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Malta Business Review | SPECIAL EDITION
Analysis
Analysis
Malta Business Review | SPECIAL EDITION
Malta slammed for
cash-for-passport program
The super-rich are using the option to buy
access to the EU and beyond.
Malta has issued hundreds of passports to
non-EU nationals in exchange for huge sums
of cash over the last two years, resurrecting
concern that the country is effectively selling
access to the European Union. The passports
were granted to wealthy individuals who
made large donations to the government
and dropped cash to buy property on
the Mediterranean islands without being
required to live there.
Prime Minister Joseph Muscat’s spokesman
Kurt Farrugia said almost 700 passports have
been issued to non-EU nationals since the
program’s launch in 2014. Those passports
have so far generated at least €200 million for
Malta. Farrugia was responding to questions
from POLITICO after the government released
a list of more than 900 people granted
Maltese citizenship last year.
Critics charge that the program undermines
the concept of European citizenship,
potentially poses security risks and provides
a possible backdoor for Russians seeking
to escape sanctions against their own
country. The program requires a €650,000
contribution to a national development fund
and investing €150,000 in government stocks
or bonds. A spouse or a child costs up to
€50,000. “If I didn’t have a great deal of love
and sympathy as well as respect for Malta as
a country, I would say what I was inclined to
say two years ago: These are the practices of
a banana republic which must be rigorously
counteracted within the EU,” said Frank
Engel, a center-right MEP from Luxembourg.
Ana Gomes, a senior Socialist MEP on the
Justice and Home Affairs Committee, said
such schemes “put at risk the integrity of
the Schengen system” and should be looked
at closer. “I am absolutely disgusted,” she
said, adding that she has demanded “an
investigation by the EU Commission to look
into member state investor schemes, not just
Malta’s.”
The price of a passport
The program requires applicants to give
a €650,000 contribution to a national
development fund and provide a €150,000
investment in government stocks or bonds.
That leads to a Maltese passport that
provides visa-free travel to at least 166
countries. Applicants must also own property
worth at least €350,000 in Malta for at least a
year to establish a so-called residency link to
the country.
Those passports have so
far generated at least €200
million for Malta
A spouse or a child costs an extra €25,000,
or €50,000, if the dependent is older than
18. The figures indicate many families
are taking advantage of the scheme: 202
applicants secured citizenship for 503
spouses or children. Each donation provides
more money for the government than
“your average Maltese will pay in a lifetime
of income tax,” says the CEO of a company
spezialising in “citizenship planning.”
“Citizenship is something that has to be
earned, not simply handed out to people
with deep pockets,” said Latvian MEP Robert
Zīle, a former finance minister. He added that
the scheme “may also be helping to defy the
sanctions imposed on Russia by Europe as a
large chunk, if not a majority, of those who
get Maltese citizenship through investment in
the country are of Russian origin.”
By Harry Cooper
Pedestrians in Valletta. Malta has issued hundreds of passports to wealthy non-EU individuals who made large donations to the government
| Credit: Horacio Villalobos/Corbis via Getty Images
Many Russians originally expressed interest
in the scheme, according to a company
involved in the program, but it is unclear how
many have actually been granted Maltese
passports.
Getting ‘quality persons’
When the government published the list
earlier this month of those who obtained
citizenship in Malta last year, including those
who used the Individual Investor Programme,
it was accused of making it virtually
unintelligible by listing individuals by their
first names and not including their country of
origin. “We have no idea about the names or
who the hell they are,” said Jason Azzopardi,
the country’s shadow justice minister.
“There’s no way of knowing.” Maltese
officials, however, defended the program and
said applicants are thoroughly scrutinised.
“The people going through the program have
to go through a very strong and thorough due
diligence process,” Farrugia said, noting that
25 percent of applicants are rejected. “We’ve
always looked to get the quality persons.”
Applicants must have no criminal record as
well as undergo checks against records at
the International Criminal Court and Interpol.
Andrew Rosindell, a Conservative politician in
the U.K. who sits on his parliament’s Foreign
Affairs Committee, said there are still security
concerns, and the program highlighted the
need for the U.K. to “urgently” end automatic
free movement for EU citizens. “Malta is
effectively deciding U.K. immigration policy,”
Rosindell said. “Clearly, there are going to be
security concerns in terms of criminality, in
terms of people coming in who perhaps are
not desirable in our own country.”
The Maltese government spokesman
dismissed such concerns by saying other
European countries have similar routes to
citizenship and are less rigorous in their
vetting. When asked, he declined to specify
which countries he meant. Although other
countries offer various visa or residence
options in return for investment, Cyprus and
Austria are the only other European countries
besides Malta to offer a direct route to EU
citizenship through investment.
Building connections to the 1
percent
“Today, a person of talent and means need
not limit his or her life and citizenship to
only one country,” reads the website of
Henley & Partners, a company based in the
Channel Islands that handles “residence and
citizenship planning.” The company, which
was awarded the contract to design the
program in 2013, now promotes the Maltese
passport option globally and recommends
applicants to the government, receiving
a commission for every person who gets
citizenship.
European Union flag flies with a Maltese flag
in front of the Auberge de Castille, office
of the Prime Minister in Flordiana, Malta |
Credit: Karl Azzopardi/EPA
Eric Major, the CEO of Henley & Partners,
confirmed that Russia, former Soviet
republics and the Middle East are the main
markets for the passports.
“This is a very privileged offering for the
world elite,” Major said, adding that the
program builds “a connection with the top 1
percent of the world population.”
Major pointed out that the passport income
benefits the national development fund and
that each donation provides more money
for the government than “your average
Maltese will pay in a lifetime of income tax.”
In addition to Henley & Partners, individuals
can apply through one of 137 registered
agents, including the accounting firms E&Y,
KPMG, Deloitte and PwC.
A rocky start
When the program was first announced two
years ago, the European Parliament objected,
saying: “EU citizenship should not be for sale
at any price.” In particular, MEPs expressed
concern that a lack of residency requirements
for applicants would violate international law.
Even though the European Commission has
no say in an EU country’s citizenship and
does not formally endorse or approve cashfor-passport
programs, it encouraged the
Maltese government to introduce a residency
link, which it subsequently did.
“The Commission continues monitoring
investors’ schemes … to ensure that there is
a genuine link between these investors and
the EU country that awards them citizenship
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and thus also citizenship of the Union,”
said Christian Wigand, a spokesman for the
Commission. Major, whose company also
offers help with citizen programs in Austria
and Cyprus, said that business is booming but
that Malta is “the most successful investment
program in the marketplace” on account of
the amounts raised.
“It’s a very powerful passport in terms of
mobility.” MBR
Creditline: PoliticoPro
EDITOR’S NOTE
Harry worked for five
years in the European
Parliament as assistant
to ECR chairman
Syed Kamall MEP and
latterly Chairman of
the Internal Market
Committee, Vicky
Ford MEP. He advised
them both on a wide range of policy
areas, in particular financial services
and technology. Prior to that, he was a
lobbyist for the Confederation of British
Industry, with a focus on environmental
regulation and infrastructure policy. He
is a history graduate of Oxford University
and received his Master’s in global politics
from the London School of Economics.
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