A report put together by a committee and released on Tuesday said that even when authorities were in possession of disqualifying details about a candidate, they did not act.
The program, which offered citizenship and visa-free travel throughout the EU in exchange for a two million euro (US$2.45 million) investment, was supposed to have mechanisms that would prevent illegally gained money from being funneled into the country. Applicants were not supposed to have a criminal record.
However, an Al Jazeera investigation revealed in August that some of the 2,500 people who acquired EU citizenship through the Cyprus investment program were given so-called Golden Passports shortly before authorities in their native countries filed criminal charges against them.
The revelations led to the abolishment of the scheme in October, and prompted the then Speaker of the House of Representatives Demetris Syllouris and another lawmaker to step down after they were caught on camera promising to help a fictitious Chinese citizen obtain citizenship, despite the fact that his representatives admitted the man was a convicted criminal.
The government appointed a committee in November of last year that would conduct an investigation into 26 beneficiaries whose citizenship authorities intended to revoke.
The committee’s heavily redacted report listed the shortcomings of the now abandoned program, and offered recommendations for how it could be improved. One suggested that the country set up a special “independent” body which would be responsible for stripping passports from criminals who had received Cypriot citizenship through the program.
The three-member committee, led by the chairwoman of the Cyprus Securities and Exchange Commission (CySEC) Demetra Kalogerou, also found that the government’s decisions to grant citizenships were made based on one or two-page-long reports prepared by the Ministry of Interior’s understaffed team, which often left out incriminating information.
The team was relying on information obtained from banks and other governmental bodies and the procedures were insufficient to authenticate documents presented by applicants. Staffers also had little time to carry out background checks, the report said.
Authorities were also found to have received false or misleading references signed by employees of law and accounting firms which submitted applications on behalf of their clients, and that there were gaps in the implementation of anti-money laundering procedures by the island’s banks.
Instead of scrutinizing payments made by applicants, Cypriot lenders focused on the accounts held by local land developers and services providers, the committee said in its report. The banks did not monitor investor accounts and failed to report unusual or suspicious transactions or verify the source of funds.
“Complex or unusually large transactions carried out without obvious economic or clear legal purpose should have prompted the banks in question to carry out further audits or to even decline to carry out the transactions,” the report said.
Anti-money laundering procedures were bypassed with the use of bank cards. This allowed the circumvention of capital controls in the applicant’s country of origin. In one case, an applicant paid three million euros ($3.67 million) with 25 card payments ranging from 24,844 to 150,000 euros ($30,400 to $183,763).
The report also recommended that police, tax authorities, the courts and CySEC investigate “promoters” of the scheme for wrongdoing such as submitting false sworn statements by applicants who were not present on the island, or from a trustee operating without a licence from relevant supervisory bodies.
