The European Commission will warn Member States on Wednesday to tighten security checks on wealthy investors applying for cash for passport schemes such as that run by Malta, saying they have have opened the EU to money laundering, corruption and organised crime.
The warnings are included in a draft report seen by Reuters and expected to be published on Wednesday by the European Union’s executive.
Malta, Cyprus and Bulgaria are the only EU Member States that run schemes selling citizenship allowing wealthy individuals to buy EU passports, and free movement inside the bloc.
This is the first time the Commission is looking into the schemes, resulting in a report that identifies a number of concerns. The Financial Times states the report notes shortfalls among all three countries in due diligence checks, as well as efforts to circumvent EU rules that require “effective” residence in an EU state before granting citizenship.
The move follows high profile scandals over money laundering in the past year, including Malta’s Pilatus Bank that led to its chairman, Ali Sadr Hasheminejad, facing charges in the US. The scandal was among those that led to the European Central Bank (ECB) stepping up scrutiny of banks by launching a dedicated network of watchdogs sharing information on the matter.
Danske Bank, whose Estonian branch is suspected of laundering €200 billion involving mainly Russian and Eastern European customers, was another a major scandal. European Union Justice Commissioner Věra Jourová described the money-laundering case involving Danske Bank as “the biggest scandal in Europe”.
Although Brussels has no direct control over the schemes, it will urge governments to agree on common security checks for all applicants and push for mandatory lists of the number of applications made and rejected every year, along with their countries of origin.
The report is also expected to refer to EU states’ programmes to sell national residence to foreigners, considering that these posed similar risks as citizenship schemes. Twenty Member States including Malta, Cyprus and Bulgaria, sell residence permits.
A group of experts will be set up by the Commission that will recommend measures to counter the risks caused by these schemes.