Hot, New Trend and Ultimate Status Symbol Passport and Permit Kings

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EUROPEAN G E TAWAY INSIDE THE MURKY WORLD OF GOLDEN VISAS

Hot, new trend and ultimate status symbol

...for oligarchs and tycoons. Zooming in on Cyprus, Malta and Portugal | P. 8

Passport and permit kings

Golden visas don’t sell themselves – there is a very lucrative industry trading in citizenship and residency | P.29

HAS EUROPE OPENED ITS DOORS ...to the criminal EU’s time to act and corrupt?

Passport and permit trade in one Member State affects the entire Union | P.48 Transparency International and Global Witness 2018.

Research for this report was supported by the Global Anti-Corruption Consortium, a groundbreaking partnership to accelerate the global fight against corruption by bringing together investigative journalists and activists. The Consortium is spearheaded by the Organized Crime and Corruption Reporting Project (OCCRP) and advocacy is driven by Transparency International. Global Witness is working in cooperation with the Consortium on this issue.

Transparency International (transparency.org) is a global movement with one vision: a world in which government, business, civil society and the daily lives of people are free of corruption. With more than 100 chapters worldwide and an international secretariat in Berlin, we are leading the fight against corruption to turn this vision into reality.

Global Witness (globalwitness.org) investigates and campaigns to change the system by exposing the economic networks behind conflict, corruption and environmental destruction.

Global Witness is a company limited by guarantee and incorporated in England (No.2871809).

Authors: Transparency International (Laure Brillaud and Maíra Martini) and Global Witness

Every effort has been made to verify the accuracy of the information contained in this report. All information was believed to be correct as of 1 September 2018. Nevertheless, Transparency International and Global Witness cannot accept responsibility for the consequences of its use for other purposes or in other contexts.

Acknowledgements: We would like to thank Adam Földes, Elisavet Spitadaki and Tamas Bogdany for their invaluable contribution to the research, Eka Rostomashvili for her careful review and useful comments to the report and Conny Abel for her continuous support and coordination. The comments and feedback provided by Carl Dolan, Maximilian Heywood, Casey Kelso from Transparency International and colleagues from Global Witness have been a great help in shaping and sharpening up the report. We are also grateful to Paul Bell, Angela Capillo, Julius Hinks, Michael Hornsby, Lucinda Pearson from Transparency International and colleagues from Global Witness for their help with our communication strategy.

We would also like to acknowledge the contribution of our local partners who helped us with the collection of country data and information. In this respect, Transparency International’s extended network across Europe proved extremely useful and efficient. Our special thanks goes to Miklós Ligeti from Transparency International Hungary and Karina Carvalho from Transparency International Portugal. We would also like to express our appreciation to Simon Büchler from Transparency International Austria, Angelos Syrigos from Transparency International Greece, Donncha O Giobuin from Transparency International Ireland, Liene Gātere from Transparency International Latvia, Daniel Amoedo from Transparency International Spain and Ben Cowdock from Transparency International UK as well as our local contacts in Cyprus and Malta for their inputs to the research.

ISBN: 978-3-96076-110-5

Except where otherwise noted, this work is licensed under CC BY-ND 4.0 DE. Quotation permitted. Please contact Transparency International – [email protected] – regarding derivatives requests. Contents

EXECUTIVE SUMMARY 02 CLOSING EU DOORS TO THE 48 CRIMINAL AND CORRUPT: GOLDEN VISAS: 08 KEY RECOMMENDATIONS FACTS AND FIGURES What The EU Needs To Do 48 How Much Does a Golden Visa Cost? 09 How Much Money Have Member What National Governments Need To Do 50 States Made? Enhanced due diligence 50 How Many People Have Bought 12 Their Way Into Europe? Integrity Principles 50 Where Are They From? ANNEX 52 WHAT’S THE PROBLEM 18 Annex 1. European Golden 52 WITH SELLING CITIZENSHIP Visa Programmes AND RESIDENCY? Annex 2. Investment Required 54 Due Diligence Procedures Ill-Adapted 19 and Made Through European to Risk Profile of Applicants Golden Visa Programmes Lack of Operational Integrity 20 Annex 3. Number and Origins 62 in Governance of Schemes of Applicants to European Lack of Harmonised Standards 20 Golden Visa Programmes and Practices at EU Level Annex 4. Golden Visa Programmes 66 Caribbean Golden Visas: 21 of Cyprus, Malta And Portugal Rum Deal for Europe Endnotes 74 VICTORS OF THE EUROPEAN 24 GOLDEN VISA MARKET

CYPRUS 26 BOXES Oligarchs, Crooks, Citizens 28 What Does This Report Do? 07 MALTA 30 What Are the Real-Life Impacts 16 Allegations and Suspicious 33 of Golden Visa Schemes? Payments Tarnish Malta’s Scheme Should EU Citizenship Even Be For Sale? 19 PORTUGAL 37 Passport and Permit Kings 29 Clean Cars, Dirty Money, Golden Visas 38 National Development Funds: 34 WHEN THINGS GO WRONG 40 Who Benefits From Golden Visa Schemes? Hungary: Shady Middlemen 40 Annex III of the 5th AML Directive 44 The UK Tier 1 Visa: 42 Is Not the Answer The Dangers of Blind Faith The EU’s Competency to Act 49 Executive Summary

Just like a luxury good, European Union (EU) citizenship and residency rights can be bought. There are many buyers, and there is no shortage of suppliers, which explains why investment migration is a growing, multi- billion-euro industry. The rules of the game in this diverse market are shaped, on the one hand, by government officials who have effectively demonstrated their preference for quick gains over longer-term impacts, and, on the other hand, by profit-driven private sector players. However, the selling of passports and permits is not without risks. The response from the EU has been limited thus far, and Member States have been making use of their wide discretionary powers when it comes to issues of citizenship and residency. This report highlights the corruption risks posed by the sale of citizenship and residency and how these schemes threaten the integrity of the EU.

The idea is simple: investment migration of citizenship and residency – its profits, schemes offer fast-track citizenship and/or ethical implications and risks – affects all residency to foreign nationals in exchange EU citizens. But as this report shows, EU for their substantial investment in the citizens remain woefully ignorant of how country. Many European countries have these schemes work, how their national such mechanisms in place. In some of the governments may or may not be mitigating schemes, the qualifying requirement is a the inevitable risks of selling passports and large and passive form of investment, e.g., permits to the ultra-wealthy, and where the in luxury property, a national development investments made by foreign nationals are fund, government bonds or shares in an ultimately going. existing company. This report refers to these schemes as “golden visas”. Despite increasing public interest, secrecy continues to enshroud the most basic Currently, four EU Member States sell information about golden visas. Having passports and 12 trade with residency rights investigated publicly available sources through golden visa schemes. The two lists and reached out to national governments overlap, as three countries – Bulgaria, Cyprus for additional information, Transparency and Malta – trade with both. In addition International and Global Witness are able to to those, Hungary operated a residency present a revealing but incomplete picture of scheme between 2013 and 2018. The sale the current situation.

02 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS KEY FINDINGS

»» In the last ten years, the EU has welcomed more than 6,000 new citizens and close to 100,000 new residents through golden visas schemes.

»» Spain, Hungary, Latvia, Portugal and the United Kingdom (UK) have granted the highest numbers of golden visas – above 10,000 each – to investors and their families. Next in line are Greece, Cyprus and Malta.

»» None of the countries, with the exception of Austria and Malta, publish lists of new citizens or residents. »» EU golden visa schemes require varying amounts of investment. Residency can cost €250,000 in Greece and Latvia, while a Cypriot passport can cost €2 million. It can even reach €10 million in the Austrian case, though the law does not officially tag the Austrian passport with a price.

»» Seven out of 17 schemes have not disclosed how much investment they have raised. »» The golden visa schemes of EU Member States have attracted around €25 billion in foreign direct investment into the EU over the past decade.

»» Spain, Cyprus, Portugal and the UK appear to be the top earners, each receiving annually, on average, €976 million, €914 million, €670 million and €498 million, respectively.

»» In relative terms, the figures for small economies like Cyprus and Malta are especially impressive. Through the sale of citizenship, Cyprus has raised €4.8 billion since 2013, while Malta has reaped about €718 million in foreign direct investment since 2014.

The analysis of the schemes offered Our analysis reveals that poor due diligence and the strongest in Cyprus, Malta and Portugal accountability and limited measures to protect the integrity shows the ways in which insufficient transparency can give rise to of the EU. In spite of this, recent due diligence, wide discretionary corruption within countries operating scandals show that applicants powers and conflicts of interest can golden visa programmes, with are not as carefully scrutinised as open Europe’s door to the corrupt. groups of individuals bound to benefit they should be. Furthermore, the Specifically, we found that: from the schemes to the potential success rates of applicants seem detriment of the local population. to indicate that some Member »» Cyprus and Portugal, in spite States are not particularly selective, of recent reviews and changes Structural weaknesses and opacity raising doubts about the strictness in their programmes, do not in a highly discretionary government of checks and controls conducted seem to take into account an programme are problematic in any on applicants. Hungary, Latvia and applicant’s source of funds sector. But when such schemes are the UK, in particular, have granted or wealth when analysing marketed directly at individuals of residency to over 90 per cent of their applications. high net worth and high risk, such applicants. Tellingly, these three flaws risk exposing the government countries also serve as salutary »» While a four-tier due diligence to undue influence, abuse of power, process is in place in Malta, warning of the social, political, and bribery. In short, they risk not only reputational and diplomatic risks government officials enjoy wide the entrance of corrupt individuals discretion when deciding on of golden visas. Specifically, the into Member States, but also the Hungarian programme terminated an applicant’s eligibility for the corruption of states themselves. programme. Applicants who with allegations that individuals have criminal records or are By their very nature, golden visa with dubious background gained subject to criminal investigation schemes are an attractive prospect residency through the scheme, and may still be considered due to for the criminal and the corrupt. Latvia and the UK had to put the “special circumstances”. The risk profile of applicants brakes on their schemes and even should demand the strictest of consider revoking residency from a significant number of people.

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 03 It is an EU-wide problem. Member While the EU 5th Anti-Money States that profit from selling Laundering (AML) Directive is a golden visas are putting at risk not At the national level, welcome recognition of the anti- only their own citizens, but also governments administering money laundering risks posed by other Member States and the EU as golden visas, it falls short of fully a whole. However, Member States golden visa schemes addressing the problem and could apply different criteria and risk need to ensure that the be counter-productive. The directive appetite when reviewing applicants. individuals they welcome essentially amounts to shifting, and Authorities claim to follow best due in fact diluting, the responsibility of diligence practices when screening into their countries and, by conducting due diligence to banks applicants. But even if we were to extension, the EU, are clean and intermediaries. The EU needs take it for granted that authorities in to do more. In the immediate term, Member States are truly following – and that their money is, and before the end of its mandate, best practices during the screening as well. Countries dazzled the European Commission must process, what matters even more is consider the money laundering and how they assess their due diligence by profit are at risk of corruption risks of golden visas findings to make decisions – in failing to exercise rigorous and formulate robust guidelines for other words, the level of risk they Member States. are willing to tolerate on behalf oversight over the decision- of other EU Member States when making process. Because Member States have a approving applicants. Foreign collective obligation to ensure the nationals are being awarded safety of citizens and the integrity citizenship and residency, along of European security and justice objectives, it is important to cast with all the rights and privileges There exist no harmonised a wary eye upon such schemes. that come with them. Governments standards despite the fact that Should Member States decide that should use due diligence to assess Member States are ultimately they want to continue profiting from the risks an applicant poses not selling the same thing: EU the controversial trade in passports only to the country, but to the EU citizenship and residency, and the and permits, it is critical, at the very as a whole. The bar needs to be accompanying benefits. It is critical least, to harmonise and enforce high set high, and golden visas should to harmonise the sale of residency standards of transparency and due be given only to individuals with and citizenship across the EU, and diligence in the sale of residency and exceptional track records. that high standards of transparency citizenship across the EU. and due diligence are implemented across the board. Only a unified and coordinated approach will prevent risky individuals from “passport- shopping” between jurisdictions and avert a race to the bottom when it comes to standards.

