An Audit Office probe into the citizenship for investment scheme said the process lacked due diligence while it should cease offering family members of wealthy investors a Cyprus passport.
It said handing passports to investors’ family members who haven’t contributed “a single euro” to the economy cheats state coffers.
The office said “thousands” of wealthy family members have been granted citizenship since 2013, even though the law at the time did not give the government the authority to do so.
A legal amendment granting the government that authority was passed earlier this year.
The scheme has been criticised for a lack of due diligence, allowing politically exposed politicians and fraudsters access to a Cyprus passport which gives them access to the 27-member bloc.
It is one of the few EU members to offer a passport, rather than residency, to attract investment.
Closer scrutiny of the investment programme follows allegations by broadcaster Al Jazeera that criminals essentially bought a passport for a € 2 500 000 investment.
Cyprus has already said it will be revoking seven passports that were issued in the past because the terms were violated.
Around 4 000 Cypriot passports have been issued to foreign investors generating at least €7 bln.
The Audit Office said three out of five cases that it examined raised “reasonable suspicions” that the true applicant was the investor’s spouse, “so that perhaps the investor who is a high-risk individual is not asked to explain the source of his wealth.”
Two family members who were granted passports did not even meet eligibility criteria.
The report highlighted one applicant who was on an EU sanctions list and another who was under investigation by Interpol in his home country for financial crimes.
It said of the 635 applications still pending since May 2018, 91 should have been already rejected because officials have found evidence of possible money laundering, forgery, fraud, tax evasion or bribery.
A separate probe by the Cyprus Security and Exchange Commission recommended this month that authorities revoke citizenship from seven individuals who submitted forged documents in their application.
The government has conceded that “mistakes” were made and has beefed up eligibility criteria in recent years.
The most recent changes parliament approved last month include new anti-money laundering vetting rules and making it easier to revoke the citizenship of investors involved in or convicted of a serious crime.
There is also greater oversight and due diligence ensuring the scheme is in line with European directives.
A ceiling has also been placed on the number of applications per year (700).
An independent committee of inquiry has been set up to sift through thousands of applications that were made since 2007.
The investment programme was boosted in 2013 to generate income after when a banking crisis almost destroyed the economy.
The Interior Ministry was unimpressed with the Audit Office report saying it overstepped its reach with a “patchy” report that covers only a limited time frame.
“This report is fragmentary and covers only a very restricted period,” an Interior Ministry statement said.
The Audit Office looked into 1,597 passport applications submitted since 21 May 2018.
“At the same time, we cannot fail to note that for the umpteenth time the Auditor General exceeds the responsibilities provided under the Constitution commenting on issues that are outside his scope,” it added.
The ministry said it would wait for the findings of the independent committee, which will decide whether all the rules were applied, and eligibility criteria met at each phase of the programme.
Photos: Financial Mirror