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Is the EU Being Put at Risk by Its Member States?

The European Commission published a Report on 23rd January 2019 on Investor Citizenship and Residence Schemes in the EU. The report highlights the serious risk for Member States and the Union posed by the growing trend in investor citizenship (“golden passport”) and investor residence (“golden visa”), in exchange for financial investment.

The investments made under such programmes are considered not to necessarily promote the real economy of the Member State granting citizenship (“CBI”) or residency (“RBI”).  Mainly, due to the fact, they often do not require applicants to spend any time on the territory in which the investment is made, and that even when such a requirement formally exists, its fulfilment is usually not verified. As a result, the particular concerns which have arisen are in terms of security, money laundering, corruption, tax evasion and the circumvention of EU rules.

Therefore, pressure is being imposed on Member States to:

  • Require physical presence in the country as a condition for benefiting from CBI and RBI schemes.

The main reason for this is since by one Member State granting citizenship for investment it automatically gives rights in relation to other Member States to the individual. In particular – free movement rights, the right to vote and stand as a candidate in EU and local elections, rights of access to the internal market to exercise economic activities and right to consular protection in the event of being unrepresented outside the EU.

  • Enhanced customer due diligence (“CDD”) are carried out on applicants for citizenship or residence through these schemes, as required by the fourth Anti-money Laundering Directive;

This is significant particularly since several formal investigations into corruption and money laundering have been launched at national and EU level directly relating to these schemes. The fifth Anti-money Laundering Directive came into force on 9th July 2018 and must be adopted by all Member States by 10 January 2020 introduces amendments which require enhanced customer due diligence. 

  • Anti-money laundering directive imposes enhanced CDD for politically exposed persons (PEPs);
  • Calls on Members States that Governments bear the ultimate responsibility for performing due diligence on the applicants for CBI or RBI; and
  • The Commission should rigorously and continuously monitor the proper implementation and application of CDD within the framework of CBI and RBI schemes until they are phased out.

Furthermore, Members States are being pressured to compile and publish data relating to their CBI or RBI regardless of whether they are issued or declined together with details of the number of refusals and the reason for denial.  This is to ensure better data collection and the exchange of information between Member States with the primary goal to improve the transparency and governance of the schemes.

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Mandeep Johal's picture

Mandeep is an experienced and organised U.K qualified solicitor with numerous years of experience. Accustomed to multi-tasking with the ability to work under pressure to exceed client expectations. Excellent legal and business skills, with the experience and capability to manage a team to achieve excellent results. As Head of International Development at Manubens Abogados she is responsible for managing relationships with the firm’s commercial and private clients.