04 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © TheaDesign / Shutterstock.com » » » » » 06 06 UNION TO: WE URGE THE EUROPEAN RECOMMENDATIONS » » » » » values andobjectives. cooperation andjeopardise EU undermine theprincipleofsincere schemes ifthey are deemedto States offering goldenvisa procedures againstMember infringement Undertake concerning rejected applicants. sharing betweenMemberStates coordinating information Establish mechanismsfor uphold these regulations. approved agents,are obligedto the goldenvisaindustry, including to ensure thatallthoseinvolved in money launderingrequirements Explore ways to broaden anti- anti-money launderingrules. two years, pernewEuropean Commission produces every (SNRA) thattheEuropean Supranational RiskAssessment ofthe could bedoneaspart mitigation measures. This risks, andissuescorresponding regularly reassesses these Establish amechanismthat posed by theschemes. aware oftherisks andbenefits ensure thatallEUcitizens are corrupt andthecriminal,to abuse oftheseschemesby the transparency to prevent the operational integrityand enhanced duediligence, Set EU-widestandards of EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS » » » » STATES TO: WE CALL UPON MEMBER » » » » standards ofthescheme. and enhancedduediligence criteria, residency criteria specific objectives, investment Predefine andpublishthe checks. addition to policeandsecurity members are conducted in against theapplicantorfamily civil orcriminalproceedings Ensure thatchecksonpending how itwasacquired. expected of the applicant and of of wealthto bereasonably an indicationofthevolume should beobtainedthatgive income. Sufficientinformation to theirknownlawfulsources of wealth isnotdisproportionate Ensure thattheapplicant’s rather thanby private entities. responsible government agency, be independentlyverified by the provided by theapplicantmust information anddocuments enhanced duediligence.All members are subjectto applicants andtheirfamily Ensure thatallgoldenvisa » » » » » » » » » » » » » » or criminalityisuncovered. that newevidence ofcorruption residency rights,inthecase Revoke citizenship and reviewing problematic cases. whistleblowers, andfor e.g., fromreceiving reports, Set upamechanismfor necessary. and make adjustmentsas Conduct impactassessments published. audited andthattheresults are that theschemesare regularly Exercise oversight by ensuring are kept onfile. documents relating to decisions Ensure thatadequatenotesand exposure to risk. denied dueto securityissuesor had theirgoldenvisaapplications information onindividualswho Share withEUauthorities origin ofsuccessfulapplicants. the namesandcountriesof rate ofapplicationsaswell Publish statisticsonthesuccess

© Marco Verch / Flickr © Alejandro Molina Fernández / Unsplash Project (OCCRP). and CorruptionReporting and theOrganized Crime Transparency International between partnership (GACC),Consortium a Global Anti-Corruption ofthe Witness, aspart International andGlobal by Transparencyconducted wasjointly This report WHAT DOES THIS REPORT DO? discontinued residence government We alsodiscuss Hungary’s States: Cyprus,MaltaandPortugal. in operation inthree EUMember golden visaschemescurrently tovulnerabilities the particular so, weexaminethefeatures and residency rightsintheEU.Indoing with thesaleofcitizenship and the typesofrisksassociated Next, weidentify and passports. Member Statesare sellingvisas to convey thescaleatwhich of thekey factsandfigures beginswithanoverview This report TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS to thecriminalandcorrupt. selling EUcitizenship andresidency States canreduce therisksof European Unionand itsMember recommendations forhowthe risks. The finalsectionpresents and theirvulnerability to corruption how thedifferent schemesfunction profiles, wespecify In thecountry 1 (Investor) Visa. problematic experiencewithits Tier lessons learnedfrom the UK’s bond programme aswellthe 07 Golden Visas: Facts and Figures

Citizenship- and residence-by-investment schemes (CBIs and RBIs), commonly known as “golden visas”, offer fast-track citizenship and residency to foreign nationals in exchange for their substantial investment in the country.

This type of investment-based migration Under these criteria, four EU Member States dates back to 1984, when the first currently sell passports:2 Austria, Bulgaria, programme of this kind appeared in the Cyprus and Malta. Twelve offer residency Caribbean region (Saint Kitts and Nevis) and permits: Bulgaria, Cyprus, France, Greece, soon thereafter in North America (Canada Ireland, Latvia, Luxembourg, Malta, the in 1986, the United States in 1990). The Netherlands, Portugal, Spain and the UK. phenomenon is far newer in the EU, where (See Annex 1.) most programmes were established, scaled up or revamped following the 2007-2009 financial crisis.

According to our research, many European countries have mechanisms in place for the facilitation of investment-based migration. Though definitions vary across the literature, we limit our analysis to schemes in which the primary qualifying requirement is a large and passive form of investment, e.g., in luxury property, a national development fund, government bonds or shares in an existing company. These schemes tend to offer a fast-track route to citizenship or residence with low requirements for physical presence. With the exception of Austria, the laws stipulate the cost of visas or passports offered by these programmes.1

08 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS WHICH EU COUNTRIES SELL GOLDEN VISAS?

LATVIA

IRELAND

GREAT BRITAIN NETHERLANDS

LUXEMBOURG

AUSTRIA HUNGARY FRANCE

BULGARIA

PORTUGAL SPAIN GREECE

MALTA

CYPRUS

CITIZENSHIP-BY-INVESTMENT RESIDENCY-BY- INVESTMENT TERMINATED

HOW MUCH DOES to generate as much as US$20 European schemes require varying A GOLDEN VISA COST? billion (€17.17 million) annually in amounts of investment. Residency HOW MUCH MONEY HAVE a year or two.4 can cost €250,000 in Greece and MEMBER STATES MADE? Latvia, whilst a Cypriot passport can European schemes represent the cost €2 million. It can even go as Commentators have estimated higher end of the market. The high as €10 million, as is the case that golden visa schemes globally average cost of an entry ticket into in Austria, though the law does not 5 generate US$13 billion (€11.15 the EU for most popular schemes officially state a price for an Austrian billion) a year, of which citizenship- (around €900,000) is much higher passport.8 The type of investment by-investment schemes represent than the investment requirements required includes investment in about US$3 billion, and residence- for other popular schemes, such as real estate, government bonds or by-investment schemes probably Saint Kitts and Nevis (US$150,000- company shares, and investment 6 exceed tens of billions of dollars.3 400,000) or Grenada (US$150,000- through national specialised funds 7 According to industry experts, 350,000). or donations. golden visa schemes are expected

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 09 Available public official data In relative terms, the figures for generate fiscal revenues for the on golden visa applicants small economies like Malta and state, they also come with fiscal and investments is scarce, Cyprus are impressive. Following and macroeconomic risks (e.g., scattered and limited. The lack a recent reform that introduced an boom-bust cycles, property market of harmonisation across the EU annual cap of 700 naturalisations bubbles), due to the highly volatile makes it even more difficult to through its Investment Programme, nature of the generated inflows, get a complete picture of the Cyprus has the potential to which are dependent on external total amount of money invested attract €1.4 billion annually, which factors over which the country has in the EU since the start of these represents about 7.5 per cent no control (e.g., the introduction of a programmes. of the country’s current Gross more attractive scheme in another Domestic Product (GDP) levels.9 country).11 According to available statistics, In Malta, the contributions of the however, we estimate that at Individual Investor Programme (IIP) least €25 billion in foreign direct to the Treasury and the National investment has flown into the EU Development and Social Fund through golden visa schemes over (NDSF) was reported to have risen Golden visa schemes of the past decade (See Annex 2). Spain, from €50 million in 2015 to €172 Cyprus and Portugal, appear to be million in 2016 (0.5 and 1.7 per cent EU Member States have the top performers. They have been of the GDP, respectively). In 2017, attracted around €25 billion annually generating, on average, the International Monetary Fund €976 million, €914 million and €670 (IMF) expected these inflows to in foreign direct investment million, respectively. Following reach €230 million, or roughly 2.1 into the EU over the past suit, the UK and Hungary, earned per cent of the GDP and 5.4 per cent approximately €498 million and €434 of fiscal revenue.10 decade. million per year from selling golden visas. Greece, Malta and Latvia Golden visa schemes can have have also been reaping sizeable a significant economic and investments – on average, €250 fiscal impact, particularly in million, €205 million and €180 million small island states like Cyprus per year, respectively. (See Annex 2.) and Malta. While they can boost private sector investment and

10 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS HOW MUCH MONEY HAVE MEMBER STATES MADE FROM GOLDEN VISAS ANNUALLY?

AUSTRIA

BULGARIA CBI: €25 million RBI: Unknown

CYPRUS CBI: €914 million RBI: Unknown

FRANCE RBI: Unknown

GREECE RBI: €250 million

HUNGARY RBI: €434 million

IRELAND RBI: €43 million

LATVIA RBI: €180 million

LUXEMBOURG RBI: Unknown

MALTA CBI: €205 million RBI: Unknown

NETHERLANDS RBI: Unknown

PORTUGAL RBI: €670 million

SPAIN RBI: €976 million

UNITED KINGDOM RBI: €498 million

€50 MILLION OR LESS UNKNOWN

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 11 HOW MANY PEOPLE HAVE European golden visa schemes thus the golden visa refusals (156) and BOUGHT THEIR WAY INTO far. More specifically, at least 2,500 revocations (3,278) in Latvia were EUROPE? WHERE ARE investors and about 3,500 family made after a 2014 reform that THEY FROM? members have acquired citizenship, imposed tighter security checks and at least 34,000 investors and along with an increase in investment Official public statistics on the 69,000 family members have gained requirements.16 number and profile of applicants are residence rights through the Member either non-existent or limited, and States’ golden visa programmes. The top nationalities granted not harmonised across countries. (See Annex 3.) passports or visas through Few countries have published any golden visa schemes are Chinese kind of statistics on applicants.12 Since the start of their respective and Russian. According to an With the exception of Malta and programmes, the following international advisor for citizenship Austria, no country has published countries have granted the highest programmes, Chinese nationals a list of successful applicants number of golden visas to investors account for 70 per cent of the 17 for golden visas. Data for other and their families: Spain (~24,800), world’s golden visa market. countries has been obtained either Hungary (~19,800), Latvia Our analysis (see Annex 3) confirms through freedom of information (~17,300), Portugal (~17,500) and this trend, though the lack of requests or from leaks to the media. the UK (~10,400). Next in line are Greece (~7,500), Cyprus (~3,300) harmonised and consistent data Even when official data is published, and Malta (~2,400). (See Annex 3 across Member States makes it it may come in a format that does for detailed figures.) difficult to derive aggregate figures not allow for meaningful use of at EU level. In Portugal and Hungary, 14 the information. For example, the The success rates of applicants Chinese investors represent, Maltese government published a seem to indicate that some Member respectively, 61 and 83 per cent of list of naturalised persons sorted States are not particularly selective, the golden visas granted since the alphabetically by first name, which raising doubts about the strictness start of the programmes. In Latvia, fails to distinguish between golden of checks and controls conducted 70 per cent of the golden visas visa recipients and persons granted on applicants. Success rates in issued went to Russian investors citizenship through other forms of Hungary, Latvia and the UK are 98.7, and their families since the start of naturalisation, such as marriage.13 97.9 and 91.1 per cent, respectively. the programme. In Hungary, only 20 investors and 44 According to the available data, family members have been denied more than 100,000 passports or residence, on national security visas have been granted through grounds.15 Tellingly, a majority of

12 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Eogan Roberts / Shutterstock.com Austria andBulgariadon’t include dependents,whileCyprusandMaltado. Reference formore periodsvary; informationpleaseseeAnnex3.Figures for 2,027 3,336 16 303 MALTA CYPRUS BULGARIA AUSTRIA BOUGHT EU CITIZENSHIP? HOW MANY PEOPLE HAVE TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 500 INDIVIDUALS OR LESS 13 HOW MANY PEOPLE HAVE BOUGHT EU RESIDENCY?

BULGARIA 296

CYPRUS Unknown

FRANCE Unknown

GREECE 7,565

HUNGARY 19,838

IRELAND ~1,290

LATVIA 17,342

LUXEMBOURG Unknown

MALTA Unknown

NETHERLANDS

PORTUGAL 17,521

SPAIN 24,755

UNITED KINGDOM 10,445

Reference periods vary; for more information please see Annex 3. 500 INDIVIDUALS OR LESS UNKNOWN Except for Bulgaria, count includes dependents.

14 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS WHERE DO GOLDEN VISA AWARDEES COME FROM?

AUSTRIA

BULGARIA 75 39 33 28 25 2012 - October 2017

CYPRUS

FRANCE

GREECE 1,395 429 308 109 109 2013 - 27 July 2018

HUNGARY 5,431 385 93 74 57 2013 - 2017

IRELAND 395 8 3 2 1 2012 - March 2017

LATVIA 12,097 1,428 1,376 723 665 2010 - 2017

LUXEMBOURG

MALTA

NETHERLANDS

PORTUGAL 3,936 581 259 236 227 October 2012 - August 2018

SPAIN 7,118 4,715 4,327 3,233 3,116 2013 - April 2018

UNITED KINGDOM 1,278 815 187 132 82 2008 - March 2018

BAHRAIN BRAZIL CHINA EGYPT HONG KONG INDIA IRAN KAZAKHSTAN LEBANON

SOUTH UNITED ARAB PAKISTAN RUSSIA TURKEY UKRAINE USA UZBEKISTAN VENEZUELA AFRICA EMIRATES

UNKNOWN

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 15 WHAT ARE THE REAL-LIFE IMPACTS OF GOLDEN VISA SCHEMES?

