Malta is a small island nation situated between Sicily and North Africa that’s home to just over 550,000 people. Though it isn’t the most well-known of Europe’s Mediterranean destinations, it offers something particularly attractive to the world’s ultra-rich: one of the world’s most popular golden passport programs that offers a backdoor path to citizenship in the European Union without the fuss of a standard immigration process.
But depending on the outcome of a years-long legal challenge brought by the European Commission, those citizenship schemes for wealthy investors could be banned in Malta and across the EU—or become far more common.
Several EU and investor immigration programs are currently before the European Court of Justice, and the outcome is expected to shake up cash-for-citizenship schemes that have popped up across the continent over the past decade or so. This comes after European countries began offering so-called golden visa programs in the aftermath of the 2012 debt crisis as a way to attract capital from rich foreigners. Malta’s program, though, is unique because it offers wealthy investors expedited citizenship, not just residency. For the price of at least €600,000 (around $660,000), wealthy people—including Russian oligarchs, Chinese nationals, and foreign celebrities—have bought a Maltese passport, which allows them to live and work across the EU.
After public outcry about the programs, the European Commission, the executive branch of the EU, brought a legal challenge against Malta in 2022, arguing that citizenship must be based on a “genuine link” to a country, not investments. “Genuine link” essentially means there must be a specific connection between a person and a country in order to claim legal recognition, and is a controversial concept in the international legal community.
Once they are citizens of Malta, a member of the EU, these wealthy investors can live and work in any member state. That’s potentially problematic, says Eka Rostomashvili, campaign lead on corrupt money flows at Transparency International, an anti-corruption organization, because they can allow “dodgy” characters to circumvent normal immigration proceedings, giving them easier access into countries where they can then continue illegal activities, like money laundering.
“We’ve had a momentum against these programs in the EU for several years now,” says Rostomashvili.
Of course, not every rich investor has a shady past. But Rostomashvili says the visa schemes pose other problems as well. Real estate investments, for example, are often the primary vehicles for getting these passports and visas, and as such, housing prices in countries like Portugal and Spain, who had popular investment visa programs, have sky-rocketed, driving out locals. All of this has put pressure on European policymakers to crack down on the practice.
Several European countries, including Ireland, Portugal, and Spain, have already started paring back their golden visa programs on their own. And Cyprus and Bulgaria, which previously offered citizenship by investment programs similar to Malta’s, scrapped them altogether in recent years.
Reports reveal corruption
Transparency International began looking into immigration passport schemes in 2018, and subsequently worked with journalists at Al Jazeera on an investigation which found government officials in Cyprus, which had a golden passport program, allowed convicted criminals and fugitives to obtain citizenship, sometimes personally aiding them through the process. The investigation led the Mediterranean island nation to revoke at least 233 golden passports.
As a result of that investigation and public pressure, the European Commission has initiated a series of anti-money laundering measures over the years related to golden visas. That includes requiring intermediaries selling or marketing the visas to report suspicious activities to European authorities.
But Rostomashvili says the measures could go further. For example, residency requirements can be lax for investors pursuing the visas—in some cases, they only need to physically live in the country for a few days to become a resident. She also thinks due diligence processes, which vet the legitimacy of the applicants and the source of their investments, could be improved.
“We think that this is a particularly attractive feature for corrupt individuals, criminals,” she says of the lack of residency requirements. “If you actually have to move there or reside there, or spend some considerable time there, this wouldn’t be as risky for us.”
Transparency International is worried that if Malta’s program is allowed to continue, other countries will launch their own, and there will be a “race to the bottom” in which countries have laxer and laxer security requirements in order to attract more investors. Those interested in buying a passport will go the cheapest route, she says, because what they ultimately want is access to the EU, not the individual country selling citizenship.
“What worries us the most as an anti-corruption organization is that it facilitates cross border corruption and allows corrupt individuals to evade scrutiny, evade potentially even accountability,” says Rostomashvili. “The standards will drop even further in the absence of [standardized] checks, which is what we wanted all along.”
Rostomashvili says Transparency International is worried that the “genuine link” argument made by the European Commission will not be enough to convince the court that the programs should be rolled back. And indeed, a non-binding legal opinion from EU Advocate General Anthony Michael Collins indicates that the Court of Justice may rule in Malta’s favor, says Rostomashvili. Collins wrote that a “genuine link” is not required under EU law, and that individual countries “have decided that it is for each of them alone to determine who is entitled to be one of their nationals.” Though the Luxembourg-based tribunal does not need to follow his opinion, it will help guide the decision.
The decision from the court is expected to come at any time. Depending on the outcome, the European Commission could bring another challenge based on corruption or money laundering, which Rostomashvili says the court could be more open to.
This story was originally featured on Fortune.com
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