On 23 January 2019 the European Commission issued a report on citizenship by investment and citizenship by residence schemes operated by a number of EU Member States. The report looks at current practices and identifies some of the risks from such schemes to security, money laundering, tax evasion and corruption. Those risks are increased by the lack of transparency in how the schemes are operated and by a lack of cooperation among EU Member States.

Investor Citizenship schemes

Three EU Member States, Bulgaria, Cyprus and Malta, operate investor citizenship schemes granting investors the nationality of those countries subject to conditions that are not as strict as those for ordinary naturalisation regimes. They do not oblige the individual investors to physically reside in the country or require any other genuine connections with the country before obtaining citizenship.

Every person acquiring the nationality of an EU Member State also acquires EU citizenship so the decision by one EU Member State to grant investor citizenship automatically gives that person rights in relation to other EU Member States, including free movement and access to the EU internal market. They also acquire the right to vote and to be elected in EU and local elections. The schemes are often advertised in practice as a means of acquiring EU citizenship and obtaining the associated rights and privileges.

Areas of Concern

The European Commission points out that the security checks run on applicants are not robust enough and there is insufficient systematic use of the EU’s own centralised information systems such as the Schengen Information System (SIS). Also enhanced due diligence procedures are needed to ensure that applicants do not find a way round the anti-money laundering rules.

Monitoring and reporting is necessary to make sure that individuals do not use the schemes to benefit from privileged tax rules and effectively evade tax. Also the European Commission report considers that there is insufficient clear information on how these investor citizenship schemes are run, including information on the number of applications received, granted or rejected and on the state of origin of the applicants. EU Member States do not exchange information on the applicants for such schemes or on rejected applicants.

Investor Residence Schemes (‘golden visas’)

Investor residence schemes raise equally serious security concerns. The grant of a valid residence permit gives a third-country national the right to reside in the EU Member State concerned and also to travel freely in the Schengen area. EU law regulates the entry conditions for certain categories of third-country nationals but the granting of investor residence permits is not regulated at EU level. There are 20 EU Member States currently running these schemes. The European Commission is concerned about the implementation of security checks; insufficient physical residency requirements; and lack of transparency and monitoring.

Next Steps

The European Commission will monitor the relevant wider issues of EU law. Member States are urged to use the tools available in the EU for administrative cooperation including exchange of information. Also the funds paid by applicants for the schemes should be assessed under the EU anti-money laundering rules.

The Commission will monitor the steps taken by Member States in relation to transparency and governance in managing these schemes and will establish a group of experts to improve the transparency, governance and the security of the schemes. The expert group will be given the task of setting up a system for the exchange of information and consultation on the numbers of applications received, including information on countries of origin and on the number of citizenships and residence permits granted or rejected by Member States based on investments. The expert group will also be asked to develop a common set of security checks for investor citizenship schemes by the end of 2019.

The European Commission will monitor investor citizenship schemes in candidate countries and potential candidates for EU membership as part of the EU accession process. As part of the visa-suspension mechanism it will also monitor the impact of such schemes by EU visa-free countries.