The main argument for The money channelled through golden visa schemes is usually setting up golden visa invested in passive segments of programmes is economic. the economy (e.g., real estate), thus None of the Member States generating fewer benefits in terms of employment, innovation and analysed in this report, industrial development. In Portugal, however, have performed there have been 6,141 investments an impact assessment of in real estate properties as of August 2018, representing about the schemes, whose socio- 95 per cent of total investment, economic benefits remain compared to just 12 investments in employment creation.21 largely undetermined in any official capacity. This can lead to other problems. Although causality may be difficult to establish, some analysts have In Hungary, the scheme granting suggested that these programmes residence permits in exchange for a have contributed to increasing €300,000 investment in government pressure on the housing market in bonds actually resulted in a loss places like Lisbon or Limassol.22 In for the state budget. The loss is Portugal, two-thirds of real estate estimated at about €192 million for purchases related to the golden visa the period of 2013 to 2017.18 The programme are made in the capital state sold the bonds at a discount city, and 98 per cent in the Greater price (€271,000), but to be repaid Lisbon municipal area.23 In Malta, the the full amount (€300,000) after five IMF has called for policy measures years, with a fixed interest rate of to tackle the growing demand for two per cent. housing on the island, suggesting In some cases, schemes that periodic reviews of the scope and are expected to generate foreign parameters of Malta’s Individual investment can have uncertain Investor Programme and how it sets economic benefits when the the minimum rent and real estate investment does not actually come investment required in order to from a “foreign” source, but is rather qualify for its golden visa scheme.24 financed by a local bank. Indeed, Bulgaria’s First Investment Bank (Fibank) allegedly awarded loans of up to €500,000 to applicants for citizenship, as reported by the Bulgarian National Bank in a confidential report published in 2012 and leaked to the media in 2016.19,20

16 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Didier Weemaels / Unsplash What’s the Problem With Selling Citizenship and Residency?

Golden visas offer fast-track citizenship and residency to foreign nationals in exchange for their substantial investment in the country. For EU governments, these schemes are a low-cost method of generating substantial inward investment. For the wealthy elite, they are a means of securing the right to live, work and travel throughout Europe with ease. By virtue of these schemes, citizenship and residency rights have been turned into luxury commodities. The transaction may seem fairly straightforward and transparent – so what’s the problem?

Apart from the basic ethical conundrum of bank may be less watchful when screening selling citizenship as well as the unsettling a customer with an EU passport than a notion that some Member States are passport from a country that sits higher in profiting from the sale of a shared European international country risk rankings. In general, asset, there is a distinctly sinister side to travelling under the radar of sanctions these schemes. In September 2017, The regimes becomes much easier with a golden Guardian revealed that business executives visa. In the event that circumstances back implicated in Brazil’s Car Wash corruption home become unfavorable, a golden visa scandal were able to secure access to can effectively serve as a get-out-of-jail-free Europe through Portugal’s golden visa card for the participant and their dependents, programme.25 The publication also uncovered allowing them to skip town, evade law that billionaire Russian oligarchs and enforcement or prosecution efforts, and avail Ukrainian elites accused of corruption had themselves of the freedom of movement, acquired EU citizenship through Cyprus’s rights and protection conferred by their new passport-for-sale scheme.26 European status.

Golden visa schemes are highly desirable for These schemes share three qualities that those associated with corruption because produce high levels of risk. The first is the they offer access to a safe haven. Not only particular profile of the applicants and the does a golden visa provide a luxury lifestyle, high amount of investment required of them. but it also frees its holder from having to The second is the lack of operational integrity navigate the risk-based approach of banks, in the governance of the schemes. The third which may baulk upon learning about the is the lack of harmonised standards and individual’s original nationality. Indeed, a practices at EU level.

18 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS DUE DILIGENCE PROCEDURES For the most part, authorities fail to ILL-ADAPTED TO RISK routinely identify these risks. Recent PROFILE OF APPLICANTS In spite of the inherent scandals reported in the media risks associated with suggest that in some EU countries, By their very nature, golden visa enhanced checks on applicants, schemes are attractive to the the high-risk profile of its their family members and the criminal and the corrupt. The risk applicants, a number of origin of their funds have not been profile of applicants should demand adopted as standard procedure. the strictest of due diligence and schemes operating in the the strongest measures to protect EU have revealed alarming the integrity of EU governments and flaws in their architecture. their officials.

SHOULD EU CITIZENSHIP EVEN BE FOR SALE?

Following the financial For some, these facts alone settle Whichever side may be right, one the question of whether citizenship thing is certainly clear: the sale crash in 2008, the idea and residency should be for sale of citizenship – its profits, ethical of developing a lucrative to the highest bidder. For others, implications and risks – affects all industry with low overhead however, the industry smacks of EU citizens. As this report shows, unfairness. According to this view, however, we remain woefully was attractive to many a minority of Member States are ignorant of how these schemes Member States, and rightly reaping profit from jointly shared work, how our governments may so. Selling passports and EU assets by hawking internal free be mitigating the inevitable risks movement and external visa-waiver that arise from selling mobility to permits has proved to be agreements, and they are enjoying the ultra-wealthy, and where their a rewarding business. the spoils whilst exposing their investment is ultimately going. neighbours to risk. The sale of EU passports The debate, however fierce, accounted for as much as Beyond the question of profit and cannot advance toward productive its distribution, some believe that results without transparency and 5.2 per cent of Cyprus’s the schemes pose a threat to the consultation regarding the risks GDP in 2017; Portugal’s meaning of citizenship itself. Many and rewards, for the EU, of selling scheme has delivered close argue that citizenship is a public citizenship and residency. good, not a commodity for the open to €4 billion to the economy; market. According to this school and Malta enjoys a budget of thought, citizenship is an active surplus partly because of its duty and a critical building block in the development of a democratic booming trade in residency community that should not be and citizenship. sold to the passive, footloose and mobile investor.

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 19 LACK OF OPERATIONAL approach to selling residency and INTEGRITY IN GOVERNANCE citizenship, with differences in their OF SCHEMES Do the Portuguese due diligence practices and appetite and Cypriot schemes for risk. In the end, however, they Though most countries that trade are all selling the same product: in visas and passports assert that require verification of the EU citizenship and residency. This they uphold the highest standards, legitimacy of the wealth shared asset, a body of rights and audits performed in a number of invested in luxury houses? values, is haphazardly sold off, countries in recent years have with Member States competing identified serious deficiencies. In The answer remains for clients — in sum, a scenario 2014, Portugal’s programme fell unclear. Do Maltese citizens that risks triggering a “race to the into the spotlight after allegations bottom” when it comes to standards that the scheme had been subject know how the money that of due diligence and transparency. to “corruption, money laundering, golden visa recipients Countries dazzled by the profit that and influence peddling”, for which could be gleaned from golden visas several government officials contribute to the National risk failing to (1) exercise rigorous were detained.27 The Portuguese Social Development Fund is oversight over the decision-making government has since claimed that process, (2) subject applicants to its golden visa scheme “strictly used? Not at all. strict due diligence and (3) inform follows all legally established citizens of the potential risks. security procedures” and that authorities possess the “adequate To ensure the safety of citizens, the tools” for safeguarding security.28 Structural weaknesses and opacity resilience of Member States and in a highly discretionary government the integrity of European security In March 2017, the Hungarian programme are problematic in any and justice objectives, it is critical golden visa scheme was suspended sector. But when such schemes are to cast a wary eye upon these following revelations that the right marketed directly at individuals of schemes. And, if these schemes are to sell residency bonds on behalf high net worth and high risk, such deemed compatible with European of the government was awarded to flaws risk exposing the government values and acceptable to citizens, eight companies without any public to undue influence, abuse of power, it is clear that the European Union 29 procurement process. Seven of the and bribery. In short, they risk not only must find a way to harmonise the chosen companies were registered the entrance of corrupt individuals sale of citizenship and residency outside of Hungary, and there was into Member States, but also the across Member States, introduce little to no information about their corruption of states themselves. rigorous checks on applicants and real owners in the public domain. ensure that the schemes operate According to an investigation according to the highest standards published by the Organized Crime LACK OF HARMONISED of transparency and integrity. and Corruption Reporting Project STANDARDS AND PRACTICES (OCCRP), while the government AT EU LEVEL ran the scheme at a loss, these The lack of harmonisation of obscure companies netted over standards and practices at EU $600 million (€480 million) in fees level adds another layer of risks across the programme’s four years by encouraging Member States of operation.30 to weaken their due diligence and This is perhaps the starkest example integrity requirements in order to make of the risk posed by the secrecy their programmes more attractive and with which some of these schemes competitive on the market. operate. As this report shows, As this report shows, the way in citizens are continuously kept in the which golden visa schemes operate dark about how their new wealthy varies from country to country. Each compatriots have come to acquire Member State has its own unique residency or citizenship rights.

20 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS the country’s reputation.34 In June 2017, Canada CARIBBEAN GOLDEN cancelled visa-free travel for citizens of Antigua VISAS: RUM DEAL FOR and Barbuda over fears that its lack of residency requirement for applicants posed a risk.35 Canada EUROPE had made a similar move against Saint Kitts and Nevis back in 2014 due to security concerns.36 A Antigua and Barbuda, Dominica, Grenada, Saint year earlier, the US Department of the Treasury Kitts and Nevis, and Saint Lucia are the Caribbean Financial Crime Enforcement Network (FinCEN) countries that offer a fast-track route to citizenship, issued an advisory stating that the Saint Kitts and with a significantly low investment requirement and Nevis citizenship-by-investment programme was an extremely fast processing time. being used to facilitate financial crime.37 According to FinCEN, the program is attractive to illicit actors Passports for a family of four can be acquired for its lax controls regarding who may be granted with an investment as low as US$100,000 within citizenship. FinCEN has yet to lift its advisory. 90 days. There are no requirements to reside in these countries, with the exception of Antigua The opacity of these programmes compounds and Barbuda, which has a five-day residence the risks. Caribbean countries publish limited requirement. In fact, applicants do not even need to information about due diligence checks carried pick up their passports in person. out during the application process. There is also limited information regarding the number of Saint Kitts and Nevis’s scheme claims the title of the applications received and rejected. None of the world’s first citizenship-by-investment programme. countries publish the names of individuals granted Since its establishment in 1984, it has undergone citizenship, thus preventing public scrutiny. several changes. Henley & Partners became responsible for the re-design and international As the programmes become a fundamental part promotion of the programme in 2006.31 The success of the economy in these countries (in some cases, of the programme, however, only came around 2009,32 income from the programmes has contributed up after the country was granted a visa-waiver status by to 25 per cent of the GDP38), there may be a greater the EU. In fact, according to Henley & Partners, the desire to attract more applicants and consequently firm was “instrumental in the negotiations with the more funds, increasing competition in such a way European Union that led to visa-free access for all that it produces a race to the bottom. Weak due Saint Kitts and Nevis citizens”.33 diligence processes and lax control can result in security and reputational risks not only to the The other countries running citizenship-by- countries running these programmes, but also to all investment programmes also recently signed countries and regions with which they have visa-free visa-waiver agreements with the EU (Antigua and agreements, including the European Union. Barbuda in 2009; Dominica, Grenada and Saint Lucia in 2015), coinciding with the time of establishment In light of the risks of admitting the corrupt and the or re-design of their programmes. This means that criminal, the European Union must review its visa- successful applicants of these programmes can free agreements with these Caribbean jurisdictions enter the EU Schengen Area and the UK without and encourage governments to set high due having to apply for a visa or undergo any enhanced diligence and integrity standards. Ultimately, if the checks by authorities in EU Member States. EU is not confident in the ability of these schemes to identify and reject high-risk applicants, it should Recent events raise red flags regarding the due consider following Canada’s lead by suspending the diligence process in some of these countries. In visa waiver to golden visa schemes outside the EU. March 2018, Saint Lucia cancelled the citizenship of six recently successful applicants, alleging that they had committed acts that had the potential to harm © Annie Spratt / Unsplash © Annie Spratt

The European golden visa market is diverse. A potential customer can browse through over a dozen of schemes and make a choice of their favourite destination based on their willingness to pay, the ease of paperwork, the processing time and other factors. No two schemes are identical in how they are set up and run. With this diversity in design comes a diversity in the corruption risks of each scheme. © Robin Vrancken / Unsplash © Robin Vrancken

24 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS In this section, we take a close look Portugal have come under significant Cyprus and Malta also operate at the well-established golden visa public scrutiny due to their golden residency-by-investment schemes currently in operation in visa recipients’ questionable schemes. For more information three Member States: Cyprus, Malta business connections or alleged about the specifics of golden and Portugal. Cyprus and Malta involvement in international money- visa programmes in these three sell both citizenship and residency laundering scandals.39 countries, please refer to Annex 4. rights, whilst Portugal’s programme offers residency rights that can lead In the profiles below, we review the to citizenship after six years. Our administration and management selection reflects the fact that there of the schemes across the three is more publicly available information countries and identify the gaps in about how corruption risks have policy and practice that give rise to manifested in these jurisdictions. a range of corruption risks. In recent years, Cyprus, Malta and

QUICK FACTS ON CYPRUS, MALTA AND PORTUGAL SCHEMES

CYPRUS MALTA PORTUGAL

Type CBI CBI RBI

Start year 2013 2014 2012

Golden visas sold to date (including 3,336 2,027 17,521 dependents)

Cap on the sale 700/year 1,800 for programme duration None of golden visas (excluding dependents)

€ invested to date €4.8 billion €718 million €4 billion

Investment €500,000 in property purchase €350,000 in property purchase €350,000-500,000 in property requirements + €2 million in a national or €16,000 in annual property purchase or €1 million transfer development fund, Cypriot rent + €650,000 in a national to Portuguese bank account or companies or government development fund and diverse €1 million in government bonds bonds fees + €150,000 in government or €350,000 in Portuguese bonds companies with the creation of 5-10 jobs or €250,000-350,000 in the field of culture heritage or scientific research

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 25 CYPRUS

€4.8 BILLION

Since 2013, Cyprus has sold more than 3,000 passports, including to dependents.

