Bulgaria’s cash for passports scheme under EU scrutiny

 

After Bulgaria pledged to end its ‘golden passport’ scheme and then didn’t, the Council of Europe (CoE) and the European Commission (EC) are set to investigate over concerns of irregularities.

Along with Malta, Bulgaria is the only other EU member state that offers citizenship in return for investment. Cyprus ended its scheme in October 2020 over corruption involving officials and politicians. Possession of an EU passport gives the holder the right to travel, live, and work in any member state.

In January 2019, the Bulgarian government said they would end the scheme after amendments to the Bulgarian Citizenship Act would be adopted. However, for more than two and a half years, Bulgarian authorities have been delaying the implementation, meaning the scheme has continued.

In the same year, the Bulgarian State Agency for National Security (SANS) looked at the investments of several new citizens. They demanded the revocation of several citizenships, including a Russian, three Egyptians, a Pakistani and a Jordanian.

At the end of November this year, SANS sent a letter to the Ministry of Justice urging it to collate and pass on information on every person who has obtained citizenship by investment. This information will then be passed to the CoE and EC for further analysis.

As of the start of 2021, a total of 98 foreigners have received Bulgarian citizenship through the scheme after decaring “investments” of at least EUR 1 million in the country. This information was provided to The Shift by EURACTIV Bulgaria who has been investigating the matter for two years.

Investigations by journalists found that 78 of the foreigners had not made any real investments. Instead, they purchased government securities. It was then discovered that the securities were sold once the passports were secured. Another way of meeting citizenship criteria in Bulgaria is by depositing money in a local bank account.

Some six foreigners obtained Bulgarian citizenship in this way, and after obtaining their passports, they were able to withdraw the money and live in the EU.

An investigation by the Organised Crime and Corruption Reporting Project (OCCRP) revealed last year that many applicants were taking out loans in Bulgaria through foreign banks, meaning that no investment was taking place in the country, and they were circumventing requirements.

Data provided by EURACTIV Bulgaria to The Shift shows that 86% of those who got a Bulgarian passport through investments had not made any tangible investment as of the start of 2021.

For more than two years, the portal has been trying to ascertain whether the sale of Bulgarian passports has led to any actual investment. Journalists told The Shift that from the information they have gathered,  real investments are “almost absent” and said the loopholes in legislation mean golden passports are “a shallow scheme for earning commissions and circumventing European rules”.

When the government said it would cancel the scheme, the official reason given was that it had failed to attract the necessary investment. Yet, despite the pledge and claim, applications continue to be approved.

The renewed EU interest in the scheme is because, for some 18 months, Bulgaria has been working with the EC on its Structural Reform Assistance Programme. This programme aims to reduce the risk of money laundering and other financial crime.

In November, then caretaker Minister of Justice Ivan Demerdzhiev told the Bulgarian journalists that Bulgaria had issued passports “extremely easily and without necessary investment checks”.

“It is clear that politicians have been involved in this scheme. The spheres of influence regarding Bulgarian citizenship and who exercised this influence are clear to a large part of Bulgarian society,” he added.

Furthermore, a report issued by the EC notes that the United States has raised the issue of golden passports in negotiations about lifting visa requirements for Bulgarian citizens travelling to the US.

Failure to end the scheme could see Bulgaria slapped with infringement proceedings. Furthermore, the CoE and EC investigation outcome will likely bring more pressure to bear on the newly formed government.

If it is finally shelved, Malta will remain the only country in Europe still selling passports despite repeated calls for it to cease. Investigations by local and international journalists have consistently shed light on irregularities with the Malta Citizenship and Investment Programme.

These include properties rented to meet one of the application criteria, being nothing more than simple apartments or, in some cases, hovels that were never intended to be lived in. Additionally, some applicants received citizenship despite it being illegal to hold dual citizenship in their native country.

Other issues include several new Maltese citizens having trouble with the law. Their rap sheets include embezzlement, fraud, environmental crimes, smuggling, and money laundering allegations.

Many more successful applicants were found to have very little in the way of links to Malta, and some had only spent no more than two days in the country before receiving their passports.

The Maltese government has shown no intention of suspending or cancelling the scheme, arguing it brings significant investment and cash flow to the country.