The European Union on Wednesday warned countries running lucrative schemes granting passports and visas to rich foreigners to toughen checks on applicants amid concern they could be flouting security, money laundering and tax laws.
EU countries have welcomed in more than 6,000 new citizens and close to 100,000 new residents through golden passport and visa schemes over the past decade, attracting around 25 billion euros ($28 billion) in foreign direct investment, according to anti-corruption watchdogs Transparency International and Global Witness.
In a first-ever report on the schemes, the EU Commission said that such documents issued in one country can open a back door to citizenship or residency in all 28 states.
Justice Commissioner Vera Jurova said golden visas are the equivalent of "opening the golden gate to Europe for some privileged people."
"We want more guarantees related to security and anti-money laundering. We expect more transparency," she told reporters in Brussels.
Bulgaria, Cyprus and Malta offer passports to investors without any real connections to the countries or even the obligation to live there by paying between 800,000 and 2 million euros ($909,000 to $2.3 million).
Twenty EU states offer visas in exchange for investment: Britain, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, France, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia and Spain.
Investment can range from 13,500 euros to over 5 million euros ($15,350 to $5.7 million) in the form of capital and property investments, buying government bonds, one-time payments to the national budget or certain donations to charity.
Cyprus toughened up vetting procedures last year after it was accused of running a "passports-for-cash" scheme. It said passport numbers would be capped at 700 a year.
The Mediterranean island introduced the scheme in the wake of a 2013 financial crisis that brought the country to the brink of bankruptcy and forced it to accept a multibillion-euro rescue program from creditors. One Cyprus lawmaker has estimated that the scheme generated around 4.8 billion euros ($5.4 billion) between 2013 and 2016.
In compiling the report, Commission researchers struggled to obtain clear information about how the schemes are run, the number of applicants and where they come from, as well as how many are granted or refused visas. They noted that EU countries exchange little or no information about the applicants.
But the report did find that the security checks run on applicants are insufficient, and it recommends that EU computer databases like the one controlling Europe's passport-free travel area be used routinely. Tougher "due diligence" controls are also needed to ensure that money laundering rules are not circumvented, while more monitoring and reporting could help tackle tax evasion.
Migration Commissioner Dimitris Avramopoulos said the Commission "will monitor full compliance with EU law."
"The work we have done together over the past years in terms of increasing security, strengthening our borders and closing information gaps should not be jeopardized," he warned.
The Commission proposed setting up a working group with EU member countries to study the schemes by year's end.
The report angered Cyprus President Nicos Anastasiades, who underlined that, over the past five years, the number of citizenships granted by Cyprus under its scheme amounts to 0.3 percent of the EU's total.
He said that Cyprus has the toughest citizenship criteria among all 20 countries, "and despite this, Cyprus is being targeted."
"These double standards must finally come to an end and I want to be strict about this," Anastasiades said.
Malta welcomed the Commission report, but said it has "reservations on a few issues," notably that people it accepts under the schemes undergo far more rigorous checks than others granted residency or citizenship. It also underlined that physical presence in Malta is mandatory.