Billionaires Worth Over $35 Billion Could Be Locked Out Of Europe As Cyprus Finally…

Cyprus has announced it will finally suspend its controversial “golden passport” program following the release of a covertly filmed documentary by Al Jazeera implicating senior politicians in corruption earlier this week.

The move leaves at least five members of Forbes’ billionaires list facing uncertainty over the passports they reportedly paid $2.5 million (EUR 2.2 million) to guarantee citizenship and visa-free travel throughout the European Union.

Leaders of the Mediterranean island-nation were forced to react to a crescendo of political pressure from EU leaders following the exposé, with the office of Cypriot President Nicos Anastasiades announcing on Twitter the “abolition of this investment program,” from November, based on the “weaknesses” of the scheme and “the abusive exploitation of the provisions of the program.”

Golden Economics

The investigation will hit Cyprus where it hurts–the program delivers a large part of Cyprus’ national income, around $1.7 billion (€1.4 billion) annually, marking 7.5% of their gross domestic product (GDP) according to a 2018 report from watchdog group Transparency International.

Until this week the country was understandably hesitant to pass up this much needed income at the time of a global pandemic and possible recession. But Cyprus has reluctantly now been forced to admit that many of the names revealed by Al Jazeera point to a massive failure in basic background checks that would stop international criminals from obtaining visa-free travel and market access to Europe. 

The decision has been met with praise by international leaders and anti-corruption advocates. EU Commissioner for Justice Didier Reynders welcomed the decision on Twitter, citing EU President Ursula von der Leyen’s “concerns” over the program, while Věra Jourová, vice-president for values and transparency in the EU Commission, said that the “EU passport is not for sale and fight against crime of any kind must never be underestimated.”

With Cyprus under increasing pressure to respond, “Axing the scheme was the only option,” says Maria Martini, policy expert on corrupt money flows at Transparency International, welcoming the news in a statement to Forbes. Transparency say 30 individuals with pending criminal charges or convictions, and 40 people they classify as “politically exposed persons” were revealed in the leak.

Pressure

The outrage began in late September, when Al Jazeera published leaked documents revealing details on some of the 2,500 people who paid to become citizens of Cyprus between 2017 and 2019.

The complete list, of which over one thousand were “wealthy Russians” according to Al Jazeera, featured billionaires alongside so-called PEPs (‘politically exposed persons’ – those who work with or for national governments with potential access to public money) and those convicted of crimes, largely financial, among those seeking access to the EU through investment in Cyprus.

In all, Forbes found that five billionaires, collectively worth more than $35 billion, applied to the program over the two year span, according to the Al Jazeera documents. Yang Huiyan, a Chinese real estate heiress worth an estimated $29 billion applied. So did Oleg Tinkov, founder of Tinkoff Bank (worth an estimated $2.7 billion), Vadim Moshkovich ($2.1 billion), Zhang Keqiang ($1.6 billion) and Taha Mikati ($2.3 billion) also applied.

Former billionaires Oleg Bakhmatyuk and Alexei and Dmitry Ananyev were other applicants, according to the leaked documents.

Golden Visas are legal and always have been legal. There is no suggestion that successfully applying for an investment visa is in itself an allegation of wrongdoing. However, Laure Brillaud, an anti-money laundering policy expert at Transparency International tells Forbes to expect “passports canceled” where there is suspicion that the applicant was using the golden passport scheme to “launder money or evade justice.” Brillaud does not expect to see a “blanket revocation of passports previously awarded” but rather a case-by-case review of each application.

There are, according to Brillaud, “legitimate reasons why someone would want to acquire another nationality, and for the super-rich they offer advantages like easy access to certain markets and financial systems.” However she later warns, “Several of the billionaires named in the Cyprus Papers are politically exposed persons in their home countries. They should not have qualified under the programme since 2019, though it appears that this rule may have been routinely flouted.”

Big Business

The Ministry of Finance of the Republic of Cyprus has previously argued that golden passports were given to “genuine investors, who establish a business base and acquire a permanent residence in Cyprus.” It’s been a cash cow for the small nation, which produces annual GDP of about $25 billion. According to a report in The Guardian, the scheme has generated over $8 billion for Cyprus since 2013.

According to Astons, a leading investment immigration and relocation provider, with offices around the world, their Cypriot Citizenship by Investment program “currently offers the quickest route to citizenship within the EU from application submission in only 180 days” for a minimum investment of $2.5 million (€2.2 million). “Cyprus citizenship grants applicants and their families the freedom to live, work or study in any of the 28 European member states with unrestricted visa-free access to over 173 countries worldwide,” the Astons site reads.

Golden passports remain big business for firms in London. Luke Hexter, managing director of Knightsbridge Capital Partners, told Forbes in July 2019 that their European Passport program was driving 70% year-on-year growth at the firm. “If you got a few billion–a lot of these clients will have citizenship in one country, passports in another and residency somewhere else as a way to mitigate risk,” Hexter said. “The industry can get a little bit of flack for pandering to certain unscrupulous high-net-worth individuals”—an accusation, he said that’s “as far away from the truth as can be possible.”

Once Cyprus shuts down its program in November, there will only be two countries still offering similarly low-price citizenship by investment schemes—Malta and Bulgaria. Brillaud, the anti-money laundering expert, expects them to be put under increasing pressure to “phase out” their golden passport and similar schemes entirely as well, as the EU slowly wakes up to their “appeal” to those who seek to “move ill-gotten gains around the world, avoid sanctions, or escape jurisdictions with the power to hold them accountable.”

Forbes has approached Yang Huiyan, Oleg Tinkov, Vadim Moshkovich, Zhang Keqiang, Taha Mikati, Oleg Bakhmatyuk, Alexei and Dmitry Ananyev for comment.