent regulator which examines the process of every file to ensure proper running. Malta is also one of the few EU countries to publish the names of all the people granted Maltese citizenship.
“The IIP Agency still constantly seeks to make the programme more efficient and effective and continues to identify areas for improvement to further ensure that only the right individuals make it through. It also advocates internationally to improve the standards across the industry worldwide,” she said.
Another unique aspect of the Maltese programme is the actual contribution to the Government. This is not refundable and, unlike other similar programmes, the applicants cannot divest from it and make a profit on the investment.
