Recent events regarding the Cyprus Investment Program (CIP) of golden passports did not leave much room for its survival. For months, the scheme has been under intense scrutiny because of constant revelations and publications by international media organizations.
The latest revelations from Al Jazeera on how the scheme really works, left the Republic of Cyprus fully exposed. Even worse, in a video revealed by the network, the now former President of the Parliament of the country, Demetris Syllouris, appeared ready to bypass the law and offer the state’s services to an investor who has been convicted of corruption and money laundering.
As expected, the CIP was eventually abolished, following a decision by the Council of Ministers. If the government had not officially terminated the program, then the market itself would end it. Large accounting and law firms that offered affiliate services had already stopped providing them. Commercial banks, which have always been strict with KYC controls in such cases, became even stricter.
Government Spokesman Kyriakos Koushos announced the termination of the program after an extraordinary Council of Ministers session. He said that the government based its proposal on the inherent weaknesses of the scheme and its exploitation by individuals. He said that the program’s termination is to be put into effect on November 1, 2020. Koushos added that the government would reconsider its policies to encourage foreign investment after an inquiry by the Attorney General’s office. Asked by the press if there would be a new scheme, the Spokesman said that we should wait for the completion of the investigation by the AG.
On October 15, the President of the House of Representatives, Demetris Syllouris, announced his resignation, in light of the revelations by Al Jazeera. He also issued a public apology for the negative image he portrayed – of himself and the position of the President of the Parliament – and the upheaval he caused.
Christakis Giovannis, a member of left-wing AKEL, the second-largest party in the country, also resigned from his MP position. Giovannis is the owner of the company that the Al Jazeera journalists approached, pretending that a Chinese client of theirs, convicted of corruption and money laundering, wanted to get a Cypriot passport.
The investment program significantly helped the Cypriot economy emerge from the recession after the financial crisis of 2013 and the “haircut” on deposits. It has mainly helped land development companies repay non-performing loans to banks, and created a significant number of new jobs in the construction sector. According to a recent study by the Ministry of Finance, from 1.6.2013 to 31.12.2019, the country’s authorities approved the naturalizations of 2,855 investors. The relevant transactions amounted to approximately $11.4 billion. The country’s GDP is around $25.9 billion. According to the ministry, the transactions do not equate to real investments or contributions to the GDP.
Applications that will be submitted before the scheme ends, and those previously pending will be examined under the program’s latest rules. It remains to be seen whether the country’s authorities will create a new investors’ naturalization program, with stricter application criteria, which will not allow fraudsters and criminals to obtain European citizenships. It is worth noting that the European Commission is looking into compliance with EU law of the Cypriot scheme in view of possible infringement proceedings.