The “Cyprus Investment Programme” is established by the Government of Cyprus on the basis of subsection (2) of section 111A of the Civil Registry Laws of 2002-20179, to further encourage foreign direct investment and to attract high net worth individuals to settle and do business in Cyprus. On the basis of the Programme, a non-Cypriot citizen, who meets certain economic criteria and other conditions may apply for the acquisition of the Cypriot citizenship through naturalization by exception.
The Cyprus investment scheme naturalizes investors for citizenship upon acquisition of real estate worth EUR 2 million, which includes purchase of home for EUR 500,000, donation to EUR 150,000 to cyprus development. All investments must be held for five years and investors must have held immigration permit for atleast six months.
One of the main objectives of the economic policy of the Republic of Cyprus is to further encourage foreign direct investment and to attract high net worth individuals to settle and do business in Cyprus. Key factors that make Cyprus an attractive destination for investment, is the highly specialized human capital, the reliable legislative and regulatory framework, the stable tax system and the safety and stability conditions prevailing in the country. Within this framework and taking into account the strong investor interest, the Government of Cyprus has established and revised a scheme for naturalization of non-Cypriot investors by exception, on the basis of subsection (2) of section 111A of the Civil Registry Laws of 2002-2019, with specific incentives, terms and conditions and control procedures in order to prevent abuse. In this framework, non–Cypriot entrepreneurs/ investors can be granted Cypriot citizenship, through the discretionary “Cyprus Investment Programme” (CIP).
The Council of Ministers, as part of its policies aiming to further encourage foreign direct investment and to attract high net worth individuals to settle and do business in Cyprus, on the 13th of February 2019, revised the CIP and, thus, established new criteria and terms based on which non–Cypriot entrepreneurs/ investors and members of their families may submit applications in accordance with the provisions of the CIP. The new rules came into effect on May 15, 2019
On the basis of the CIP, a non-Cypriot citizen, who meets certain economic criteria, either personally or through a company/companies in which he/she participates as a shareholder –in proportion to his holding percentage, or through investments done by his/her spouse or jointly with the spouse or even as a high-ranking senior manager of a company/companies that meets one of the economic criteria, may apply for the acquisition of the Cypriot citizenship through naturalization by exception. Moreover, a high-ranking senior manager may apply, provided that he/she receives such a remuneration that generates for the Republic tax revenues of at least €100,000 over a three-year period and provided that this tax has already been paid or prepaid.
All applicants should have made the necessary investments during the three years preceding the date of the application and must retain the said investments for a period of at least five years as from the date of the naturalization.
In addition, the applicant must fulfil the following Terms and Conditions:
1. Clean Criminal Record: the applicant must have a clean criminal record. Furthermore, his/her name must not be included in the list of persons whose assets, within the boundaries of the European Union, have been frozen as the result of sanctions. Moreover, an applicant whose application for citizenship in any other member-state of the European Union had been rejected, is not eligible to apply for the acquisition of the Cypriot citizenship through the CIP.
2. Schengen Visa: The applicant must hold a valid Schengen visa. Third-Country nationals that do not require an entry visa for travelling in European Union member-states, as well as citizens of European Union Member States are excluded from this obligation.It is noted that all the aforementioned in paragraphs 1 and 2 also apply for the family members of the investor that are eligible to apply for the acquisition of Cypriot citizenship.
3. Residence in the Republic of Cyprus: In all cases, the applicant must possess a permanent privately-owned residence in the Republic of Cyprus, the purchase price of which must be at least €500.000, plus V.A.T. Residence Permit in Cyprus: The applicant, prior to his/her naturalization as a Cypriot citizen must hold a residence permit in Cyprus for a period of at least 6 (six) months.If the applicant does not already hold a residence permit, he/she may apply for an immigration permit on the basis of Regulation 6(2) of the Aliens and Immigration Law, simultaneously with the application for naturalization. The applicant, prior to his/her naturalization as a Cypriot citizen must hold a residence permit in Cyprus for a period of at least 6 (six) months. If the application for acquiring an immigration permit is made solely for purposes of acquiring the Cypriot citizenship, in accordance with the provisions of the CIP, there are no other conditions than those stated above. It is noted that all of the above also apply for the adult members of the family of the investor, who will apply for naturalization. In case the application for naturalization is rejected for any reason, the immigration permit, obtained in accordance with the provisions of this decision, will be canceled immediately..