“Cypriot citizenship-by-investment programme is not one for those on a limited budget [...] But for those with the means, Cyprus ticks all the boxes.”40 © George Kourounis / Unsplash Kourounis © George According to marketing materials, Acknowledging the existence of the independence, resources and Cyprus’s citizenship-by-investment “problematic cases”, the Cypriot mandate to rigorously apply the scheme offers “the quickest, most government unveiled a set of code of conduct and to pursue assured route to citizenship of a reforms on 1 August 2018. These violations. Moreover, while agents European country”.41 The statistics reforms doubled the length of time appear to be under greater scrutiny, seem to support this: Cyprus’s for assessing applications and it remains unknown if applicants passports-for-sale scheme is the introduced an annual cap of 700 themselves have been subject to most prolific of its kind in Europe, on the number of passports for enhanced due diligence. In May with over 3,000 foreign nationals sale. Furthermore, private sector 2018, it was reported that the having secured EU passports since agents are now accredited by and government would be bringing 2013.42 Prior to the programme’s answerable to the Supervision and in agencies that specialise in revamping in 2013, ministers Control Committee. These agents identifying money laundering to granted Cypriot citizenship on a are named on a public register and review applications. As of August discretionary basis, in a less formal obliged to abide by a code of conduct 2018, however, there has been no arrangement.43 that requires them to submit a “report confirmation that the government of the findings of due diligence will conduct its own independent The trade has gleaned a whopping review” for every individual they and in-depth due diligence checks or €4.8 billion. But Cyprus has been support for citizenship.45 take any steps to verify the source heavily criticised for its scheme. In and legitimacy of an applicant’s May 2018, the government made its When asked about the rationale wealth.48 This leaves open a critical difficulties clear: behind the reforms, an anonymous gap. government source told The Cyprus Mail that the changes were both for Despite their shortcomings, these the sake of appearances and due to new changes represent the long genuine abuses of the program.46 overdue recognition that the Indeed, so concerned was the scheme may have exposed Cyprus government about protecting its and the EU to risky individuals. reputation, that it created a new To prove that their reforms are We’re not hiding that code of conduct banning agents not mere cosmetics, the Cypriot some cases were from referencing the “sale of government must ensure that passports” or from using the EU applicants are subject to enhanced maybe problematic and symbol or pictures of passports in due diligence as a matter of needed further research their marketing material.47 course. The government must not rely on banks or agents alone to internationally. It is not There is continued cause for conduct this critical work. Moreover, easy to trace the activity of concern, particularly as some of the Cypriots, and indeed all EU citizens, reforms seem to be more cosmetic everyone around the world. deserve to know whether individuals than substantive. For example, who were successfully naturalised it remains unclear whether the through the scheme prior to 1 Prodromos Prodromou, cap on applications applies only August 2018 pose risks to the EU. spokesperson for the Cyprus to main applicants or includes To identify visa-awardees who have government44 dependents. If the former, the cap accepted dirty money and exposed of 700 applicants is somewhat citizens and fellow Member States disingenuous, for the number of to risk, the Council of Ministers main applicants since the scheme’s must undertake retrospective establishment has never been checks on “problematic cases” and higher than 503 a year, a number revoke citizenship where warranted. that is far below the new cap. As it stands, in spite of its reforms, While the register of agents is a Cyprus’s trade in residency and welcome move toward transparency passports remains at risk of and oversight, it remains to exposing the EU to the corrupt and be seen if the Supervision and the criminal. Control Committee will be given

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 27 of whether there hadbeenany red citizenship broaches thequestion successfully secured Cypriot The fact that thisoligarch duo of the oligarchs’ “worldwide” assets. order to freeze more than$2.5 billion nationalised bankandgranted an London judgedinfavour of the newly of Justicein 2017, theHigh Court business partner Igor Kolomoisky,business partner Gennady Bogolyubov and his former Amongst themwere theUkrainians and Iran. of Russia, Ukraine, China,Saudi Arabia veritable “who’s who” of the super-rich investment programme. The list was a applied forCyprus’s citizenship-by- leak of thenames of people who had on a In 2017, TheGuardian reported untruthful anddefamatory”. allegations as“unsubstantiated, Bogolyubov dismissed PrivatBank’s Meanwhile, trial of thecaseincourt”. freeze a “temporary arrest during the billion from the bank. that the pair had illicitly extracted £4.2 the nationalisation came allegations government in2016. On theheelsof its nationalisation by the Ukrainian were its largest shareholders until who together foundedPrivatBank and legal requirements atthetime”. and being fully compliantwiththe companies) (via certain in the country having made substantialinvestments in 2010 “aspassport aresult of him that he had been granted aCypriot Bogolyubov’s lawyer confirmed In response to the country”. of his substantialinvestments in that citizenship ofCyprus,inrecognition confirmed that “hewas granted As for Kolomoisky, aspokesperson 28 28 CROOKS, CITIZENS OLIGARCHS, EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS 49 54 Kolomoisky has called the report, Guardian report, 51 In December InDecember 55

aiding corruptioninSyria. by theUSin2008forhis role in evade sanctions.Hewassanctioned visa programmes may beusedto is anotherexampleofhowgolden Syria President BasharAl-Assad, Rami Makhlouf,thecousinof finally reconsider hiscitizenship. seen iftheCypriotgovernment will Deripaska. another newlymintedCypriot:Oleg In March 2018, found at fault. revoking theirstatus,shouldthey be is whetherCyprus will consider thenextquestion themselves in court, overlook them. Now that thepairfind such that it had been willing to the government’s riskappetitewas flags in 2010, andifso,whether was hisCypriotcitizenship revoked. Cypriot citizen. Austrian citizenship, hebecamea after unsuccessfulattemptsto buy decision. in ontheCouncilofMinisters’ Russia didnotseemto have weighed of allegedtiesto organised crimein business visain2007onthegrounds authorities revoked Deripaska’s US succeeded. The factthatAmerican for aCypriotnaturalisation dropped in2016,andhisapplication affairs inBelgium. results of a intopreliminary inquiry his resubmit hisapplicationdueto the Deripaskawasasked to same article, in theearlystages.According to the allegedly raised questions,atleast even thoughhisapplicationhad granted Cypriotcitizenship in2017, sanctioned by theUS Treasury? minds nowthatDeripaskahasbeen cousin’s regime. sanctioned Makhlouf forbankrolling his the USauthorities unsavoury allegationsputto himby Though Deripaskahasdeniedthe 58 Butwillthey changetheir 56 The oligarch was 62 The Guardian named 63 InMay 2011,theEU Only in March 2013 60 57 itremains to be was The inquiry 61 In2010, 59

Passports and visas do only players now. Other specialist This may all seem perfectly sound, global firms, such as Arton Capital until you realise that the “best not sell themselves. There and CS Global, compete against practice” and “high professional is a very lucrative industry a range of small, medium and standards” espoused by the dedicated to the trade in large law firms with expertise in councils are entirely voluntary. immigration and a penchant for Despite the risk profile of their citizenship and residency. serving the needs of the ultra-rich. desired clients, firms in most In 2018, Henley & Partners Large multi-national accountancy countries are neither subject to CEO Christian Kälin, the firms with expertise in tax planning statutory regulation nor considered have also joined the game. obliged entities for the purposes of so-called “passport king”, anti-money laundering regulations. This industry appears to be quite estimated that the trade organised. It boasts not one, but This is a big problem. These would soon generate US$20 two membership bodies: the Global firms play a vital role in enabling billion a year.65 Investor Immigration Council works governments to sell a public “to protect the reputation of the good, one that gives successful investor immigration industry” and, investors the right to travel and It is safe to assume that investor somewhat obscurely, “serve[s] as live freely anywhere in the EU, visa firms are taking a healthy solid ground” for the development the means to acquire the right to cut. These firms sell schemes to of best practice,68 whilst the vote in elections, and the right to potential clients, help them with Investment Migration Council exists request diplomatic assistance and their applications and support them to build “public understanding” of protection. And they are doing this in their purchase of property. In the industry and promote “high without regulation or scrutiny. some cases, these firms also design professional standards”.69 and / or administer the schemes on behalf of governments, even to the point of managing due diligence procedures or helping governments to lobby for visa-free agreements.

In the early days of Malta’s scheme, Henley & Partners not only solicited applicants, but also conducted their due diligence. At the time, the firm received a 4 per cent commission for successful applications – an arrangement that led Members of the Maltese opposition to voice concerns about possible conflicts of interest in the application process.66 In response, Henley insisted that “Chinese walls” were successfully protecting business functions from conflict, ensuring that due diligence could take place unimpeded by the profit motive.67

Henley & Partners claims to have created the concept of “residence and citizenship planning” back in the 1990s, but they are not the © Pina Messina / Unsplash

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 29 MALTA

€718 MILLION

Launched in 2014, Malta’s citizenship- by-investment scheme had sold over 2,000 passports, including to dependents, by mid-2017.

“If you have a yacht and two airplanes, the next thing to get is a Maltese passport [...] It’s the latest status symbol.” - Chris Kälin, chairman of Henley & Partners70 © Micaela Parente / Unsplash © Micaela Parente Since 2014, Malta has been Nesis – managed to obtain Maltese Identity Malta, but it remains unclear operating the Investor Visa citizenship through the IIP in 2016, if or what measures have been taken. Programme (IIP). Like other golden raising doubts on the rigour with Identity Malta has issued no further visa programmes, individuals which the programme manages its written guidance or more concrete are granted a European passport due diligence findings. While the criteria on what constitutes “special in exchange for a significant Kremlin list, published by the US in circumstances”, and government investment. The benefits are January 2018, is not a sanctions list, officials still enjoy wide discretionary noteworthy: right of establishment it does identify Russia’s wealthiest power to define these “special in any of the 28 EU countries and businesspersons who are believed circumstances” and to determine the in Switzerland as well as the ability to be close to Russia President level of risk they are willing to take on to travel without a visa to 182 Vladimir Putin and who could have behalf of EU citizens. countries, including the US and been enriched through corruption.75 Canada. Companies specialising Neither has been on record with a Another aspect of the screening in citizenship and residence response to these allegations. The and due diligence process that may planning describe the process as three Russian were not included pose risks is that applicants are not “straightforward” and “efficient”.71 in the subsequent sanctions list required to purchase the passport You do not need to physically reside released on April 6 by the US using their own funds and may in or move to the country, you do not Treasury.76 rely on a benefactor to make the need to learn Maltese, you obtain a investment on their behalf. While new passport within a year, and you According to Maltese law, an the benefactor is required to submit enjoy citizenship for life. applicant who has a criminal a declaration of their sources of record, provides false information wealth and funds,81 the law does not But the programme has not been or is subject to a criminal specifically require the conducting without controversy. Recent events investigation is not eligible for of enhanced due diligence on the indicate that the IIP may not be the programme – unless Identity benefactor. If no additional checks as “straightforward” and “efficient” Malta, the government agency are undertaken, there may be risk of as its marketing claims. In its that was established in order money laundering, as applications of joint resolution on the sale of EU to administer the programme,77 individuals with clean criminal record citizenship in January 2014, the judges the applicant still worthy of could be financed by a dubious European Parliament warned of the being considered, due to special benefactor using illicit funds. risks of golden visa programmes in circumstances.78 This gives Identity general and of Malta’s programme Malta wide discretionary power In addition, a lack of transparency in particular.72 Earlier this year, the to assess individual applications and accountability in the IIP may report of the ad hoc delegation of and make a recommendation to offer opportunities for corruption the European Parliament that visited the Minister for a final decision. In and favouritism within Malta itself, Malta to look into the state of the 2017, the Office of the Regulator, which could lead to the diversion or rule of law and the implementation an independent body that was spending of public money for the of European anti-money laundering established in order to monitor benefit of a particular group. legislation in the country also the scheme, reported that Upon the European Parliament’s mentioned the concerns of the Identity Malta’s communications criticism of the fact that Maltese Financial Intelligence Analysis Unit to the Minister, involving and ultimately EU citizenship of Malta (FIAU) regarding the IIP. recommendations for whether or was available for sale without According to the report, the FIAU not to approve an application, were any residence requirements, the acknowledged “an element of risk” usually not explicit enough about Maltese government established a 73 in the scheme. the red flags identified during the 12-month residence requirement due diligence process.79 There are also concerns regarding for IIP applicants. There was initial the risk appetite of the authorities There were a number of cases uncertainty regarding what this 82 who manage the programme. in which a cover letter written by requirement meant in practice. According to the IIP, applicants are Identity Malta to the Minister failed Maltese authorities eventually subject to a four-tier due diligence to mention potential issues that had clarified that no physical presence process. Nevertheless, three been raised in the dossier, which in Malta was required or expected. Russians who were included on the tended to be more comprehensive.80 Assessment of an individual’s so-called “Kremlin list”74 – Arkady The Office of the Regulator residence status – which is to say, Volozh, Boris Mints and Alexander communicated these concerns to what constitutes their genuine

