Today’s guest post is from Anton Moiseienko, a research analyst at the London-based Centre for Financial Crime and Security Studies of the Royal United Services Institute.

 Investor citizenship and investor residence programs, known colloquially as “golden passport” and “golden visa” schemes, have a less than sterling reputation. Much of the disapproval comes from anticorruption organizations like Transparency International and Global Witness. Those two organizations published a joint report last year that criticized these programs for offering a “safe haven” to figures associated with corruption.

The European Union has also expressed concern about these programs in several of its Member States. For example, back in 2014 the European Parliament adopted a resolution that accused some Member States, in particular Malta, of an “outright sale of EU citizenship [that] undermines the very concept of European citizenship.” And this past January the European Commission published a report on golden visa and golden passport schemes that will do little to improve their battered reputation. The Commission report raises a number of worries about these programs, and expresses particular concern about golden passport programs, since citizenship in an EU Member State automatically confers EU citizenship with its attendant rights, including free movement.

There are at least three ways in which golden passport and golden visa programs threaten to undermine the fight against corruption.

• First, as noted above, there is the concern that investor visa or citizenship programs will enable corrupt actors (or other criminals) to purchase a safe haven, thus evading justice in their home countries. A case in point is that of Thaksin Shinawatra, the former Prime Minister of Thailand who became a citizen of Montenegro, reportedlyin return for investments, shortly before his conviction for corruption back in Thailand. A related problem noted by the Commission is that a newly acquired residence or citizenship may make it difficult for financial institutions to accurately identify a customer’s tax residence and to report information to the relevant country.
• Second, there is a serious concern that citizenship or residency might be purchased with the proceeds of crime. That was the crux of Transparency International UK’s criticismof the UK’s Tier 1 (Investor) visa scheme, which until April 2015 did not require the opening of a UK bank account and the associated due diligence. Furthermore, as the European Commission’s report noted, organizations in charge of administering investor schemes in some EU Member States are not legally obligated to do anti-money laundering checks on applicants, even though they typically do so in practice.
• Third, self-evidently, the award of citizenship or visas must not take place due to corruption; nor should there be unmitigated conflicts of interest in the administration of such schemes. The compliance of some EU Member States with the latter principle has been questioned. For instance, an OCCRP investigation allegedthat in Hungary, where the investor visa scheme has since been suspended, licenses to market state bonds qualifying as requisite investment had been allocated to private companies in an opaque process. In addition to principled concerns about the integrity of investor schemes, irregularities in their administration can have security ramifications if proper vetting protocols are not followed.

In addition to these concerns, there is an overarching argument that “selling” citizenship or residency for investment is itself a kind of legalized corruption. In particular, some advance the view that acquisition of citizenship should reflect a genuine and lasting connection between the state and the applicant, rather than the applicant’s wealth. If one accepts that, then providing citizenship in return for investment amounts to selling something that should not be for sale.

The Commission’s report touches on all of these issues, and presents a fair and cogent summary of the risks inherent in golden passports or visas. The tone is not in the least complacent, and the accompanying Staff Working Document attests to the extensive research that went into the publication. Nevertheless, the Commission’s proposed response to the problem—setting up an expert group to “address matters of transparency, governance and security” in the administration of golden passport or visa programs—has been criticized as “half-hearted.”

This is not entirely fair. The Commission had to tread carefully, since matters of naturalization remain within Member States’ competence. Furthermore, within the framework of an EU-wide immigration policy in relation to the admission of third-country nationals, Member States are free to decide on visa applications subject to compliance with common security screening requirements. In short, the Commission cannot simply dictate to Member States how to implement investor citizenship or visa schemes, or whether to have them at all.

Moreover, the Commission’s report does make at least one rather bold legal argument with respect to golden passport programs: The Commission endorses the view that only individuals with a “genuine link” to the Member State concerned should be granted citizenship—a view that implies limits on the commodification of citizenship—and the Commission further contends that this “genuine link” requirement, which originates in public international law, forms part of EU law.

Far from being an obscure legal technicality, the “genuine link” issue raised by the Commission involves a policy choice that is essential to the future of investor citizenship. If investment in a state’s economy alone is never a sufficient reason to grant citizenship, investor citizenship schemes are an aberration—a market in something that, like court judgments, should never be traded. In contrast, all other objections to “golden passports” can be addressed by refining the conditions for how citizenship can be “bought” and reinforcing anti-money laundering controls, not unlike when any high-value goods are purchased.

The Commission’s “genuine link” argument will be attractive to many, but appears novel in the context of EU law. If correct, its implications are not altogether clear. Could one EU Member State deny entry to someone who has received a “golden passport” from another Member State in the absence of any other links to that country? Possibly. Could the Commission act to prevent such naturalizations in the first place? That may well go too far in encroaching on Member States’ sovereignty.

So, given the limits on the Commission powers, there’s still a lot for it to work out. And of course there’s always the question whether words will be followed by actions. All the same, the report is a helpful and earnest step toward a fuller engagement with a complex set of issues.