According to the Decision of the Council of Ministers dated 13.2.2019, as well as the relevant legislation, the Cypriot citizenship can be granted to the spouse or partner of the investor and to his/her parents, financially dependent adult children and minor children.
The Council of Ministers, as a part of its efforts to further improve the CIP, on 9.1.2018 and 21.5.2018 decided the establishment of the Committee for Supervision and Control as well as of the “Registry of Service Providers” for the CIP. According to these decisions, since 1.8.2018,applications will only be able to be submitted by Service Providers that are included in the «Registry» on the basis of an improved procedure. The members of the Registry have responsibilities in order to actively contribute to the maintenance and enhancement of the integrity of the Programme and shall apply specific due diligence practices in relation to client acceptance, when examining the possibility of collaboration.
The Council of Ministers also has decided to restrict the number of citizenships granted to investors under the CIP to 700 a year.
The 2017 statistics show that, the Government of the Republic of Cyprus issued 506 passports to an equal number of investors and 511additional passports to members of their respective families, compared to 443 and 461 in 2016, 337 and 342 in 2015, and 214 and 186 in 2014.The applications are received by the Ministry of Interior and are jointly assessed by the Ministry of Interior and the Ministry of Finance. The recommendation is forwarded to the Council of Ministers for a final decision. In 2018, 798 applications of investors and 907 applications of family members were received by the relevant authority.
CIP Service providers
The members of the Registry of Service Providers for the CIP, must apply specific due diligence practices in relation to client acceptance, when examining the possibility of collaboration. More specifically, these agents shall apply the following due diligence practices:
- Recording and verifying information that fully and accurately identifies the potential client.
- Undertaking, within the framework of the law, checks on the client, of its professional activities as well as its surroundings (including possible publications in the press or online).
- Verifying the origin and legality of the investment funds of the client.
- Providing a report of the findings of the due diligence review (due diligence report) from internationally recognised electronic databases, for the use of which a fee is payable (e.g. World Check, LexisNexis Diligence, RegulatoryDataCorp Inc, etc). The report must be dated no later than thirty days from the date of its submission.
- Members must ensure that they take all necessary steps to secure the safety of their clients’ funds and apply clear and distinct procedures to manage all clients’ information with due confidentiality and ensure that the information is made available only in cases where the members are obliged to disclose information through court or other legal proceedings, notifying their clients in advance.
The Ministry of Interior, as soon as one application is received, investigates whether the applicant meets the terms and conditions for the granting of the citizenship, stated in paragraph 1.3 above. Due diligence investigations are conducted through an electronic database and internet checks. Simultaneously, checks of the travel documents, passports and identities take place by the Cyprus Police (European Union and International Police Cooperation Directorate) in collaboration with Europol and Interpol. When required, checks are also conducted by The Financial Intelligence Unit of Cyprus (MOKAS) of the Attorney General of the Republic and Central Intelligence Service of the Cyprus Police.
Regarding the applicants’ investment and funds transfer to Cyprus from abroad, the Cypriot commercial banking institution where the funds are deposited, institutes appropriate procedures to fully comply with the relevant legislation, regulations, guidelines and best practices, and exercises due diligence to deter the use of its services and products by money launderers and those involved in illegal activities, including the financing of terrorism.
Overall objective
For the purposes of further improvement of the CIP, the Ministry of Interior, as the competent Ministry of the Republic of Cyprus for the implementation of the CIP, decided to strengthen the due diligence measures already taken by various Cypriot Authorities, by contracting with up to three contractors in order to provide enhanced global due diligence reports for applicants and other related individuals.
