Golden passports scheme could be heading into trouble with European Commission

Sale of EU cit­i­zen­ship under­mines states’ mutu­al trust

The European Commission is mulling open­ing legal pro­ceed­ings against Malta over its con­tro­ver­sial ‘gold­en pass­ports’ scheme, Times of Malta can reveal. 

The Commission is con­sid­er­ing issu­ing what is known as a let­ter of for­mal notice, the first step in infringe­ment pro­ce­dures against Malta, warn­ing that the pass­ports scheme vio­lat­ed EU rules.

It is of the opin­ion that by sell­ing EU pass­ports, Malta departs from the com­mon basic under­stand­ing that nation­al­i­ty is the expres­sion of a spe­cial rela­tion­ship of alle­giance, sol­i­dar­i­ty and a gen­uine link between the state and its people.

Sources said legal analy­sis by the com­mis­sion has con­clud­ed that the sale of EU cit­i­zen­ship under­mines mem­ber states’ mutu­al trust in each other’s deci­sions to grant citizenship.

European Commission President Ursula Von der Leyen set her sights on pass­ports sales dur­ing her state of the European Union speech in September, insist­ing “European val­ues are not for sale”.

Also known as the Individual Investor Programme, the scheme was mired in con­tro­ver­sy from the very begin­ning. The IIP scheme attract­ed plen­ty of neg­a­tive press and crit­i­cism from the European Commission, which has repeat­ed­ly said that it dis­likes such schemes.

Last April, EU Justice Commissioner Didier Reynders said that the Commission had writ­ten to Malta, Bulgaria and Cyprus to urge them to “phase out” their cit­i­zen­ship schemes. But Reynders acknowl­edged that the deci­sion to do so rest­ed with mem­ber states and said that the Commission was in talks with them to find “pos­si­ble evo­lu­tions” of the schemes.

Malta’s scheme, which gen­er­at­ed more than €800 mil­lion for the gov­ern­ment between its launch in 2014 and last July, has been mired in con­tro­ver­sy for sev­er­al years.

Last year, the European Commission iden­ti­fied gold­en pass­port schemes as rais­ing the risk of pos­si­ble infil­tra­tion of non-EU organ­ised crime groups, as well as mon­ey laun­der­ing, cor­rup­tion and tax eva­sion possibilities.

Warned gold­en pass­ports scheme vio­lat­ed EU rules

In September, Times of Malta report­ed how a rogue state is believed to have used Malta’s pass­port scheme to sneak at least one per­son in and out of Europe.

The “per­son of inter­est” is under­stood to have made it through Malta’s cash-for-pass­ports’ ini­tial vet­ting process by pos­ing as a cit­i­zen of anoth­er coun­try prompt­ing con­cerns that he may have been a spy or a state asset work­ing for a dic­ta­to­r­i­al regime.

His Maltese pass­port and that of two depen­dants who trav­elled to Malta with him were all revoked ear­li­er this year.

Three years ago, a mag­is­te­r­i­al inquiry was opened into a leaked FIAU report detail­ing sus­pi­cions that the for­mer prime minister’s chief of staff Keith Schembri took a €100,000 kick­back on three pass­port sales. Schembri and his audi­tors, Brian Tonna, Karl Cini and Manuel Castagna, are cur­rent­ly on police bail as the police con­tin­ue inves­ti­ga­tions into the kick­back allegations. 

These four, and scores of oth­er peo­ple and com­pa­nies, had their assets frozen by the court as after a court issued an attach­ment order to that effect. The order list­ed 91 peo­ple and com­pa­nies, includ­ing Schembri, Tonna, Cini and Castagna.

All four were arrest­ed fol­low­ing the con­clu­sion of an inquiry into finan­cial crimes and released after some 20 hours under arrest. The gov­ern­ment recent­ly announced an over­haul of Malta’s IIP scheme.

The new reg­u­la­tions, which came into force in September, remove the pos­si­bil­i­ty for indi­vid­u­als to apply for Maltese cit­i­zen­ship with­out first becom­ing residents.

Anyone inter­est­ed in get­ting a Maltese pass­port will have to live in Malta for a year before being allowed to apply for citizenship. 

Under the new scheme, appli­cants who invest €750,000, up from €650,000 under the exist­ing rules, will be able to apply for cit­i­zen­ship after liv­ing in Malta for one year.

Applicants who invest €600,000 will have to spend three years in Malta before apply­ing for a passport. 

The min­i­mum val­ue of the prop­er­ty pur­chased will dou­ble to €700,000 from €350,000. A €10,000 phil­an­thropic dona­tion will be manda­to­ry. The plan was for up to 400 cit­i­zen­ship appli­ca­tions to be approved per year and the new scheme was capped at a max­i­mum of 1,500 suc­cess­ful applicants.

The Individual Investor Programme was man­aged by Henley & Partners, which got com­mis­sion for every suc­cess­ful appli­ca­tion. It has emerged that from its launch in 2014 to 2017, the con­ces­sion­aire has raked in more than €19 mil­lion from this programme.

In the new revi­sion, Henley and Partners will no longer serve as Malta’s cash-for-pass­ports pro­gramme concessionaire. 

Prime Minister Robert Abela had said in January he was keen to retain the scheme and has sub­se­quent­ly argued that rev­enue from it is key to coun­tries fol­low­ing the coro­n­avirus-caused eco­nom­ic slowdown. 

Times of Malta, Matthew Xuereb and Jacob Borg

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