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October 14, 2020

Cyprus suspends its successful but controversial Citizenship by Investment Programme

Following media criticism of Cyprus’ Citizenship by Investment programme and a subsequent investigation exposing political abuse, the Cypriot government has today announced that it will suspend its highly successful Citizenship by Investment programme, taking effect from November 1.

In an emergency session of Cyprus’ cabinet on Tuesday 13th October, a proposal was made by the Cypriot Ministers of Interior and Finance to scrap the country’s CBI programme, which has been running in its current form since 2013.

In a statement following the session, Cypriot government spokesman Kyriakos Koushos said “the proposal was based on the longstanding weaknesses but also on the abusive exploitation of the provisions of the programme”.

He further stated that government would consider its future policy to encourage investment after the completion of an inquiry conducted by the Attorney General.

Launched in 2013 to help strengthen Cyprus’ economy in the wake of the 2008 international financial crisis, the programme offered foreigners Cypriot citizenship, within six months and with visa-free access to 173 countries, in exchange for a minimum US$2,150,000 investment.

Despite its strict due diligence, the programme has garnered media criticism and EU concerns over the last few years, with the EU having flagged the programme as a potential money-laundering risk for Cyprus.

And despite the passing of a number of bills in parliament in July 2020 aimed at tightening its CBI regulations and strengthening its due diligence even further,  a subsequent report by media group Al Jazeera alleging collusion by high-ranking Cypriot politicians in making use of the programme has ultimately seen its demise.

Following the announcement of the programme’s suspension, Cypriot Attorney General George Savvides made a statement that an investigation into possible criminal offences would be launched. “What has been published in the last few hours by the Al Jazeera news network is causing outrage, anger and concern among the people,” he stated.

The loss of the programme as it stands is huge for Cyprus, bringing in as it did some €8 billion in recent years and playing a huge role in the recovery of the Cypriot property market since 2013.

In a statement today, the Cypriot chamber of commerce and industry said the suspension of the programme will have negative effects on the entire economy, but will be mainly felt in the real estate sector.

According to the KPMG Cyprus Real Estate Market Report, high-value residential property transactions have seen remarkable rates of increase since 2013, increasing 18 per cent in 2019.

Kritonas Onisforou, head of real estate at the Cyprus platform of BidX1, a global property sales site, told the Cyprus Mail, that 30% of the potential buyers for Cyrus property come from outside the EU.

“This scheme has played a significant role in the recovery of the Cypriot property market since 2013, breathing new life into the construction industry, and by default into the country’s economy,” said Kritonas. “However, the recent revelations are alarming – it’s absolutely necessary that these are tackled by government.”

There is likely to be a new programme put in place pending government discussions.