After the financial crisis of 2009-2013 that led to a haircut on deposits of more than $8 billion, Cyprus introduced a “golden visas” scheme in order to exit recession. Indeed, the scheme significantly helped the country’s economy to return to positive growth rates in just three years. It also helped companies in the real estate and construction sectors to deal with huge amounts of non-performing loans. This happened because the Cyprus Investment Program (CIP) -as it is called officially- is designed in such a way, that most of the investments made by wealthy foreigners to obtain the country’s passport, are in the real estate sector.
In just a few years, Limassol’s seafront was overflowed with high-rise buildings developed specifically to meet the program’s criteria. Under the CIP, a foreigner who wants to obtain the Cypriot and consequently a European citizenship, needs to invest approximately $2.4 million. Since 2013 it is estimated that approximately $9.5 billion were invested in the Cypriot economy through the program. Not bad for a country with an annual GDP of $26.4 billion.
But unfortunately for Cyprus, the “golden visas” scheme is evolving into a reputational problem. Recent revelations by international media outlets have shown that several foreigners should have never been allowed to acquire the Cypriot nationality. Criminals, international wanted persons,, sanctioned businessmen, and politically exposed persons now have a Cypriot passport, courtesy of the Cyprus Investment program.
Recent reports in local media, Al Jazeera, The Guardian and OCCRP, among others, brought to light a significant number of ‘shady’ cases. Most striking was perhaps the case of Jho Low. The Malaysian financier allegedly at the center of the Asian country’s multibillion-dollar 1Malaysia Development Berhad state fund scandal, was granted the Cypriot citizenship in 2015 after acquiring a seafront mansion in the area of Ayia Napa.
After the revelations, the Cypriot government created a special committee to investigate every case up to 2018. Approximately 30 problematic cases of investors that had acquired the Cypriot citizenship were traced. But the revocation of one’s citizenship is not an easy task, according to the law. It turns out that recalling citizenships obtained under the program was not possible for most of these cases. To solve this, the House of Representatives, about a month ago, passed an amendment of the relevant law that allows the country’s authorities tο proceed with passports revocations, after giving the affected persons the right to a hearing. The Minister of Interior, Nikos Nouris also announced that last June, the Council of Ministers decided to recall the Cypriot citizenship from three persons that had no longer met the criteria of the program.
With the program under increased scrutiny from local and international institutions, Cyprus has made significant changes to the CIP, rendering the process to acquire the Cypriot citizenship much stricter.
According to the new regulations applicants are considered as high-risk if:
- their assets have been subject to a seizure order within the EU,
- they are Politically Exposed Persons (PEPs),
- they were sentenced for a serious criminal offense which carries a sentence of five years or more or for any other serious offense or offenses that involve moral obscenity.
- they are subject to criminal investigation,
- they are affiliated with any person or legal entity against which sanctions were imposed by the European Union
- they were, but who no longer are, affiliated with any physical person or legal entity against which sanctions were imposed by the European Union
- they were affiliated with any physical person or legal entity against which the EU or the United Nations have imposed restrictive measures
- they are wanted by Europol or Interpol.
In recent years, Cyprus made huge efforts to shake off accusations of money laundering. Now that this effort has started to pay off, a new round of defamatory articles and comments regarding the CIP threaten to destroy the image the country is striving to build.
Even though Nikos Nouris recently stated that the program will not be revoked, the pressure from international institutions is mounting. Namely, the European Commission seems to have had enough with the CIP and is considering its next moves even though, it has stated that “it is for each Member State to lay down the conditions for the acquisition and loss of its nationality.”
It is yet uncertain whether the CIP will be postponed or even terminated. What is certain is that it is becoming a liability for the country’s international image as a professional and financial center, despite the economic benefits it has created in recent years.