The European Commission on Thursday (29 September) formally took Malta to the EU’s highest court for its cash-for-passports scheme, something that should serve as a warning shot for Albania’s government which wants to start a similar scheme.
The Commission said it considers the scheme a violation of EU law and has long called on Malta, a member state since 2003, to withdraw the scheme over fears of money laundering and citizenship being granted to high-risk individuals.
“By offering citizenship in exchange for pre-determined payments or investments, without a genuine link with the member state concerned, Malta breaches EU law,” tweeted EU justice affairs commissioner Didier Reynders.
“European Union values are not for sale,” he added.
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Malta’s government responded with a statement denying the scheme violated EU law, and reiterated that its citizenship policy was strictly a matter of national competence.
Going to court “gives Malta the opportunity to continue rebutting the said allegations and let the Court of Justice of the European Union (ECJ) settle the matter”, a government statement said.
If Malta loses its case at the ECJ, it must comply with the court decision or face hefty fines.
The history of the scheme
The controversial scheme was announced shortly after now-disgraced ex-prime minister Joseph Muscat came to power, involving a concession awarded to Henley & Partners- a company administering similar schemes worldwide.
It saw hundreds of mainly Russian, Chinese, and Saudi applicants and their families gain Maltese citizenship, visa-free travel, and the right to remain throughout the EU and, until recently, the UK.
Those searching for a passport had to satisfy several requirements including renting or buying a property for a certain value and time frame, demonstrating a link to the country, paying thousands of euros in fees, and donating hundreds of thousands to the Maltese government. They also had to pass due diligence processes to ensure they were of good reputation and character.
However, multiple investigations found glaring problems with the process.
Many applicants were found to have simply rented a hovel or garage to satisfy the requirement while not actually living in the country. Others had no link or intention of calling Malta home and openly intended to use it as a stepping stone to other EU states.
Meanwhile, the government was non-transparent on who received citizenship via the scheme in a bid to throw journalists off the scent.
But years of investigations found Maltese citizenship had been awarded to members of the Saudi royal family, Russian oligarchs associated with fraud, money laundering, and tax evasion, as well as others close to the Putin regime, Turkish tycoons, and several others that went on to be investigated for various financial crimes.
One of the journalists reporting on the scheme was Daphne Caruana Galizia who was assassinated in 2017. She was threatened with multiple law suits from the government and the concessionaire company for her reporting.
The island’s scheme also attracted attention from Low Taek Jho, an international fugitive accused of stealing billions in Malaysia’s largest-ever corruption scandal, although he was ultimately refused.
Others applied for citizenship despite it being illegal in their native country, and reports of kickbacks to politicians involved in getting the scheme off the ground were rife.
Malta has controversially raised €1.1 billion since 2013 by offering passports in exchange for investments.
Cyprus and Bulgaria previously had similar programmes, which they both withdrew following national scandals and EU pressure.
Nicosia put an end to its “golden passport” offer last year while Bulgaria withdrew after concerns of possible irregularities in almost half of all passports issued.
After Russia’s invasion of Ukraine, Malta excluded Russians and Belarusians from its scheme as Europe cracked down on Russian oligarchs and politically linked individuals.
Malta scraps citizenship scheme for Russians, Commission to monitor
In March, the commission issued a recommendation saying that EU member states “still operating investor citizenship schemes need to terminate them immediately”.
It also called for “golden passports” or similar investment-dependent residence permits given to Russians or Belarusians hit by EU sanctions to be immediately withdrawn.
Meanwhile, in Albania
In November 2019, Exit sounded the alarm over the government’s plans to introduce a scheme granting citizenship to those investing a certain amount of money into the country. Prime Minister Edi Rama spoke at a conference organised by the controversial passport concessionaires Henley and Partners in London, where he joked that the EU would be unhappy with the plan, but it would proceed anyway.
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In December, the EU Delegation in Tirana told Exit that it does not support the plan, and they had “the European Commission has encouraged Albania to consider whether the introduction of an investor citizenship scheme would be worth the inherent risks.”
They also stated that any failures of the Albanian government to ensure that proper security and background checks are carried out on those granted passports will result in “grounds for re-imposing visa requirements.”
EU Delegation in Albania Does Not Support Rama’s Cash for Passports Scheme
Albanian citizens currently enjoy visa-free travel throughout the EU.
Their spokesman commented that the “investor citizenship scheme poses risks as regards security, money laundering, tax evasion, terrorist financing, corruption and infiltration by organised crime.”
They added that schemes that allow bypassing regular Schengen visa procedures for 3rd country nationals can result in “security risks” and an “evasion of measures to prevent money laundering and financing of terrorism.”
From then, little else was heard about the scheme, but in 2020, the president’s right to grant citizenship was transferred back to the Ministry of the Interior.
Then on 29 July, the government adopted a decision to offer the processing of Albanian citizenship applications through a scheme via an unnamed international company. It was not detailed whether Henley and Partners will take on the role, and the company previously told Exit they do not comment on potential client relationships.
Answering questions from BIRN, the Commission echoed previous comments to Exit.
“The Commission has taken strong measures against citizenship schemes for investors inside and outside the EU. The Commission considers these schemes contrary to EU laws, as they violate the principle of sincere cooperation and the concept of EU citizenship,” the Delegation told BIRN.
“With the holding of the first Intergovernmental Conference for the opening of EU membership negotiations with Albania on 19 July, the European Commission expects the Albanian authorities to gradually align with the acquis and avoid deviating from it,” said the Delegation.
“The European Commission will continue to follow any development related to the possible introduction of a citizenship scheme for investors in Albania,” concluded the Delegation.