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 31 links to the country – would be There is little information and has been “consensually toned based on their commercial and accountability regarding the role down”.90 This, however, raises financial commitments. Common of the concessionaire – Henley another concern: given that the role proof of “links” include renting & Partners, in the case of the of the concessionaire has been property, opening a personal bank IIP. According to IIP law, the reduced essentially to marketing account with a local bank, signing concessionaire is responsible for the programme, and that there has up for membership with clubs and the programme’s operation and been a consensual change in the donating to a charitable institution.83 may be involved in the examination terms of the contract between the of applications and in the due government, Identity Malta and the The extent to which a commitment diligence process. The Organized concessionaire, one might argue is considered sufficient for Crime and Corruption Reporting that the commission received satisfying the residence requirement Project (OCCRP) reports that Henley by the concessionaire is far too is at the discretion of Maltese & Partners receives 4 per cent of generous. As of June 2017, Henley authorities. This may lead to the application fee of successful & Partners has reportedly earned conflicts of interest and offer applicants, and another 4 per €19,054,000 from the programme, opportunities for corruption and cent of the applicant’s €150,000 while Identity Malta, now favouritism. For example, an investment in governments bonds.88 responsible for the programme’s approved agent interviewed by the The concessionaire may also implementation and administration Office of the Regulator suggested introduce prospective applicants as well as for conducting and that Identity Malta was pointing to the programme for a service making final decisions on due applicants to specific charities fee of €70,000.89 The role of the diligence processes, has received 84 for donation purposes. On a concessionaire as stated in the law €23,701,500.91 number of occasions in 2016 produces clear conflicts of interest: and 2017, members of the Malta the concessionaire, who receives a In order for the IIP to contribute House of Representatives raised commission for every successful to the economy and social questions about these donations application, represents clients development in a sustainable to the Minister responsible for the while also being responsible for the manner, Malta needs to adequately 85 programme. According to the operation of the project. In other address the programme’s Minister, by the end of 2016, 215 words, the concessionaire may be reputational and money-laundering donations amounting to €1,703,700 conducting due diligence checks on risks. It also needs to increase had been made to philanthropic the very individual they represent. transparency and accountability in organisations and NGOs in Malta.86 the management of contributions A list of organisations that benefited In practice, however, it seems and decision-making, particularly from donations was published in that some of these risks have by limiting the discretion of public February 2017, but this information been mitigated. The Office of the officials. Otherwise, the programme is not made regularly available for Regulator recently confirmed that is at risk of benefiting the few to the public scrutiny.87 the role of the concessionaire detriment of many.

32 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Tom Grimbert / Unsplash account with PilatusBank. money to anoffshore company’s (Willerby Trade) in applicationfees to BT International,they sentthe applications. But insteadof transferring €166,831 an agent approved by Identity Malta,to handletheir The three Russians hired BT International/ Nexia BT, close business associate of Prime Minister Muscat, International / Nexia BT anda Managing Partner revealed by the Panama Papers, Brian Tonna, BT Willerby Trade do have somethingin common. As But BTof Maltese passports. International and andis not an authorised agent for the sale industry that hasnotrack record of operating in the passport Willerby Trade is aBritish Virgin Islands company commission fordirect referrals of clients to theIIP. guaranteed that Willerby would receive a 50 per cent agreement between BT International and Willerby revealed by the Panama Papers, an unsigned by Daphne Caruana Galizia and As reported Joseph Muscat. Schembri, chief ofstaffto Malta PrimeMinister ended up inthe account of Keith reportedly by theRussians in relation to their IIP applications Intelligence Analysis Unit shows that thefees paid by in 2015. theMalta Financial Aleaked report how three Russians obtained Maltese citizenship close to the decision-making? This wasallegedly process or to get in a goodword from someone it was possible to pay an extra fee to expedite the application to government authorities.But what if fee sothat the agent can collect and submityour need to findan approved agent andagreea on you If you would wantedto buy aMaltese passport, reply to OCCRP’s requests for a comment. there was something to hide?Brian Tonna did not company with an opaque ownership structure unless of the funds go to an offshore sense. Why would part same individual, the agreement seems to make little Considering that both companies are ownedby the is the ultimate beneficialownerof Willerby Trade. SCHEME SCHEME TARNISH MALTA’S SUSPICIOUS PAYMENTS ALLEGATIONS AND 92

95 96

investigation by the Police”, notes the report. FIAU to besuspicioustransactions warranting further holding a position oftrust in thesameoffice is seen the schemeto thepersonalaccountofanofficial transfer of fundsoriginatingfrom applicantsunder promotion ofthe scheme in different countries. The of theIndividualInvestor Programme andinthe extensively involved intheactualestablishment “The officeofthePrimeMinisterhasbeen Prime MinisterMuscat’s chief of staff. Bank inthename of Keith Allen Schembri–again, of themoney to anotheraccountwithPilatus part transferredreceiving the funds,Willerby reportedly To after complicatematters, shortly further ordered further investigations. ordered further the other hand, thought it could beabogusloan and report, but did not open further investigations. butdidnotopenfurther report, those involved. The Maltese police received the FIAU have taken nomeasures to investigate and sanction Despite the evidence, authorities in Malta seem to rules, without facing anyconsequences. incontraventionreports, to anti-money laundering Pilatus Bankfailedto submitsuspicioustransaction clear explanation. up inSchembri’s account,reportedly, withoutany a total of €100,000 of fees related to theIIPended the processing oftheapplications. determine thepresence of any unusual behaviour in inorderthree to Russians named report, in the FIAU International /NexiaBT, thoseofthe in particular a reviewundertake of all applicationshandledby BT MIIPA and the Office oftheRegulator should also agents and investigating potentialwrongdoing. The in placeforreviewing theconductofaccredited Programme Agency (MIIPA) hasadequate procedures questions aboutwhetherthe Malta IndividualInvestor with money laundering and sanctionsevasion. its owner, Ali Sadr Hasheminejad,who was charged Bank following the arrest and indictment in the US of 2018, Malteseauthoritiesseized control of Pilatus Brian Tonna. legitimate repayment of a loan given to his friend, and alleged that thepayments were a on his part as an“accredited agent”oftheIIP, BT International/ Nexia BT continueto beregistered TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 100 According to reports, the FIAU, on According on theFIAU, to reports, 99 Schembri denied wrongdoing 101

106 raising 98 Allegedly, 104 InMarch 103 105

102 102 33 NATIONAL DEVELOPMENT FUNDS: WHO BENEFITS FROM GOLDEN VISA SCHEMES?

Many golden visa There is very limited information operator in the domestic banking not only on how funds are used, sector”.112 There is no publicly programmes include but also, more importantly, on available information on how much direct contributions to the how decisions regarding the the NDSF paid for the shares. The government as one of the allocation and investment of funds move has been met with criticism are made. In the absence of clear in Malta, with many stating that the available modalities of transparency and accountability investment does not align with the investment. The funds are mechanisms, and given the wide fund’s purpose.113 kept in national development discretion enjoyed by public officials who award golden visas, the risk In general, there is no publicly funds, which typically aim to of corruption increases. Moreover, available information on how the funds are used and how investment promote education, quality without access to information, citizens remain unable to make decisions are made. The NDSF does health care and the country’s a fair judgement of the schemes’ not seem to share any information overall development. contributions to them and their about its activities as well. Audited country’s economy. accounts and annual reports – which the fund needs to produce, Most of the Caribbean countries In Malta, 70 per cent of the according to the law114 – are not offer these direct non-refundable contributions received by Identity publicly available. contributions as the cheapest Malta under the IIP go to the investment option. For example, a National Development and Social Countries should adopt a clear family of four can gain an Antiguan Fund.107 The funds are to be used in and transparent accountability passport in exchange for a €87,000 the public interest: the advancement framework for the management of contribution to the National of education, research, innovation, resources earned through golden Development Fund. In Europe, Malta social purposes, justice and the rule visa programmes. The amount of has opted for the establishment of law, employment initiatives, the revenues earned, their use, and the of a development fund that environment and public health. As of amounts saved, spent or invested manages contributions under the December 2017, the NDSF had more should be subject to financial audits, IIP. In contrast to the Caribbean than €360 million.108 According to and all of this information should be programmes, the IIP requires a Prime Minister Muscat’s statement made regularly available to the public. contribution to Malta’s National in Parliament, the NDSF invested Otherwise, these schemes are at risk Development and Social Fund approximately €27 million by of offering a number of opportunities (NDSF) as a mandatory investment, December 2017.109 More recently, for corruption. In turn, public officials in addition to investments in in March 2018, money from the may be willing to accept applicants real estate and other investment NDSF was used to buy shares of with controversial backgrounds vehicles. The IIP also requires the Lombard Bank Malta from the simply for reasons of profit. significantly higher amounts – Cyprus Popular Bank Public Co. namely, a donation of €650,000. Ltd.110 According to media reports, Countries running golden visas the NDSF Board of Directors programmes have underscored the explained that “this acquisition is by importance of these contributions no means a strategic investment to their economy. But are these but intended solely to facilitate the funds really used for the benefit of exit of the Cypriot major shareholder the population? The simple answer of Lombard Bank Malta”,111 and it is that we don’t know. aims “to support […] an important

34 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Yousef Alfuhigi / Unsplash PORTUGAL

€4 BILLION Having sold over 17,000 residence permits since 2012, Portugal is one of the top earners among EU golden visa schemes.

“[It] is a highly appealing and affordable opportunity – it’s a hassle-free arrangement with guaranteed buy back.” - Chris Immelman, managing director of a South Africa real estate company Pam Golding International115 © Rodrigo Kugnharski / Unsplash © Rodrigo Kugnharski The Residence Permit for internal control mechanisms nothing regarding who invests in the Investment (ARI) is one of the most were “basic and weak, and in programme, how much is invested, popular golden visa programmes some areas fully inefficient”.119 and whether and how the source in the world. It allows investors The programme was revised after of the investor’s funds is verified.125 to obtain a residence permit in alleged corruption involving high- Transparência e Integridade, Portugal and consequently free rank officials responsible for the Transparency International’s chapter access to the vast majority of programme came to light, with the in Portugal, submitted access-to- European countries. It also offers last revision taking place in 2017, information requests to competent an indirect route to citizenship: after when new modalities of funding authorities in Portugal, seeking to six years of residence, successful were introduced.120 Since then, no clarify these doubts, but Portuguese applicants can apply for a European significant efforts seem to have authorities replied that all available passport. Firms offering residence been made to address the issues information about the programme and citizenship planning services identified in the report. had already been published.126 describe Portugal’s golden visa as flexible, with a fast process and low The current legal framework There is the additional problem of physical presence requirements.116 does not explicitly mandate main applicants acting as “Trojan that Immigration and Borders horses” for family members who But the programme comes with Service conduct due diligence on may have a more difficult time high risks. This was the conclusion applicants or determine whether passing inspection. Currently, reached during discussions between applicants are politically exposed family members need to apply for the Financial Action Task Force persons (PEPs).121 Applicants are “family reunion”, in a process that (FATF), public sector authorities and only required to provide a police is not subject to comprehensive private sector entities in Portugal.117 certificate from the country of due diligence and rely only on Ana Gomes, a Portuguese member origin, or, should they no longer a certificate of a clean criminal of the European Parliament, said reside in the country of origin, the record.127 Enhanced checks should she fears the programme may be country in which the applicant has be extended to all family members “abused by individuals and criminal resided for more than a year.122 who wish to obtain a residence organisations with great economic This means that if an applicant left permit through the programme. power”. “It is a corrupt scheme to their country of origin after being support the corrupt”, she said.118 convicted of a crime, they can easily provide a police certificate from In its 2014 review, the Inspectorate the country of residence so that General of Home Affairs in Portugal Portuguese authorities do not know flagged a number of issues that the applicant has a criminal that make the ARI vulnerable conviction, unless an international to corruption. The lack of clear arrest warrant has been issued. “It is a corrupt scheme to guidelines and the wide discretion Moreover, it does not seem to support the corrupt.” given to public officials working be the case that documents and in the regional immigration and information provided by applicants Ana Gomes, Member of the borders services offices open are independently verified, with European Parliament opportunities for inconsistent the exception of additional checks application of the rules. The carried out by the Judicial Police and inspectorate found that regional the Portuguese Central Department delegations were applying different of Criminal Investigations. criteria when reviewing applications and supporting documents; that When reviewing applications, the rationale for decisions was Portugal’s Immigration and Borders not always properly documented; Service does not seem to check that many regional delegations whether applicants are subject to had a poor audit trail, resulting in ongoing investigations or open the inadequate filing of important criminal complaints outside of documents and communication Portugal.123 There also seem to be exchanges between public no checks on applicants’ source officials and applicants (and/or of wealth and funds used for their representatives); and that investment.124 We know little to