Due diligence framework
The DD framework includes provision of enhanced due diligence reports and checks on non-Cypriots applying for the CIP and other related individuals, in order to further investigate and access the risks associated with that applicant.
Provision of training for the competent governmental staff that deals with the CIP in order to be able to comprehend covering topics such as due diligence, Anti-money laundering and Anti-Bribery and Corruption compliance and understanding of any relevant risks
Expected results
The use of enhanced due diligence procedures is expected to validate the integrity of the CIP and improve its reputation in the international market.
It is estimated that the total number of the required due diligence reports will be circa 1300 per year (600 investors, 700 dependants)
The CIP applicants are mostly from Asia, Eastern European countries and Arab states.
Assumptions and Risks
For the successful delivery of the due diligence reports it is necessary for applicants, or the members of the Registry of Service Providers mentioned to cooperate with the Contractors and provide all the relevant information, data or documents. This information, data or documents provided, must be adequate, with no reasonable grounds to believe that they are fraudulent.
If the applicant’s investments are made through companies with nominee shareholders or trusts it makes it more difficult to identify the beneficial owners of a company, and therefore increases the complexity of the company structure and adds another level of obfuscation in the due diligence checks.
Additionally, if the applicant is from or invests in a country with insufficient Anti-Money Laundering and Countering Financing of Terrorism and Corruption measures and/or with higher risks, the execution of the due diligence will be more difficult.
Moreover, the execution of due diligence checks is more difficult when the investments of the applicant involve complex or unusual transactions that require further investigation.
Lastly, when the applicant has a large number of dependent family members, the completion of all the due diligence reports will probably take longer.
If some of the above assumptions take place during the execution of the due diligence checks for an applicant, the major risk is that the examination of his/her application will be delayed.
Enhanced due diligence reports on CIP applicants
The enhanced due diligence and checks on non-Cypriots applying for the CIP and other related individuals may include the following checks:
- Identity verification (applicants’ details, passport details, verification of CV, family details)
- Company background analysis(e.g. beneficial ownership structure, details of representatives and other key persons related to the applicant, etc)
- Applicants’ reputation, business conduct and social accountability
- Checks against Global compliance checks
- Checks whether the applicant is included in any sanction list (e.g. EU Sanctions, Office of Foreign Assets Control Sanctions, etc)
- Verification of information relating to the source of wealth/funds with Anti-money laundering and Anti-Bribery and Corruption checks, in order to determine whether the wealth or funds are legitimately derived, or intended for legitimate use, or whether there are reasonable grounds to suspect it may be the proceeds of crime
- Fraud and Regulations Violations in order to determine the legitimacy of relevant actions. For instance, determine whether complex beneficial ownership structures are legitimate and intended to facilitate business or if they are complicated on purpose in order to deter investigation and conceal the identity of the beneficial owners
- Criminal and litigation history and checks for on-going investigations
- Links to organised crime, arms trafficking, war crimes, human rights violations, terrorism and funding of terrorism, etc.
- Checks on any other risk factors
- Risk assessment of applicants with categorisation (e.g. amber/red/green)
- The Contractor, as a part of the technical offer, must provide a sample due diligence report and describe the data sources and reliability used for the investigative work, the regulatory searches available, tools and technology, comparison, validation, relevance filtering of results and risk assessment processing.
Training for the competent governmental staff that deals with the CIP
In order for the competent governmental staff to be able to comprehend the enhanced due diligence reports delivered by the Contractors, they should be trained accordingly, covering topics such as due diligence, Anti-money laundering and Anti-Bribery and Corruption compliance and understanding of risks.
Cyprus has opened a tender for selection of due three diligence contractors last month. The estimated value of contract €2500 per investor’s report and €1000 per related individual’s report. It is estimated that the ministry will seek total number of the required enhanced due diligence reports will be circa 1300 per year (600 investors and 700 related individuals).
