European Commission Vice President Jyrki Katainen has said that the European Commission has established an expert group to consider how to create fully transparent rules on the granting of EU citizenship from member states, in order to avoid tax evasion, money laundering or security threats.
Katainen who is in Cyprus for a two-day visit, was replying to journalists’ questions during a joint press conference with Democratic Rally (DISY) President Averof Neophytou, in Nicosia.
“I know the issue is very hot in some countries and some countries may find it disturbing that other member states or the Commission are talking about this issue,” he said, adding that “I think that pragmatism is the best way to look at the issue.”
“Everyone knows that all European citizens have enormous opportunities. No matter what nationality you have, as long as you have an EU nationality, you have the right to do almost anything you want in our Union,” he noted.
That is why, Katainen pointed out, “we need to make sure that we know who are the people in our Union.”
He said that there have been incidents where providing citizenship to somebody has caused some security issues or encouraged tax evasion or had other negative implications.
“We have established an expert group to consider how to create fully transparent rules”, in order to know, who we are and who has the right to get a citizenship, he said.
He continued, noting that the EU cannot exist without security, trust or transparency and we are all against tax evasion, money laundering or security threats.
On his part Neophytou said that “we will cooperate with the European Commission to find the way to improve our criteria in order on the one hand for the investments to continue and on the other hand to have in practice such criteria that will make our friends in Europe feel comfortable with our plan.” That, he added, “is our intention.”
He assured the European Commissioner for Jobs, Growth, Investment and Competitiveness that “we have our concerns as well.” We want to make sure that whoever gets the Cypriot citizenship is not any person who has committed money laundering, he added.
EU report on citizenship and residence schemes marked by omissions and inaccuracies, Invest Cyprus chairman says
A report published by the European Commission on residency and citizenship schemes for investors is marked by omissions and inaccuracies and does not portray a fair and updated image of Cyprus Investment Scheme, Michalis Michael, Chairman of Invest Cyprus has said.
Of the 27 EU member-states only Cyprus, Malta and Bulgaria offer citizenship schemes, while a number of EU member-states offer residency schemes or golden visas to investors.
Speaking to the press, Michael said the report failed to include the legislative amendments approved by the Cyprus Council of Ministers last May.
A cap of 700 citizenship was enforced, all applications should be submitted on behalf of the applicants by natural or legal persons who are registered with the Registry of Certified Service Providers, while a thorough due diligence will be conducted on the applicants and a due diligence report, issued through an internationally accepted database will be required to be submitted together with the application of the main applicant and the main applicant’s spouse and parents.
“The report did not take into account these legislative amendments,” Michael said, adding that this haste by the EU technocrats resulted in a “incomplete and possibly distorted image” to be given in the other EU institutions.
Officials involved in the investment attraction industry overruled the report’s remark that there is no connection between the investor and Cyprus, noting that the investment in itself is a sufficient connection. Under the Scheme, an investor can obtain Cyprus citizenship after an investment of at least €2 million.
The Scheme has been instrumental in attracting foreign direct investment to Cyprus helping the island recover from the deep financial crisis of 2013. According to data, of the €9 billion FDI flow in the last four years, approximately half came from the Cyprus Investment Scheme. According to data by the Interior Ministry, applications for investor citizenship amounted to 503 in 2016 and accelerated to 696 in 2017.
The same officials said the report has eight inaccuracies on Cyprus. The rejected remarks that investors can obtain citizenship without visiting the island, noting that investors must visit the island at least twice before obtaining citizenship.
On the remarks that the Scheme is heavily advertised, the said that officials exerted great efforts to terminate advertisements with Cypriot passports, adding that a three-member committee monitors advertising by approved service providers and could kick providers out of the Registry if necessary.
Moreover, the pointed out that there is confusion between tax residency and citizenship which lead the OECD to mark the Cypriot scheme as potential risk to the Common Reporting Standard, of which Cyprus was among the early adopter states.
They also highlighted that Cyprus has implemented the stringent legislation concerning anti-money laundering.
The Commission reports highlights the limited transparency and reporting marking these citizenship and residency schemes.
The Cypriot Scheme does not provide for publishing data over the citizenships granted.
Officials said that before granting citizenship the law stipulates that the Interior Ministry should place notifications to the daily press for possible objections, while data are provided to the office of the Parliament President.
The Commission could suggest to send annual data with names and numbers of citizenships granted in confidence, the same officials said, pointing out the limitations under Data Protection.
They also said Cyprus could publish annual data on applications received and the number of citizenships granted without publishing personal data.
“This would be easy, as we have nothing to hide,” they said.
Enhanced due diligence
Furthermore, the Interior Ministry is expected to launch a tender for the selection of international firms specialised in conducting due diligence audits on the investors who apply for Cypriot citizenship, a move believed to further shield the Investor Scheme from criticism.
The Ministry said in an intention for tender that about 1,500 audits will be conducted annually. The firm will carry out the audit and will inform the Interior Ministry directly and not the service providers.
The same officials noted however that Cypriot authorities have delayed in launching this tender, which would bring about an additional layer of control to the Scheme.