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 37 The FATF mutual evaluation of Without clear criteria and due Portugal highlights the role of diligence requirements, the private sector stakeholders such programme is at higher risk of as real estate agents and financial being misused by the corrupt, or by institutions in ascertaining the origin individuals who may be investing of the funds and the background the proceeds of a crime or hiding of applicants. According to the from justice. Poor operational evaluation, however, no specific management and the lack of internal measures or recommendations controls may increase opportunities have been developed by Portuguese for corruption within Portugal, authorities or circulated to these allowing public officials to solicit stakeholders.128 The programme’s bribes in exchange for the successful current rules and guidelines do processing of an application. not require applicants to open a bank account in Portugal for To allow for public scrutiny and all modalities of investment. to increase transparency and There is anecdotal evidence that accountability in the management this is nevertheless the current of the programme, information practice and that due diligence about the ARI – including, at checks are thus conducted the very least, the number of by the respective banks. But applications received (by country the government’s outsourcing of origin), granted and refused – of the vetting of applicants to should be published on a regular private sector stakeholders is basis. The government should also insufficient for ensuring that money consider publishing the names of launderers and the corrupt do successful applicants. not abuse the scheme. It is the state’s responsibility to verify the background and source of wealth of applicants and their dependents according to predefined criteria, which takes into account the particular risks posed by these type of programmes.

38 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS a golden visa.134 A spokesman for Novis said he has CLEAN CARS, DIRTY nothing to declare and that his activities in Portugal MONEY, GOLDEN VISAS are known by the Brazilian courts.135 Oliveira Dias confirmed that he had obtained a golden visa.136 In 2014, senior public officials of the Institute of Portuguese authorities have not commented on the Registries and Notaries and of the Immigration and security checks conducted in these specific cases. Borders Service were detained for allegedly running They merely underscored that all applications are a network that took bribes and accepted gifts for assessed by means of criminal records and the expediting golden visas or turning a blind eye to consultation of national and international databases.137 programme requirements. Police investigators suspected They also stated that golden visas need to be renewed that properties registered as having been purchased for after the first year, and then every two years thereafter, €500,000, the minimum amount required for a golden which offers authorities the opportunity to review visa application, may have been bought for significantly applications. It is unclear whether the aforementioned less in reality.129 The scandal led to the resignation executives tried to renew their visas or whether of then Interior Minister Miguel Macedo. Criminal Portuguese authorities cancelled them. Regardless, proceedings against the senior officials as well as the these cases show that the current background applicants, three Chinese executives, are ongoing.130 checks, which focus solely on criminal convictions, More recently, investigations by The Guardian revealed may be insufficient, creating opportunities for corrupt that individuals involved in corruption in Brazil might individuals who wish to escape justice or move/launder have been golden visa beneficiaries.131 Documents assets to misuse the programme. obtained by the journalists showed that Otávio Azevedo It is true that at the time of their applications, there were – the former president of the Brazilian construction no criminal convictions against the aforementioned company Andrade Gutierrez, who was convicted in individuals.138 But one should keep in mind that the 2016 for corruption – bought an apartment in Lisbon real estate purchases and golden visa applications worth €1.4 million in 2014. The property was used took place in the midst of the Operation Car Wash as part of an application for a golden visa the same investigations.139 By the end of 2014, Brazilian year. A spokesperson for Azevedo said he had not yet prosecutors had already uncovered the role of Brazilian received a confirmation that his application had been construction companies in setting up a cartel to accepted.132 Other names exposed by The Guardian win contracts with Brazil’s state-owned oil company included Sergio Andrade (executive of Andrade Petrobras, and several executives from the largest Gutierrez), Pedro Novis (former president of Odebrecht) construction companies had been arrested.140 Any and Carlos Pires Oliveira Dias (executive of the Brazilian proper due diligence checks conducted in 2014 should group Camargo Corrêa).133 Andrades’ spokesperson have raised red flags about these individuals. told The Guardian he did not live in Portugal and had no plans to do so, but did not dispute that he had acquired © Ethan Cull / Unsplash

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 39 When Things Go Wrong

HUNGARY: SHADY MIDDLEMEN

The Hungarian Investment Immigration These intermediaries were selected through Program was suspended in 2017141 and a dubious process that may have violated terminated at the end of July 2018,142 Hungarian law, as shown by documents following pressure from civil society groups obtained by Transparency International and independent media. The rationale for Hungary through a court case.144 Indeed, featuring the programme in this report is its the Central Bank of Hungary is usually perfect illustration of the risks associated responsible for overseeing and licensing with golden visa schemes and the need for financial institutions, including those that harmonised rules and standards in addition buy and sell stocks and bonds. Therefore, to greater transparency. the Central Bank would have been the logical choice for selecting and regulating The scheme had allowed non-EU citizens companies that sell bonds to residency to acquire Hungary’s permanent residency applicants. Instead, these responsibilities fell status by investing at least €300,000 in into the hands of the Economic Committee special Hungarian government bonds. Unlike of the Parliament, which has a poor track other European schemes, the Hungarian record when it comes to the transparency programme foresees the full repayment of and application of procedures.145 Based on the investment to individual investors after these findings, Transparency International five years, with a minimum interest rate Hungary reported the Parliament’s Economic of 2 per cent. In another unique feature, Committee to the police for suspected abuse foreign nationals did not directly invest of power and illicit concealment of public in the residency government bonds. The interest information. However, the Hungarian investment was made through designated Prosecution Service rejected the complaint intermediary companies, the majority of and terminated all proceedings in March 143 which had opaque ownership structures. 2018.146 The decision is subject to appeal. All intermediaries except one were registered outside Hungary, including in secrecy The opacity of the selection and of the jurisdictions like the Cayman Islands, operation of intermediaries raised the Cyprus and Liechtenstein, where little to no possibility of conflict of interest and information about the real owners of these corruption. This was all the more troubling, companies is available. The intermediary considering the generous profit margins took a €29,000 commission paid by the made by intermediaries for each application. Hungary’s State Debt Management Agency, Media sources reported the concerns and based on the mandatory rate of return of fears of visa beneficiaries about dealing with the bonds as well as service fees charged “random offshore intermediaries”147 instead to investors that ranged from €40,000 to of the Hungarian state. The media further €60,000 per applicant. revealed links between the main beneficiaries of the residency bond programme, intermediaries and Hungary’s political elite.148

40 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Daniel Olah / Unsplash

Even more surprisingly, the scheme Hungary’s residency state bond The Hungarian scheme is a unique was designed to generate a net loss programme could also have been example of mismanagement, for the state by selling government vulnerable to corrupt individuals or discretionary decision-making and bonds and repaying them five other criminals who could misuse opaque governance. The pivotal years later with a minimum 2 per the programme to gain access role played by intermediaries is cent interest rate. Transparency to Europe, launder their money or also a striking feature. This serves International Hungary estimates escape from justice. It is reported to underscore the need for greater that the country’s budget could that in 2014, Atiya Khoury, Syrian transparency and accountability have experienced a loss as high dictator Bashar Al-Assad’s “money in the design and governance of as €192 million resulting from the man”, was granted a Hungarian European golden visa schemes. residency bond programme by the residence permit through the An analysis of the actual benefits end of 2017149 – and all this to the programme.152 According to a joint and losses should be conducted. exclusive benefit of intermediaries, journalistic investigation by 444 In the event that such an analysis which made a total profit of about and Direkt36, the permit was issued identifies undue gains made by €480 million with the programme.150 within 10 days of the application. certain individuals or companies, This can only raise suspicions Khoury applied for a permanent they should be investigated, and the about the underlying motivations resident permit in September relevant funds should be recovered for setting up such a scheme. This 2016,153 two months after he had to benefit the Hungarian people. was the point made by a group been put on the US sanctions of Members of Parliament, when list.154 In spite of this, Hungarian they requested the formation of authorities found no issues whilst a commission of inquiry on the conducting background checks and scheme in 2016.151 decided to grant him permanent residence the following year.155

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 41 THE UK TIER 1 VISA: THE DANGERS OF BLIND FAITH

Invest £2 million in UK bonds for had been given a visa as verification applying for the visa and are five years, and you are on your way from the UK Home Office that an required to provide clean criminal to buying UK residency. In fact, the applicant’s wealth was legitimate.157 records. Only in 2018, 10 years after more you invest, the quicker you can They incorrectly assumed that the the scheme began and three years apply for “indefinite leave to remain”. government had already undertaken since the flaws came to light, did This is the concept at the heart checks of the applicants and their the Home Office decide to review of the UK Tier 1 (Investor) Visa, money, and had been satisfied by successful applications. Why the a route into the country that has what they found. Conversely, the change of heart? The answer can be proven most popular with Russian Home Office assumed that the found in the small city of Salisbury, and Chinese nationals since its opening of a UK bank account which found itself at the centre establishment in 2008. would involve thorough due of a global diplomatic crisis when diligence checks. residents Sergei Skripal and his Compared to other schemes on daughter were poisoned by a deadly offer around the world, the UK During this ‘blind faith period’ over nerve agent. The Russian state fell scheme may sound expensive 3,000 high-net-worth individuals under suspicion. The amount of but unexceptional. However, until entered the UK, bringing with them dirty money in the British financial relatively recently, there was an at least £3.15 billion of questionable system and the number of ultra- important loophole that could have legitimacy. The scheme was most wealthy individuals who had made made the scheme more attractive. popular with citizens from high a home for themselves in the UK hit Investigations by Transparency corruption risk jurisdictions, with the headlines.159 International UK revealed that the 706 successful applicants from scheme undertook minimal checks Russia and 1,126 from China The UK’s story of blind faith and on applicants’ wealth from 2008 entering the country between 2008 delayed scrutiny provides a salutary to 2015.156 The problem was that and 2015.158 warning of the social, political, applicants were given visas before reputational and diplomatic risks they opened a UK bank account. Realising their mistake, the Home of failing to properly coordinate or Transparency International UK Office reformed the programme in conduct enhanced due diligence on discovered that a number of banks April 2015. Now, applicants have golden visa applicants. interpreted the fact that individuals to open a bank account before

42 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Ethan Cull / Unsplash ANNEX III OF THE 5TH AML DIRECTIVE IS NOT THE ANSWER

In April 2018, the EU Although this amendment is a The directive’s “golden visa clause” welcome recognition of the anti- presents a number of pitfalls and issued the 5th Anti-Money money laundering risks posed shortcomings that make it unfit for Laundering (AML) Directive, by golden visas, it falls short of its intended purpose. First, due to which established stronger fully addressing these risks and the lack of publicly available data essentially amounts to shifting, and on golden visa applicants, banks European anti-money in fact diluting, the responsibility of and intermediaries have no way of laundering standards.160 conducting due diligence to banks determining whether a customer is Annex III of the directive and intermediaries. a golden visa applicant, other than by relying on what the client says. introduces a provision Second, the introduction of an requiring banks and other amendment like the one made obliged professionals, to Annex III is based on the such as real estate agents, assumption that the issuance of It’s definitely a problem. golden visas always involves an lawyers and accountants, investment concomitant with the to consider customers Banks will have to ask, ‘Do application and thus an intervention, applying for golden visas you have one passport, first in the chain, of a national bank, a real estate agent or a similar as a potential higher-risk two passports, are you intermediary. But it remains unclear factor during the due applying for second whether this would suffice to cover diligence process.161 all investments made into the EU citizenship?’ Ultimately through golden visa programmes. they will have to rely on a For example, the investment could have been made by the applicant declaration by the client. years before the decision to apply for a golden visa. In such a case, Manfred Galdes, former head the applicant may not have been of Malta’s Financial Intelligence rated as high risk at the time of the Analysis Unit162 investment, and thus the applicant may have gone insufficiently checked by the bank or professional.

