THE GOVERNMENT is quite clearly on the defensive regarding its citizenship by investment scheme. This was why the council of ministers on Tuesday decided on new measures, tightening rules and procedures for granting citizenship. The new measures were primarily a response to criticism contained in a European Commission report, released last month and expressing concerns about the ‘investment migration’ policies of Cyprus, Malta and Bulgaria.
The report warned that the schemes could help organised crime groups gain access to the EU and pose risks of money laundering, corruption and tax evasion. It also noted weaknesses in the Cypriot and Maltese schemes, which did not adequately check the source of the wealth of applicants. The Cyprus government has indirectly admitted this to be the case by deciding to hire a specialist firm to carry out due diligence on all individuals applying for citizenship. In short, the 1,864 applications approved since 2013 were not subject to due diligence, confirming the report’s concerns about inadequate checks.
When the report came out, President Anastasiades strongly defended the government’s scheme claiming that Cyprus had the “strictest criteria of the 20 countries that offer the capability to obtain European citizenship” and had been “targeted for competition reasons or other reasons.” Surely, if we had the strictest criteria there was no reason to make them even stricter. As for Cyprus being targeted it is the oldest diversion tactic in the book that is always deployed without any evidence to back it.
Apart from due diligence being carried out, all applicants will need to have a Schengen visa, but will not be eligible if a citizenship application had been rejected by another EU country. There were also measures aimed at silencing the local critics, who complained that the scheme only benefited the big developers as well as law and auditing firms. Applicants will now have to contribute €75,000 to Research and Development and an equal amount to the Land Development Corporation in order to fund affordable housing schemes, thus expanding the beneficiaries of the citizenship by investment scheme. Whether this will appease its local detractors is another matter.
Although finance minister Harris Georgiades tried to play down the importance of the scheme, which accounted from transactions worth €6.6 billion, to the economy there is little doubt that it has given construction, one of the main drivers of growth, a big boost. Without it, there would not be dozens of high-rises planned in Limassol and Paphos. Georgiades admitted that 24 per cent of total transactions from the scheme were linked to the construction and real estate sector. Given how our economy has always depended on construction, there is no way Cyprus would ever contemplate following Bulgaria’s example and scrapping the scheme, regardless of what Commission reports say.