The Spirit of Dialogue

Alex Muscat, Malta’s Parliamentary Secretary for Citizenship and Communities, provides insights into the country’s decision to revamp its Individual Investor Programme and shares his thoughts on the European Commission’s decision to launch infringement procedures against the country.

Malta’s CBI programme has been reworked. What changes should the industry be aware of?

Malta’s Individual Investor Programme (MIIP) is soon coming to an end, having reached the pre-determined capping of 1,800 families who have successfully invested in the Maltese Islands. The Agency has stopped receiving new applications.

We shall continue giving the opportunity to a number of exceptionally talented people to invest in the Maltese Islands. We will do this by completing the existing programme, closing the Malta Individual Investor Programme Agency (MIIPA) and establish a new agency that will administer all paths leading to Maltese citizenship, and revise and reform all residence regulations.

The new regulations will be in the form of a residency plan that has the potential for eventual nationality. Under the new regulations, an applicant must be a resident in Malta for three years before applying for citizenship. Exceptionally, through a higher investment in Malta, this can be done after one year of residence.

Interested residents who want to apply for citizenship will be required to apply for an eligibility assessment before applying for naturalisation. At this stage, they will be subject to thorough due diligence. The new agency will be implementing the toughest criteria for due diligence and background verification reporting around the world. It will cooperate more with local and foreign investigative and law enforcement and tax authorities. An independent regulator will continue to scrutinise the application process executed by the Agency and all resultant decisions.

What are the main drivers behind your decision to change the programme?

One major driver is certainly a willingness to innovate and to improve our practices. The sustainability of our economic success depends on our constant readiness to innovate, together with the diligent manner in which we do business. Another major driver is our readiness to distinguish ourselves from programmes and initiatives that are offered in Europe and around the world. The Maltese Government values a strict policy of due diligence in order to make sure that only reputable applicants are admitted to its initiatives.

The EU has long been critical of Malta’s programme. In what ways has this criticism influenced your decision to redesign the programme?

EU legislation is clear in stating that EU intervention as far as citizenship goes is outside its legal authority. However, the Commission and the other institutions take legitimate steps to underline the potential risks of residence- and citizenship-by-investment programmes, mentioning security and money laundering concerns in various reports and statements.

We believe in a spirit of dialogue, and we have paid special attention to the criticism that the original programme received and availed ourselves of constructive opinions. In fact, stakeholder consultations were carried out over the past two years, including with the European Commission.

Malta has continued to strengthen the already stringent due diligence processes in order to make sure that only reputable applicants are admitted to its programmes. It is worth noting that when analysing the previous programme, the IIP regulator had already stated that it was miles ahead of similar programmes operated by other countries. The new initiative is even more highly vetted than the previous programme, and every applicant goes through a detailed process where their identity and source of funds are verified by multiple parties, including police and law enforcement agencies.

In view of the fact that the majority of the EU members states have such initiatives in place, we feel it is important to understand the benefits as well as the risks that are being highlighted by EU institutions.

The European Parliament has called on member states to phase out all existing citizenship- and residence-by-investment schemes. What thoughts would you like to share about the EP’s opinion on the matter?

The attribution of nationality is an exclusive competence of individual EU member states. It is in the national interest of every member state to protect its sovereignty, a principle that is also enshrined in EU law.

The original programme was a highly responsible one, where applicants undergo stringent due diligence. Over the years, a total of 368 applications for citizenship were refused, and a further 35 were not allowed to apply for citizenship following initial KYC checks conducted through local police authorities. In addition, 95 applications were withdrawn by the applicants, most of which were following questions raised by the Agency during the due diligence process. The rejection rate has varied throughout the years. In 2020, the Minister has refused more than 30% of the applications following due diligence conducted by MIIPA. The Agency has also spontaneously reported numerous cases to Malta’s Financial Intelligence Analysis Unit (FIAU) when it identified suspicion of money laundering.

To top it off, EU member states grant more than 600,000 citizenships a year, of which only up to 1,000 are by investment. In other words, this branch of naturalisation represents a very small percentage of the total new EU citizenry per year, and those are thoroughly screened.

What can you tell us about the MIIP’s role in cushioning the economic impact of the covid-19 crisis in Malta? What economic impact do you envision the programme will have in the coming years?

By welcoming just under 200 new families a year, we have generated a total €1.5 billion in seven years. The funds have been a tremendous boost to the Maltese economy, building Malta’s ‘war chest’ in these times of global pandemic, and will prove to be even more useful as the economy recovers from the hit. The new regulations will continue generating revenue for areas of economic need in the future.

Although this is a new initiative which is completely distinct, the benefits of Malta’s policy for attracting international investment are noticeable across the country, especially through the €600 million allocated to the National Development & Social Fund (NDSF) for social and economic development of the Maltese Islands. In this way, the Maltese Islands have sought to strike a rational balance, between opening their doors for people who have distinct attributes in their field and maintaining exclusivity when it comes to the new Maltese.

In October 2020, the European Commission opened infringement procedures against Malta over its citizenship-by-investment programme. What comments would you like to make about this issue?

The Government of Malta had already announced that the Malta Individual Investor Programme will be coming to an end. We have taken note of the concerns raised by the European Commission and by the expert group established by the Commission on citizenship- and residence-by-investment legislations found in most European member states. Subsequently, Malta will be implementing new residence regulations, which may lead to citizenship and which take into consideration the European Commission’s concerns and recommendations.

The Government reiterates that citizenship is a member state competence, whereby every European country decides on its own who are the individuals which it believes should receive citizenship. There are over 600,000 individuals who become European citizens each year with very minimal screening. Malta is implementing regulations which go way beyond what many other European member states do to scrutinise citizenship applicants.
The Government will formally reply to the letter of formal notice in due course. It is the intention of the Government to use all possible legal measures to defend the national interest and sovereignty.

Interview with with ALEX MUSCAT, Malta’s Parliamentary Secretary for Citizenship and Communities
Source: IM Yearbook 2020/2021

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