The European Economic and Social Committee (EESC) is very worried about the promotion of EU rights and EU citizenship as a product for sale by several member states.
The EESC’s opinion highlighted several of the main risks linked to these citizenship and residency by investment programs.
One of their principal concerns involves money laundering, tax evasion and corruption.
According to the EESC, “the profile and the origin of applicants often makes it difficult to carry out proper security checks and not all Member States are equally selective,” and “the intermediary bodies through which the funds paid by applicants are channeled are not subject to EU legislation on money laundering.”
Furthermore, the EESC explains, “Citizen-by-investment and residence-by-investment schemes can be misused for tax evasion purposes, as they allow investors to remain tax residents in their home jurisdiction while benefiting from the featured tax advantages of these schemes.”
There are also further risks related to both transparency and governance.
The EESC believes “the lack of transparency of many of these schemes exposes states and public officials to the risk of corruption, due to weaknesses such as broad discretionary power in decision-making, a lack of independent oversight and the risk of conflicts of interests affecting private agents and intermediaries involved both in the application and the due diligence process.”
Finally, the Committee “acknowledges that the lack of harmonised standards could encourage a race to the bottom in terms of transparency. Not only is EU citizenship used as a selling point to attract investors, but the decision by a Member State to grant a visa or a passport may affect other Member States and the EU as a whole, since such a decision grants access to the entire Schengen area and the internal market.
In line with these risks, the EESC set forth a series of suggested recommendations to be put into effect up until these programs are finally phased out.
These recommendations include:
- Setting minimum standards for due diligence, security checks and the programs’ operational integrity;
- Designing a method by which Member States can “exchange information on successful and rejected applications for citizenship and residence in order to avoid ‘passport-shopping’ or ‘visa-shopping’ between jurisdictions by risky individuals;”
- Establishing a public register of all service providers selling these citizenship and residency by investment schemes;
- Making all those involved in the sale of these programs “subject to EU anti-money-laundering rules;”
- Introducing “an obligatory code of conduct [and] supervision of regulated professionals” in this field, and;
- Not permitting accession countries “to run their own schemes when they join, so that no new schemes are added to the ones currently in place.
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