Malta’s Individual Investor Programme (MIIP) and Residence and Visa Programme (MRVP) have contributed almost €600 million to the government’s income since 2014, according to Identity Malta that administers these schemes. What has still not been quantified are the costs to the country’s reputation of selling passports and visas.
Developments over the last few weeks give a clear indication that, contrary to the government’s assertions, these schemes are tarnishing Malta’s reputation as a nation that is committed to fighting financial crime, including money laundering and tax evasion.
In August, the European Commissioner for Justice, Vera Jourova, announced her intentions to bring forward a report on citizenship-by-investment schemes to the autumn. This report will seek to issue new, more stringent guidelines on how EU countries can issue passports and visas to non-EU citizens. She expressed concern about the origins of the wealth of Russian applicants for Maltese citizenship and said: “In case of doubt, a person should not have the privilege of citizenship.”
Early in October, Transparency International and Global Witness issued a report that criticised Malta’s and other EU countries’ citizenship schemes heavily. The report asserts that the sale of citizenship, its profits, ethical implications and risks, affects all EU citizens. The report warns that despite a four-tier due diligence process in Malta, government officials enjoyed wide discretion on eligibility, noting that applicants having criminal records or are subject to criminal investigations may still be considered due to “special circumstances”.
An OECD report has just included Malta in a list of high-risk jurisdictions given its citizenship-by-investment scheme. The report claims that Malta’s “golden visas” schemes could potentially offer a back-door to money launderers and tax evaders. The OECD expects financial institutions to take the outcome of the report into account when performing their due diligence obligations.
The government described the Transparency International report as “not accurate or adequately researched”. Parliamentary Secretary Julia Farrugia Portelli, who is responsible for Identity Malta, said Malta should not be on the OECD blacklist. The Ministry of Finance insisted the listing of the Malta schemes could “only be a result of a misunderstanding”.
The government’s central trust in its defence of the citizenship schemes is that the regulatory regime of these schemes is robust. Moreover, the country’s cash-for-passports programme was only a “very small fraction” of the one million individuals acquiring citizenship in EU member states. It may choose to ignore the comments of MEP Ana Gomes who described Malta’s passport scheme as a “prostitution of the Schengen system”. However, if it discounts the concerns expressed by the OECD, Transparency International and the European Justice Commissioner, it will do so at the risk of damaging further the island’s reputation that has already been adversely affected by allegations of corruption.
The money earned from selling passports and visas may be convenient to improve public finances and to serve as a means of assisting charities in their invaluable work. However, the end can never justify the means.
Public finances will be put on a robust, sustainable improvement path if the country improves its productivity and competitiveness. This objective can only be achieved by productive investment in education, innovation and societal cohesion. Citizenship cash-flows will, at best, be no more than a high-cost palliative that hides governance failures.
This is a Times of Malta print editorial