The European Union urged member countries on Wednesday to crack down on schemes granting “golden visas and passports” to foreign investors, warning they can bring corruption and money laundering in their wake.
The European Commission, the E.U. executive arm, published a report urging members to curb the practice of giving foreigners — often Chinese, Russians and Americans — residency or citizenship in return for investment.
“We speak about opening (a) golden gate to Europe for some privileged people who have the money to pay for citizenship or residence,” E.U. justice commissioner Vera Jourova said at a news conference in Brussels. “We are looking at it with concern.”
The Czech commissioner said investor residence and citizens schemes offering “golden visas and golden passports” should not be a weak link in E.U. efforts to curb corruption and money laundering.
The EU is expected to release a report today urging member states to tighten controls over their #GoldenVisa programs, warning the schemes can be used by organized crime groups. https://t.co/fbV397mbk0
— OCCRP (@OCCRP) January 23, 2019
The report said wealthy candidates for residency or citizenship do face insufficient security and background checks to prevent them from posing a security risk, laundering money or evading taxes.
E.U. countries set conditions for granting and withdrawing nationality but must do so with respect for E.U. law, enforced by the European Court of Justice, officials said.
The bloc’s laws are important as a citizen of one E.U. country has the right to travel to others, exercise economic activities within the 28-nation internal market, and vote in local and European elections.
The Commission complained that Bulgaria, Cyprus, and Malta run schemes granting foreign investors citizenship for anywhere between 500,000 euros and two million euros.
And unlike foreigners who follow the usual naturalization route, such investors are not required to live in those E.U. countries or show “genuine connections” to them. However, Bulgaria said just before the report was published that it would scrap the practice.
The Commission also said residence permits given to foreign investors pose serious security risks to member states, even if the holder has fewer advantages.
Why This Matters
An E.U. residence permit gives a third-country national the right to live in the member country and to travel freely in Europe’s passport-free Schengen area.
Bulgaria, Malta, and Cyprus also offer investors residence permits, along with 17 other countries: Britain, the Czech Republic, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Portugal, Romania, and Slovakia.
The Commission said there was a lack of “transparency and oversight” of the residence schemes, including too few statistics on how many people obtain a residence permit in this way.
Berlin-based Transparency International and London-based Global Witness welcomed the Commission’s report about a practice they have campaigned against.
“The tide is turning on the golden visa industry with the E.U. recognising the unacceptable security and corruption risks they create,” said Naomi Hirst, a top campaigner at Global Witness.
“However, the Commission’s report tells us nothing about what member states actually need to do,” Hirst added in a joint statement on Transparency International’s website. “Now they’ve sounded the alarm, they need to offer solutions.”
E.U. countries have used such schemes to give passports to around 6,000 people and residency to around 100,000 people in the past decade, securing about 25 billion euros ($29 billion) of foreign direct investment in return, the NGOs said.
The Commission warned “it will take necessary action as appropriate” if member countries fail to comply with E.U. law and rules on border checks, money laundering, and tax avoidance.
It said it will set up a group of experts from member countries to improve the transparency, governance, and security of the investor schemes.
The aim is to develop a common set of security checks for investor citizenship schemes by the end of 2019.