44 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Abigail Low / Unsplash

Moreover, in the case of multiple There is a great risk of shifting responsibility for due diligence, investment requirements, as in the such responsibility to banks and the process as envisaged by the Maltese scheme, there may be a risk intermediaries. When it comes to directive would leave them with that the origins of the money will be delivering passports and residence little to no control over the level and only partially screened. The Maltese permits, anti-money laundering quality of due diligence checks. scheme requires both investment checks cannot simply be outsourced in government funds and bonds as to the private sector. Recent The directive’s golden visa well as investment in a real estate allegations of money laundering provisions are clearly insufficient purchase of at least €350,000 or a involving European banks in Latvia,164 for preventing money laundering rental of at least €16,000 a year. Per Malta165 and Cyprus,166 for example, risks. They may even be new European rules, the latter may suggest that this cannot be the way counterproductive and prompt not be systematically covered by forward. Similarly, recent scandals Member States to inaction by anti-money laundering obligations, like the Panama Papers have creating the impression that which only apply to transactions for highlighted the key role played by professionals are already taking which the monthly rent amounts to intermediaries in the facilitation of care of the necessary work. This €10,000 or more (€120,000 a year).163 money laundering. highlights the need for stronger harmonisation of regulations at EU Third, it is problematic to assume Moreover, it is unclear how level and for clarification of the roles that obliged entities will rate their immigration authorities would be and responsibilities related to due customers and decide to proceed informed in a timely manner, should diligence, which should not fall to with the transaction based on a bank or an intermediary detect the private sector. the same risk appetite as public an anomaly and file a suspicious authorities deciding about granting transaction report. Suspicious citizenship to foreign nationals. The transactions reports are submitted implications of those two decisions to the financial intelligence are very different and so need to be unit, which is responsible for the criteria for making such decisions. redirecting the information received from professionals to Finally, the directive should not be competent authorities, including seen as a way to absolve Member law enforcement or tax authorities. States from their responsibility to Immigration authorities appear establish, abide by and monitor nowhere in this architecture. While robust due diligence standards. they should ultimately bear the

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 45

WHAT THE EU NEEDS TO DO »» Current EU regulations, as set out in Annex III of the 5th Anti-Money Our analysis has revealed clear discrepancies Laundering Directive, are insufficient in the design and operation of European for mitigating the wide range of risks golden visa schemes. The risk appetite as associated with the sale of golden visas. well as the required levels of checks and As discussed above, the application transparency vary between Member States, of Annex III could result in absolving while the “product on sale” remains the same: Member States from taking any further EU citizenship and residency. action to identify and assess golden visa applicants, and compel states In fact, Member States that profit from selling to outsource these critical checks to golden visas are putting at risk not only professionals subject to. their own citizens, but also other Member States and the EU as a whole. Therefore, it »» Explore ways to broaden anti-money is critical to harmonise the sale of residency laundering rules to ensure that all those and citizenship across the EU, and that high involved in the golden visa industry, standards of transparency and due diligence including agents accredited by the state, are implemented across the board. Only a are obliged to uphold these regulations. unified and coordinated approach will prevent risky individuals from “passport-shopping” »» Collect harmonised statistics on between jurisdictions and avert a race to the applications and investment made through bottom in terms of standards. golden visa schemes in Member States.

»» Establish mechanisms for coordinating information sharing between Member States concerning rejected applicants.

»» Undertake infringement procedures against Member States offering golden visa schemes if they are deemed to undermine the principle of sincere cooperation and jeopardise EU values and objectives.

48 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS THE EU’S COMPETENCY TO ACT

“While it is for each Member of arguments could be made for This suggests that the scope of bringing citizenship-by-investment the principle of sincere cooperation State to lay down the schemes within the scope of EU law, extends also to areas of overlapping conditions for the acquisition thereby justifying EU-level action. competence between the Union and loss of its nationality, and Member States , or even in domains where Member States this must be done in full THE CROSS-BORDER keep the monopoly of action. An EU- respect of Union law.” DIMENSION level intervention would therefore It goes without saying that the be justified in a case where the These were the words of European passport trade in one Member State attainment of the union’s objectives Commissioner for Transport Violeta affects the entire union. After all, of preserving “freedom, security and Bulc when she kicked off in May what is on sale in the golden visa justice without internal frontiers”, as 174 2018 a parliamentary debate on the industry is mobility and access to stated in Article 3(2) of the TEU, corruption risks associated with the EU rather than strictly integration is jeopardised. And no doubt that the sale of passports on offer in a into the community of the Member this is the case when insufficient number of Member States.167 Her State in question. It is the cross- due diligence checks are made words echo those of EU law experts: border effect of naturalisation and on applicants which may lead to citizenship, that brings it within the corrupt individuals and money “Access to European citizenship scope of public international and EU entering the EU. is gained through nationality of a law, and thus justifies action at EU Member State, which is regulated In August 2018, European level. This has been highlighted in a Commissioner for Justice Věra by national law, but, like any form of number of court cases.170 citizenship, it forms the basis of a Jourová presented her myriad new political area from which rights concerns regarding the schemes on and duties emerge, which are laid THE PRINCIPLE OF SINCERE offer in Europe, citing fears that “if an down by Community law and do COOPERATION EU country opens its doors to third- not depend on the State. […] In other country nationals, it will also open the words, it is not that the acquisition There is also the question of how floodgates to the entire union”, and and loss of nationality (and, the schemes stack up against the expressing the sceptical view that consequently, of Union citizenship) principle of sincere cooperation as some newly minted citizens have are in themselves governed by stated in Article 4(3) of the Treaty on “constructed” their relationship with 171 Community law, but the conditions European Union (TEU). The Court a country rather than forging genuine 175 for the acquisition and loss of of Justice of the European Union connections. The European nationality must be compatible with (CJEU) developed this principle Commission, she has promised, the Community rules and respect the through case law, and it establishes will issue new and “more stringent” rights of the European citizen.” the legal duty of Member States to guidelines for Member States. Opinion of Advocate General Poiares respect their obligations in defence 172 But will these guidelines be adopted Maduro delivered on 30 September of the Union’s interests. It also across the board? Guidelines alone 2009 on Case C‑135/08. Janko covers one specific prohibition or will not stop a race to the bottom. It Rottmann v. Freistaat Bayern.168 negative obligation, which consists of abstaining from adopting is clear that the EU has grounds for It is true, per Declaration No. 2 measures jeopardising the Union’s curbing the risks associated with of the Maastricht Treaty, that objectives. The CJEU has further selling EU passports and permits as citizenship is a matter for national emphasised that the duty of well as the leverage to harmonise competency,169 but this competency genuine cooperation is of general standards. Given the risks at hand, it has its limits. Member States should application and does not depend should utilise its mandate to do so. not have the unfettered ability to either on whether the Community sell EU citizenship without regard competence is exclusive [...].173 for the rest of the union. A number

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 49 WHAT NATIONAL »» In-depth interview or analysis. of interest or bribery risks. These GOVERNMENTS NEED TO DO Due diligence checks should measures include the following: include interviews with well- »» The selection of specialist Enhanced due diligence placed individuals to check for political connections/ agencies adheres to open 176 Understanding the background of exposure; any corrupt business contracting principles. golden visa applicants and their practices; source of wealth »» Agencies contracted to conduct family members is the primary way and professional experience; enhanced due diligence are in which governments can make an links to organised crime; barred from marketing the informed decision on whether an suggestions of involvement in schemes or providing additional individual can gain access to the EU money laundering and other services to applicants. without posing risks. Therefore, it is illegal activities; dealings critical that all applicants are subject with sanctioned entities; and »» Contracted agencies are not to the most comprehensive form social and environmental remunerated according to of enhanced due diligence checks. responsibility. the number of successful In particular, to ensure that golden applications processed. visa programmes are not abused »» Processing time. There must by the corrupt and the criminal, be no restrictions on how long »» Any enhanced due diligence the following should be part of any the due diligence process report that identifies risks assessment conducted by golden should take. is discussed with the visa authorities: relevant agency to ensure »» Dependents and benefactors. that the government has a »» Independent verification. All All applicants over the age of comprehensive picture of the information and documents 13 years should be subject to type and level of risk at hand. provided by the applicant must enhanced due diligence. There be independently verified by the should be no leeway for the »» Governments ensure that responsible government agency. corrupt and the criminal to they fully understand how gain residency or citizenship the sources and research »» Source-of-funds and source- by posing as the “dependents” techniques applied by the of-wealth verification. The of family members who apply provider adhere to the principles amounts being invested as the “main applicants”. of best-practice methodology must be transferred via the Similarly, given the possibility outlined above.177 applicant’s personal bank of applicants relying on account and must be subject benefactors to make their While enhanced due diligence is a to anti-money laundering investment, the benefactor must critical component of preventing checks. In addition, checks be subject to the same checks. the corrupt and the criminal from must be conducted to ensure taking advantage of golden visa the applicant’s wealth is not programmes, what really matters disproportionate to their Integrity Principles is how governments assess due known lawful sources of diligence findings and the level of income. Sufficient information Governments maintain primary risk they are willing to take when should be obtained that give responsibility for accepting or selecting applicants. Foreign an indication of the volume rejecting applicants, using due nationals are being awarded with of wealth to be reasonably diligence findings to inform their citizenship and residency, along expected of the applicant, and decision. In some jurisdictions, with all the rights that come with of how it was acquired. government bodies undertake them, for life. Governments should due diligence themselves, whilst use due diligence to assess the »» Civil and criminal litigation. in others, they may hire specialist risks an applicant poses not only to In addition to police records and agencies to conduct the checks the country but also to the EU as a security checks, governments that will then be factored into the whole. The bar needs to be set high, must conduct checks of final decision. If this key step in and golden visas should be given applicable court records to the application process is handed only to individuals with exceptional verify whether the applicant over to specialist agencies, it is track records. is or was subject to civil or critical that governments adopt a criminal proceedings. set of measures to avoid conflicts

50 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Kseniya Lanzarote / Shutterstock.com Lanzarote © Kseniya

Governments must also ensure »» Conduct impact assessments »» Establish an open dialogue with that programmes operate with and make adjustments as citizens about the risk appetite, strong governance and oversight necessary. social and economic benefits mechanisms, and that citizens or detriments of the policy, and are informed of the risks and »» Exercise sufficient oversight by the regulatory and operational rewards that come with selling ensuring that the schemes are aspects of the scheme. citizenship and residency. regularly audited and that the Therefore, to safeguard the results are published. »» Publish the names and countries integrity of the schemes and to of origin of successful applicants »» Provide robust whistleblowing in an open-data format. ensure that EU citizens know who mechanisms for staff and their new compatriots are and citizens to report concerns »» Publish statistics harmonised have confidence in the screening and wrongdoing. at EU level on the success rate processes, responsible national of applications for investors and government departments must: »» Revoke citizenship and their family members and the residency rights, in the case »» Publish the specific objectives, number of instances in which that new evidence of corruption citizenship or residency is denied investment criteria, residency or criminality is uncovered. criteria and enhanced due due to regulation breaches. diligence standards of the »» Ensure that any suspicions »» Publish information on the scheme. about applicants arising total amount of funds invested, from enhanced due diligence collected by the state and »» Ensure that adequate notes and processes are shared in a timely documents relating to decisions disbursed through schemes in manner with and between an open-data format. are kept for as long as the relevant domestic, regional and statutes of limitation of the international investigations falsification of documents and agencies. In particular, share bribery offences allow. with EU authorities information »» Strictly monitor successful on individuals who had their golden visa recipients golden visa applications denied to ensure that residency due to security issues or requirements are fulfilled. exposure to risk.

