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European Parliament Answers Question Concerning Due Diligence

European Parliament Answers Question Concerning Due Diligence

The European Parliament recently addressed a public question concerning residency by investment (RBI) and citizenship by investment (CBI) schemes within the EU. The parliamentary question opened by bringing up the Organisation for Economic Cooperation and Development’s (OECD) concerns over these programs being used to circumvent the Common Reporting Standard.

Citing Malta and Portugal as examples, the questioner argued that foreign investors can take advantage of their second citizenship by transferring funds to financial institutions in a third country. The two questions directed at Parliament were:

1. Does the Commission at least plan to insist that Member States that offer RBI/CBI schemes carry out stricter identity checks, in order to prevent these arrangements from being used to circumvent the rules on the exchange of bank information?

2. The OECD has launched a consultation on RBI/CBI schemes, which is due to close on 19 March 2018. Is the Commission working together with the OECD to help draw up a global action plan to tackle these practices?

The European Parliament’s answer (E-001440/2018) stated that Member States of the EU are responsible for setting up their own rules for acquisition and loss of nationality, though these rules should be in line with EU law. The authorities of Member States should be conducting appropriate due diligence for investment migration applications.

The answer also revealed that the European Commission would issue a report on these programs sometime in 2018:

“Member States should use their prerogative to award citizenship in line with international and EC law and in a spirit of sincere cooperation with other Member States. The Commission is therefore monitoring citizenship investors’ schemes, including their application. In its 2017 EU Citizenship Report, the Commission announced it would produce in 2018 a report on national schemes granting EU citizenship to investors describing the Commission’s action in this area, current national law and practices and providing guidance for Member States.”

EU Parliament concluded by mentioning the Commission had participated in the consultation discussions with the OECD in order to determine the scope of vulnerabilities in the Member States’ investment schemes. The Commission’s final report will highlight programs with a high potential for abuse and to what degree they comply with the directive on Administrative Cooperation.


European Parliament

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