Malta’s cash-for-passport scheme has once again been described as a risk by a European Parliament special committee which called on member states to phase out all citizenship or residency by investment schemes.
In a draft report published on Tuesday, the Special Committee on Financial Crimes and Tax Evasion expressed concerns about Malta’s Individual Investor Programme, saying it could “potentially pose” high risks including a devaluation of EU citizenship and the potential for corruption, money laundering and tax evasion.
The report said that the potential economic benefits of these schemes “do not offset the serious money laundering and tax evasion risks they present” and called on Member States to phase out all existing schemes as soon as possible.
It also said that until golden visa schemes are repealed, due diligence should be enhanced and called on the European Commission “to monitor rigorously and continuously the proper implementation and application” of screening processes.
These concerns follow an analysis by the Organisation for Economic Co-operation and Development, which found Malta could potentially offer a back-door to money-launderers and tax evaders.
While stressing that the economic sustainability and viability of the investments provided through these schemes remain uncertain, the report said that “these programmes regularly involve tax privileges or special tax regimes for the beneficiaries” and expressed concerns that “these privileges could hamper the objective of making all citizens contribute fairly to the tax system.”
Noting that some 5,000 non-EU citizens have obtained EU citizenship through citizenship by investment schemes, MEPs underlined the conflicts of interest which arise when companies such as Henley and Partners design and promote such schemes while also being allowed to screen applicants and assist them in acquiring EU citizenship.
The report calls on Member States to prevent conflicts of interest “which might arise when private firms which assisted the government in the design, management and promotion of these schemes, also advised and supported individuals by screening them for suitability and filing their applications for citizenship or residence.”
Reiterating its concern that citizenship or residence could be granted through these schemes without proper or indeed any customer due diligence having been carried out, the special committee noted that several formal investigations into corruption and money laundering have been launched at national and EU level directly related to such schemes.
The report also underlined worries that there is very little transparency in relation to the number and origin of applicants, the numbers of individuals granted citizenship or residency by these schemes and the amount invested through these schemes.
The special committee also expressed concern over the risk posed by schemes which do not require a significant physical presence of at least 90 days in the jurisdiction offering the golden visa scheme.
The draft report put forward by MEPs Luděk Niedermayer and Jeppe Kofod, also called for an urgent reform of outdated international and national tax rules and puts forward recommendations on fighting tax avoidance, evasion and aggressive tax planning, revamping corporate taxation, stenghtening anti-money laundering actions, fighting VAT fraud, and better protecting whistleblowers and journalists.