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 51 Annex

ANNEX 1. EUROPEAN GOLDEN VISA PROGRAMMES

CITIZENSHIP-BY- RESIDENCY-BY- COUNTRY YEAR ESTABLISHED ONGOING? INVESTMENT (CBI) INVESTMENT (RBI)

178 1985, amended Austria in 2014179

180 181 CBI: 2013 Bulgaria RBI: 2009

182 183 CBI: 2008, amended Cyprus in 2013 and 2018 RBI: 2012

184 2009, amended France in 2016

185 2013 Greece

186 2013, amended Terminated Hungary in 2014 in July 2018187

188 2012 Ireland

189 2010, amended in Latvia 2014

190 2017 Luxembourg

191 192 CBI: 2014 Malta RBI: 2015, amended in 2017

193 2013 Netherlands

194 2007, amended Portugal in 2012 and 2013

195 2013, amended Spain in 2015 196 1994, amended United Kingdom in 2015

52 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS © Steve Halama / Unsplash ANNEX 2. INVESTMENT REQUIRED AND MADE THROUGH EUROPEAN GOLDEN VISA PROGRAMMES

MINIMUM INVESTMENT REQUIREMENT TOTAL INVESTMENT RESIDENCE REFERENCE COUNTRY SCHEME TYPE LEGAL STATUS SINCE THE START OF REQUIREMENT PERIOD INVESTMENT TYPE INVESTMENT AMOUNT THE SCHEME, € MILLION

198 Austria Article 10 (6) of Austrian CBI Citizenship None No or vague criteria including No amount specified, but Unknown N/A Citizenship Act grants significant investment, high empirical evidence shows citizenship to foreigners with economic performance, job investment or donation in 199 Extraordinary Merit “rendering creation the range of €2 million to exceptional services in the €10 million200 interest of the Republic”197

202 204 Bulgaria Investor Programme for RBI Temporary residence None (a) Real estate purchase Лв. 600,000 148 2013 - October 201 203 Residence and Citizenship (~ €307,000 ) 2017

(b) Bulgarian company and Лв. 250,000 creation of 5 jobs (~ €128,000)

CBI (fast-track Citizenship Citizenship can (a) Bulgarian company Лв. 1 - 6 million Unknown N/A 205 path) be granted after (~ €511,000 - €3 million) 1-year permanent residence, but no (b) Concession agreements Лв. 1 million (~ €511,000) physical presence rights or other securities requirement206

209 210 Cyprus Cyprus Investment CBI Citizenship None (a) 1. Real estate ownership €500,000 4800 2013 - 2017 Programme208 2. Real estate purchase or €2 million Cypriot company or approved investment funds or a combination of the above

(b) Tax payment over a 3-year €100,000 period211

212 Immigration Permit RBI Permanent residence One visit every two (1) Real estate purchase €300,000 Unknown N/A years213 (2) Bank deposit €30,000

215 France Residence Permit for RBI Temporary residence Over 6 months French company €300,000 (and creating or Unknown N/A 214 Economic Agents maintaining jobs)

217 218 Greece Permanent Residence Permit RBI Temporary residence None Real estate purchase €250,000 1,500 2013 - 2018 216 of the Investor for five years

220 221 Hungary Residency Hungarian State RBI Permanent residence None Government bonds €300,000 1,845 2013 - 30 June 219 Bond after six months 2017

54 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS ANNEX 2. INVESTMENT REQUIRED AND MADE THROUGH EUROPEAN GOLDEN VISA PROGRAMMES

MINIMUM INVESTMENT REQUIREMENT TOTAL INVESTMENT RESIDENCE REFERENCE COUNTRY SCHEME TYPE LEGAL STATUS SINCE THE START OF REQUIREMENT PERIOD INVESTMENT TYPE INVESTMENT AMOUNT THE SCHEME, € MILLION

202 204 Bulgaria Investor Programme for RBI Temporary residence None (a) Real estate purchase Лв. 600,000 148 2013 - October 201 203 Residence and Citizenship (~ €307,000 ) 2017

(b) Bulgarian company and Лв. 250,000 creation of 5 jobs (~ €128,000)

(b) Tax payment over a 3-year €100,000 period211

212 Immigration Permit RBI Permanent residence One visit every two (1) Real estate purchase €300,000 Unknown N/A years213 (2) Bank deposit €30,000

215 France Residence Permit for RBI Temporary residence Over 6 months French company €300,000 (and creating or Unknown N/A 214 Economic Agents maintaining jobs)

217 218 Greece Permanent Residence Permit RBI Temporary residence None Real estate purchase €250,000 1,500 2013 - 2018 216 of the Investor for five years

220 221 Hungary Residency Hungarian State RBI Permanent residence None Government bonds €300,000 1,845 2013 - 30 June 219 Bond after six months 2017

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 55 MINIMUM INVESTMENT REQUIREMENT TOTAL INVESTMENT RESIDENCE REFERENCE COUNTRY SCHEME TYPE LEGAL STATUS SINCE THE START OF REQUIREMENT PERIOD INVESTMENT TYPE INVESTMENT AMOUNT THE SCHEME, € MILLION

223 Ireland Immigrant Investor RBI Temporary residence 1 day per year (a) Government bonds (currently €1 million 14 2012 - March 2017 222 Programme (IIP) suspended)

(b) Irish company €1 million 138

(d) Real estate investment trusts €2 million

(e) Mixed investment of real €950,000 35 estate purchase and government bonds (currently suspended)

(f) Endowment €500,000 5

225 226 Latvia Third Country Investors and RBI Temporary residence None (a) Real estate purchase €250,000 1440 2010 - 2017 224 Residency Permit for five years (b) Latvian company that €50,000 - 100,000 employs at least 50 people and €10,000 into State budget

(d) Purchase of state securities €250,000 and €38,000 into State budget

228 Luxembourg Residence Permits for RBI Temporary residence At least 6 months (a) Luxembourgish company €500,000 Unknown Unknown 227 Investors for three years (b) Creation of a company and €500,000 5 jobs

(d) Deposit in a Luxembourgish €20 million financial institution

56 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS MINIMUM INVESTMENT REQUIREMENT TOTAL INVESTMENT RESIDENCE REFERENCE COUNTRY SCHEME TYPE LEGAL STATUS SINCE THE START OF REQUIREMENT PERIOD INVESTMENT TYPE INVESTMENT AMOUNT THE SCHEME, € MILLION

223 Ireland Immigrant Investor RBI Temporary residence 1 day per year (a) Government bonds (currently €1 million 14 2012 - March 2017 222 Programme (IIP) suspended)

(b) Irish company €1 million 138

(d) Real estate investment trusts €2 million

(e) Mixed investment of real €950,000 35 estate purchase and government bonds (currently suspended)

(f) Endowment €500,000 5

(d) Purchase of state securities €250,000 and €38,000 into State budget

(d) Deposit in a Luxembourgish €20 million financial institution

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 57 MINIMUM INVESTMENT REQUIREMENT TOTAL INVESTMENT RESIDENCE REFERENCE COUNTRY SCHEME TYPE LEGAL STATUS SINCE THE START OF REQUIREMENT PERIOD INVESTMENT TYPE INVESTMENT AMOUNT THE SCHEME, € MILLION

231 Malta Malta Individual Investor CBI Citizenship 12 months (1) Government funds €650,000 509 2014 - June 2017 Program (MIIP)229 residence prior to the application, 232 (2) Stocks, bonds, debentures, €150,000 85 but no minimum special purpose vehicles or other physical presence investments requirement.230

233 (3)(a) Real estate purchase or €350,000 71

234 (b) Real estate rental €16,000 / year 51

237 Malta Residency & Visa RBI Permanent None Government funds €30,000 and Unknown Unknown Programme (MRVP)235 residence236 (a) Real estate rental €12,000 / year (€10,000 if in Gozo or the south of Malta)

(b) Real estate purchase €320,000 (€270,000 if in Gozo or in the south of Malta)

239 Netherlands Residence of ‘wealthy foreign RBI Temporary residence Over 6 months Dutch company (and creation €1.25 million Unknown Unknown 238 national’ (‘foreign investor’) for three years. of 10 jobs or contribution to innovation or non-financial value added)

241 Portugal Residence Permit for RBI Temporary residence 7 days in the first (a) Real estate purchase €500,000 3,967 October 2012 - 240 Investment Activity (ARI) for 1-year, renewable. year and 14 days in August 2018 Permanent residence the subsequent two (b) Real estate purchase (if €350,000 after five years. years property is at least 30 years old or located in urban regeneration areas)

(d) Creation of 10 jobs

(e) Investment funds €350,000

(f) Company creation and €350,000 creation of 5 jobs

(g) Investment in research, arts, €250,000 - 350,000 culture and heritage

58 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS MINIMUM INVESTMENT REQUIREMENT TOTAL INVESTMENT RESIDENCE REFERENCE COUNTRY SCHEME TYPE LEGAL STATUS SINCE THE START OF REQUIREMENT PERIOD INVESTMENT TYPE INVESTMENT AMOUNT THE SCHEME, € MILLION

233 (3)(a) Real estate purchase or €350,000 71

234 (b) Real estate rental €16,000 / year 51

(b) Real estate purchase €320,000 (€270,000 if in Gozo or in the south of Malta)

(d) Creation of 10 jobs

(e) Investment funds €350,000

(f) Company creation and €350,000 creation of 5 jobs

(g) Investment in research, arts, €250,000 - 350,000 culture and heritage

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 59 MINIMUM INVESTMENT REQUIREMENT TOTAL INVESTMENT RESIDENCE REFERENCE COUNTRY SCHEME TYPE LEGAL STATUS SINCE THE START OF REQUIREMENT PERIOD INVESTMENT TYPE INVESTMENT AMOUNT THE SCHEME, € MILLION

243 244 Spain Residence Visas for RBI Temporary residence One visit (a) Government bonds €2 million 5,200 2013 - April 2018 Investors242 (b) Spanish company €1 million

(d) Bank deposit €1 million

(e) Real estate purchase €500,000

245 246 248 United Tier 1 (Investor) Visa RBI Temporary residence; 185 days per year Government bonds, share capital (a) £2 million ~5,100 2008 - March 2018 247 Kingdom permanent residence or loan capital in UK-based (~ €2.25 million) after 5 years companies

Temporary residence; (b) £5 million permanent residence (~ €5.6 million) after 3 years

Temporary residence, (c) £10 million permanent residence (~ €11.2 million) after 2 years

Total Investment raised by all schemes 24,926

60 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS MINIMUM INVESTMENT REQUIREMENT TOTAL INVESTMENT RESIDENCE REFERENCE COUNTRY SCHEME TYPE LEGAL STATUS SINCE THE START OF REQUIREMENT PERIOD INVESTMENT TYPE INVESTMENT AMOUNT THE SCHEME, € MILLION

243 244 Spain Residence Visas for RBI Temporary residence One visit (a) Government bonds €2 million 5,200 2013 - April 2018 Investors242 (b) Spanish company €1 million

(d) Bank deposit €1 million

(e) Real estate purchase €500,000

Temporary residence; (b) £5 million permanent residence (~ €5.6 million) after 3 years

Temporary residence, (c) £10 million permanent residence (~ €11.2 million) after 2 years

Total Investment raised by all schemes 24,926

TRANSPARENCY INTERNATIONAL & GLOBAL WITNESS 61 ANNEX 3. NUMBER AND ORIGINS OF APPLICANTS TO EUROPEAN GOLDEN VISA PROGRAMMES

NUMBER OF NUMBER OF TOP 5 NATIONALITIES OF COUNTRY SCHEME TYPE PRINCIPAL PRINCIPAL GOLDEN NUMBER OF DEPENDENTS REFERENCE PERIOD GOLDEN VISA AWARDEES APPLICANTS VISA AWARDEES

249 Austria Article 10 (6)Paragraph CBI Unknown 303 Unknown Unknown 2006 - 2017 10, Article 6 of Austrian Citizenship Act law Act grants citizenship to foreigners with Extraordinary Merit “rendering exceptional services in the interest of the Republic”

250 Bulgaria Investor Programme for RBI Unknown 296 Unknown Russia (70) 2012 - October 2017 Residence and Citizenship China (38) Pakistan (32) Egypt (27) Lebanon (23)

Fast-track path CBI Unknown 16 Unknown Russia (5) 2007 - 2017 Lebanon (2) India (2) Egypt, Ethiopia, China, Ukraine, Vietnam, Pakistan, US (1)

251 252 Cyprus Cyprus Investment CBI Unknown 1,685 1,651 Unknown 2013 - March 2018 Programme

Immigration Permit RBI Unknown Unknown Unknown Unknown Unknown

France Residence Permit for RBI Unknown Unknown Unknown Unknown Unknown Economic Agents

253 Greece Permanent Residence Permit RBI Unknown 2,968 4,597 China (1,395) 2013 - 27 July 2018 of the Investor Russia (429) Turkey (308) Egypt (109) Lebanon (109)

254 255 256 Hungary Residency Hungarian State RBI 6,621 6,538 13,300 China (5,431) 2013 - 2017 Bond Russia (385) Iran (93) Turkey (74) Pakistan (57)257

258 259 260 Ireland Immigrant Investor RBI 543 ~430 ~860 China (~395) 2012 - March 2017 Programme (IIP) USA (~8) UAE (~3) Russia (~2) Bahrain (~1)261

62 EUROPEAN GETAWAY: INSIDE THE MURKY WORLD OF GOLDEN VISAS ANNEX 3. NUMBER AND ORIGINS OF APPLICANTS TO EUROPEAN GOLDEN VISA PROGRAMMES