Europe’s efforts to lock out the corrupt falling short

27th March 2020, London – Europe’s doors remain open to the criminal and corrupt with both the EU and individual Member States failing to address the serious money laundering, security and corruption risks posed by EU governments’ sale of passports and residency, according to new analysis by Global Witness. 

“Europe’s Golden Doors”, launched as the EU considers how to enhance and make more effective its existing anti-money laundering rules, finds that tough talk from the European Commission has not been followed up by concrete legislation to eliminate the risks posed by these schemes, favoured by those with something to hide.

This has meant Member States have stopped short of substantive action on their own schemes, at best implementing cosmetic reforms that don’t go anywhere near far enough in addressing the major money laundering dangers inherent to golden passports and visas. 

Tina Mlinaric, Campaigner at Global Witness, said:

“Time and time again we’ve seen golden passports and visas being used as a gateway for the corrupt to access Europe to hide and spend their dirty cash. The problem is well known and recognised by those that have the power to end this practice. Yet still nothing concrete is being done to slam the door shut to the serious risk that Europe is rolling out the red carpet to corrupt elites from around the world.”

Previous research from Global Witness and Transparency International has highlighted the lack of transparency, insufficient due diligence and weak governance of these schemes, making them a tool of choice for money launderers. Despite recognising these risks, the European Union is still failing to legislate European-wide rules to regulate investor citizenship and residence schemes, meaning many Member States will continue to escape any form of serious enforcement. 

Key states that Global Witness has found to operate the most vulnerable schemes – Cyprus, Malta and Portugal – have made little to no actual progress despite high-profile scandals involving suspicious individuals entering the EU through these countries. 

Serious concerns remain over changes proposed by Cyprus being only a tokenistic response to public scandals, whilst proposed reforms in Portugal, which have been delayed until 2021, concentrate only on dissuading investment into the local property market, rather than reducing money laundering risks. Similarly, Malta, flagged by the OECD in 2018 as operating a high-risk golden passport scheme, has failed to introduce any changes to address money laundering via this scheme.

Tina Mlinaric, said:

“It’s welcome that the European Commission is looking into the misuse of golden passports and visas but there appears to be a worrying lack of urgency. Whilst Europe is rightly prioritising its response to the COVID-19 pandemic at this time, at the appropriate moment the Commission must ensure combatting this problem does not escape its attention.” 

“There is little point in admitting the problem but taking no significant steps to move Member States into action. Countries like Cyprus, Malta and Portugal will not end their programmes willingly – the Commission needs to get tough. If 2019 was the year of talk, 2020 must be the year of action.”

Recommendations:

The European Parliament has already called on EU countries to phase out all existing investor citizenship and residence schemes. Global Witness is calling on the European Commission to propose EU-wide rules that will ensure such a phase-out, and on the Member States to support these efforts. 

At the same time, Global Witness calls on the European Commission to initiate enforcement actions against EU governments that continue to operate golden passport and visa schemes that contravene EU law or that have granted passports and visas to high risk individuals.