The European Commission has called on EU governments to stop selling citizenship to wealthy foreign investors, also known as 'golden passports,' urging member states to suspend the sale of visas to Russians and Belarusians.

The move is part of an ongoing EU campaign to crack down on the multi-billion-euro citizenship and visa industry, long considered among European politicians to be a security risk and a backdoor for dirty money within the bloc.

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"Some Russian or Belarusian nationals who are subject to sanctions or are significantly supporting the war in Ukraine might have acquired EU citizenship or privileged access to the EU, including to travel freely in the Schengen area, under these schemes," the EU's executive body said on Monday.

But what exactly are golden visas and passports and who is benefiting from them?

What are golden passports and visas? 

The golden passport and visa schemes are formalized procedures for non-EU citizens to pay for residence or citizenship in a member state, therefore giving them rights within the whole bloc. 

Side-stepping what are often strict standard citizenship requirements, they can do this through making financial contributions like government bonds, real estate, and bank deposits. Depending on the country and the price, this can buy them either what the EU calls 'residence by investment' (RBI) - a golden visa - or 'citizenship by investment' (CBI) - a golden passport. 

Essentially, under a CBI scheme, a multi-millionaire from Russia or India could invest in the Maltese economy in return for a Maltese EU passport. That, in turn, would allow them to live in Paris or Brussels, or any other EU city they wanted.

Other benefits of a golden passport include financial access to the European Single Market and visa-free travel to up to 190 countries outside the bloc, nearly double the number for those with a Russian passport. A holder can even stand as a candidate in European elections.

Those with a 'golden visa,' or EU residency, are also granted economic privileges inside the bloc, with the possibility to be joined by their family members. 

 

Which countries are handing them out?

For the golden visa schemes, the number of EU countries issuing residency permits to wealthy foreign investors has ballooned in recent years amid a drive to boost outside investment. 

In 2011 only three countries ran such schemes; now there are 13, with the Netherlands, Italy, Spain, Portugal, Ireland, Luxembourg, Greece, Estonia, Latvia, and Hungary, as well as Bulgaria, Cyprus, and Malta, all offering residency for money. 

The minimum a foreign investor has to spend for an EU visa runs from the highest figure in the Netherlands of €1.25 million, to the lowest in Latvia at €60,000. 

The only EU member states to offer paid-for-citizenship are the islands of Cyprus and Malta, while Bulgaria's RBI program is often categorized as a CBI scheme as it eases standard residence requirements for citizenship. 

To obtain citizenship in Cyprus, individuals have to invest at least €2 million, as well buying a "permanent" residence worth at least €500,000. The bill for a Maltese passport is comparatively cheap, at €1.15 million. 

 

Who is benefitting from such schemes?

According to a 2021 European Parliament report, the majority of those applying for golden passports and visas are wealthy investors from China, Russia, Turkey, the Middle East and Central Asian countries. 

Russians are thought to account for about half of the accepted applications for golden passports, while Chinese nationals make up the majority of golden visa approvals. 

Among the more well-known figures thought to have taken advantage of such programs is Dmitry Rybolovlev, a Russian billionaire connected to the former U.S. President Donald Trump. He reportedly received a Cypriot passport in exchange for investing in the Bank of Cyprus.

Brexit-supporting billionaire Christopher Chandler, born in New Zealand, is also believed to have obtained EU citizenship in 2016 in return for investing in Malta.

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In fact, between 2011 to 2019, EU countries signed off on more than 42,000 citizenship or residence applications, but almost three times that number have benefited, mainly due to being related to the applicants. 

And while the figures are thought to be much higher, in total, this has brought the bloc an estimated €21.4 billion in investments. 

Malta alone has raised €6.3 billion through offering EU citizenship, according to the report, while the EU's largest residency-for-investment scheme is run by Portugal, which has granted more than 20,000 permits in exchange for €5 billion in investments. 

 

Why are top EU politicians against the schemes?

The attraction to such schemes are obvious, particularly for EU members worst hit by the aftershocks of the 2008 financial crisis. However, EU politicians have been trying to curb them for nearly a decade, warning that while the schemes are lucrative for individual countries, they open the door to money laundering, tax evasion and corruption. 

In fact, prompted by the European Commission taking legal action against them for "undermine[ing] the essence of EU citizenship," Cyprus, Malta and Bulgaria have all recently made moves to adjust or wind up their programs.  

Cyprus is currently only processing applications submitted before November 2020, while Bulgaria's parliament has voted to shut down its scheme entirely. Malta, in light of the Ukraine crisis, recently announced it would suspend wealthy Russian citizens from being processed for citizenship. 

One of the reasons for the EU hostility to the schemes is that they allow wealthy individuals to duck stringent vetting procedures for gaining citizenship. Member states usually demand applicants have clean criminal records in their own countries, but Malta can disregard this requirement in the case that such a certificate is deemed "impossible to obtain." 

Cyprus, outside of the Schengen zone, is not connected to the EU's main system for sharing security information, and in 2021 was forced to revoke the citizenship of nearly 40 foreign investors following claims of insufficient background checks.

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In Malta, protests continue to this day over the 2017 murder of journalist Daphne Caruana Galizia, who was killed after investigating political corruption and money laundering related to the country's golden passport scheme. 

"Passports and golden visa schemes are not about attracting any meaningful legitimate investment in the real economy of Europe," MEP Sophia in 't Veld said during a European Parliament debate on the issue in early March. "They are designed for shady business, shady money and shady characters."  

Perhaps the key complaint is that such security risks are borne by all member states, but only select countries get the economic benefits. In 't Veld said that while it was "very difficult" for small countries who depend on such revenue streams to shut down the programs, it was "not fair to European citizens, and Ukrainians at this point."

 

What does the Ukraine conflict mean for golden visas and passports?

Prompted by the escalation of the Ukraine crisis, the European Parliament voted earlier this month to phase out the citizenship by investment schemes.

Fearing that wealthy Russians sanctioned by the EU were still benefiting from the schemes, the parliament described the programs as "discriminatory", contrasting "dramatically with the obstacles to seeking international protection, legally migrating or seeking naturalization through conventional channels." 

Since the start of the conflict in Ukraine, Brussels has blacklisted nearly 700 politicians, businessmen and military staff accused of supporting the Kremlin. 

In its statement on Monday, the Commission said governments should check whether sanctioned people were holding a golden passport or visa they had issued.

But with 45 percent of all EU golden passports belonging to Russians, it added that it did not know whether such individuals were among the scheme's beneficiaries, stressing the need for closer scrutiny. 

"Golden residence permits issued to Russians and Belarusians under EU sanctions should be revoked," said the EU's commissioner for home affairs, Ylva Johansson: "Now more than ever, in the face of war, we must do everything to ensure that Russians and Belarusians under sanctions and those supporting Putin's war of aggression cannot buy their way into the EU.”

But despite demanding stricter background checks on applicants and the sources of their funds, the bloc's executive has stopped short of calling for the end of the EU residency programs. 

This is partly because of the large amount of revenue the schemes bring in to member states. But it is also the case that the EU's powers remain limited on stopping individual countries from granting residency and citizenship as the rules are made at a national level, not in Brussels. 

That means, at least in the meantime, countries will continue to be able to sell EU residency to the highest bidder, and wealthy foreign investors will likely continue to take advantage the schemes.