News on the Cyprus Citizenship by Investment Program

The Cypriot Parliament is changing the rules of its Citizenship by Investment Program. What are the new changes?

The Republic of Cyprus, along with Malta, has long been one of the two European countries offering developed programs for directly selling its citizenship. Cyprus has traditionally been in high demand among investors from CIS countries, primarily Russians.

Recently, however, the Cyprus Investment Program (CIP) has faced difficult times. International financial organizations have blacklisted it as "unreliable" due to an overly lenient approach to screening applicants. Some have even gone as far as to declare, "The Cyprus Program is dead."

Cypriots fight to save their program

Yet, Cypriot authorities have been adamant about not accepting this state of affairs. Throughout 2019, they made desperate efforts to save the program, with work continuing into the current year. As a result, in early August 2020, the Parliament passed updated rules for the Cyprus Investment Program. While the official law has not yet been published, the main changes have been revealed.

As expected, the changes primarily focus on stricter applicant screenings to eliminate even the slightest suspicion of financial or other types of fraud. The changes also consider the interests of the country itself, which, according to legislators, should receive a greater return from investors' money.

New investment conditions affect both the financial and organizational aspects of the program

So, what new conditions will potential investors seeking Cypriot citizenship face?

• The amount of mandatory non-refundable donations to various funds, previously set at €150,000, has increased by €50,000, making it €200,000.
• Previously, investing in a new business required the creation of 5 jobs for Cypriot citizens, but this number has now increased to 9.
• The investment in real estate remains at €2 million, but new rules now allow the investor’s spouse’s parents to be included in the family. In this case, additional real estate worth at least €500,000 must be purchased for them. Thus, the total investment in real estate for the investor's family and spouse’s parents must amount to at least €1 million.

In addition to real estate acquisition, there are still other options available:

• Investment in key sectors of the economy;
• Investment in science and healthcare;
• Investment in the shipbuilding industry;
• Investment in development or other infrastructure projects.

Alongside these financial changes, other updates aim to improve the organization of the investment process:

• Politically exposed persons can now participate in the program if they left public office one year before applying (previously five years).
• A criminal record certificate must be issued no later than 6 months before the application is submitted.
• All family members of the investor must apply simultaneously with the main applicant, rather than waiting until the investor is approved for citizenship.
• There is a legal procedure to revoke citizenship if the investor is found to have violated the program’s rules.
• The Due Diligence process is being tightened, in line with EU anti-money laundering regulations.

It is worth mentioning that, according to unofficial data, no more than 700 passports will be issued per year under the program.

Lekur: Suspension of the Cypriot CIP is the "right decision" – expect a relaunch in the "near future"

Less than 48 hours have passed since Al Jazeera released a damning undercover video report in which prominent Cypriot politicians, developers, and lawyers were seemingly willing to break the rules to help a fake Chinese investor, convicted of money laundering, obtain citizenship through the Cyprus Investment Program. The consequences have already been far-reaching.

The Cabinet has officially suspended the CIP indefinitely. MP Christos Giovannis (or Tiovanis) resigned from both the House of Representatives and all AKEL party positions within 24 hours of the announcement.

House of Representatives President Demetris Syllouris has stated he will step down from his duties until the investigation into the allegations is completed. The public and other political parties are calling for his resignation. Syllouris has publicly apologized but has not yet clarified if he plans to step down.

Some individuals featured in the video have filed complaints, citing provocation and violation of privacy, prompting the Attorney General to launch an investigation. Lawyer Andreas Pittadjis claimed he was "playing along" to gain the investor's trust and report them to the authorities.

European Commission spokesperson Christian Wigand stated that the Commission:

"...watched with disbelief as high-ranking officials traded European citizenship for financial gain." He reiterated the Commission's official position not only on Cyprus' CIP but on such programs across the EU, emphasizing that European values "are not for sale." The Commission has often expressed "serious concerns" and has been considering "possible infringement procedures."

Business leaders in Cyprus are calling on the government to relaunch a stricter program rather than cancel it entirely to preserve the island's economy. Meanwhile, one of Al Jazeera’s reporters wrote a revealing article about how they conducted their undercover operation.

Officials unanimously stated that the CIP’s suspension was expected at some point, not just in light of recent media attacks but also due to the EU's scrutiny. Despite the regulatory changes made in August 2020 to tighten the CIP, it’s time for the program to be completely revamped and refocused on its goal—contributing to Cyprus' economy with approved investors. It is anticipated that the program will be relaunched shortly, with the hope that the new version will be further regulated to prevent incidents like those previously recorded.

"Eurocrats are out of touch with reality"

"The suspension of the program by Cyprus after condemning and, frankly, shocking revelations is the right decision," said Bruno L'ecour.

Bruno L'ecour is the Executive Director of the Investment Migration Council, the leading advocacy group for the industry.

"An appropriate investigation of the accusations and the context should be carried out. Our experience with media programs such as Al Jazeera shows that they are often distorted to achieve a specific goal, in this case, to damage Cyprus’ reputation. Moreover, calls to ban the naturalization of citizens of EU member states are, in many ways, misguided and demonstrate just how disconnected from reality some Eurocrats are," L'ecour added.

"It is not Brussels that should decide who can become European, but rather the sovereign right of the member state, as enshrined in the Treaties on the Functioning of the EU. I would also like to point out that there are no IMC members involved in the Al Jazeera program."

The European Commission launches investigations into rights violations under the Cyprus and Malta CIP

In a press release published today, the European Commission announced that it is "launching infringement procedures against Cyprus and Malta by sending formal letters of notice regarding their investor citizenship schemes, also known as 'golden passport' schemes."

This step was not entirely unexpected; over the past few months, the Commission had repeatedly indicated that it was considering such action.

As grounds for the case, the Commission states that it considers such programs to be "incompatible with the principle of sincere cooperation enshrined in Article 4(3) of the Treaty on European Union," and that such practices "undermine the integrity of the status of EU citizenship, as set out in Article 20 of the Treaty on the Functioning of the European Union."

The Commission also stated that it had once again sent an official letter to Bulgaria, expressing its "concern about the investor citizenship scheme managed by this member state, and requested further details." The Bulgarian government has one month to respond to the letter with additional information, after which the Commission will decide on further steps.

The governments of Cyprus and Malta must now respond to the letters of notice within two months. Responses deemed unsatisfactory by the Commission will likely result in the issuance of a Reasoned Opinion (a formal request for compliance). Should Malta and Cyprus fail to comply with such a request, the Commission may refer the case to the European Court of Justice and request that it impose financial penalties, although most such disputes are usually resolved before reaching this stage.

If the case goes to court and the court finds that Malta and Cyprus have indeed violated EU law, which they are nominally required to adhere to, the countries may choose not to comply with the court's orders. In such cases, the Commission may refer the matter back to the court, this time with specific proposals for financial penalties in the form of lump sums and/or daily fines, which the court may approve or modify at its discretion.

The amount of fines, according to the Commission's website, would be determined based on:

• The importance of the rule violation and the impact of the violation on public and private interests;
• The length of time EU law has not been implemented;
• The country's ability to pay ensures that the fines have a deterrent effect.