Eleanor Knott (London School of Economics)
In 2016, Moldova joined a growing group of countries, including Antigua and Barbuda, Austria, Dominica, Grenada, Malta, Montenegro, St. Kitts and Nevis, St. Lucia and Turkey, offering citizenship by investment (CBI) schemes. However, in 2020, the parliament repealed the amendments to Moldova’s citizenship law that permitted CBI, the same year that Cyprus also repealed its CBI scheme. Why was Moldova’s foray into CBI so short-lived?
Academic literature has considered the concerning normative implications of CBI schemes for the commodification of citizenship and the political implications for corruption. Kristin Surak has also investigated the demand-side for CBI schemes among the economic elite that seek mobility and insurance options.
But less is known about the supply-side of CBI schemes, especially in examples like Moldova where the supply of CBI schemes dries up from domestic pressure, anti-corruption policies and external pressure from the EU.
Introducing CBI in Moldova
Several Moldovan MPs were instrumental in 2016 in drafting the law that would allow for acquisition via CBI from Moldova’s Democratic Party (then-parliamentary speaker, Andrian Candu, Sergiu Sârbu, Igor Vremea and Corneliu Padnevici) and Liberal Party (Roman Boţan). These MPs argued that CBI offered Moldova the “unique chance to capitalise” on its recent visa liberalisation agreement with the EU (2014) and contribute “hundreds of thousands of euros” of investment to Moldova. Afterall, since 2014, Moldovan citizenship now offered visa free access to the EU.
The scheme was developed by Moldova’s government, the Moldovan Investment Company and its service provider Henley & Partners, among the largest consulting firms that works with states and private clients to facilitate CBI. The CBI scheme was then launched in 2018 during the Global Conference on Residence and Citizenship in Dubai, at an event also attended by Moldova’s then Minister of Economy and Infrastructure and Former Prime Minister, Chiril Gaburici.
But the introduction of CBI by these MPs was also a crucial moment in Moldovan politics. Hope seemed lost of substantive anti-corruption reform, especially in the wake of Moldova’s 2014 banking theft of over one billion dollars. Instead, the parties pushing CBI in Moldova, notably the Democratic Party around the infamous and wealthiest oligarch Vladimir Plahotniuc, were pursuing state capture and engaging in corruption. Part of this involved pushing through legislation like CBI, as well as capital amnesty, to legitimise the role of the state in facilitating—and not only turning a blind eye to—corruption.
The Threat of CBI
Numerous voices within civil society and anti-corruption organisations argued that CBI was a grave source of threat to Moldova’s state security and could even threaten Moldova’s visa liberalisation agreement with the EU. For example, Moldova’s National Anti-Corruption Centre (NCA) was concerned that the CBI scheme was designed to “legalise money of criminal origin”.
In the wake of CBI’s introduction Transparency International Moldova agreed with the NCA that the CBI scheme was designed to legalise money from illegal money laundering schemes. Transparency International Moldova argued together the laws on CBI and capital amnesty. would create “favorable conditions for international money laundering”.
These concerns were not hypothetical. For example, the first CBI recipients were reported as the Russian citizen and wife of Ilan Șor, Sara Șor, and her family members. Ilan Șor was heavily implicated in the “billion dollar theft”. As Șor’s husband, Sara Șor (known also by the stage name Jasmin) could have acquired citizenship in three years anyhow. But, media reports suggest she and her family members acquired Moldovan citizenship via CBI via a company related to the “billion dollar theft”. In other words, NCA’s worst fears that CBI could be used to launder money, cleaning both the money and the names of those acquiring via CBI, appeared to be coming true.
One of the initiators of the CBI draft law, Roman Boţan, also resigned from the Presidency on the National Security, Defence and Public Order Commission because of how the CBI law developed. For example, he was particularly concerned that changes to the law included protecting the identities of those acquiring citizenship as well as the minimal debate in parliament over the law.
However, Moldova’s foray into CBI was short-lived. In 2019 and early 2020, a series of moratoria prevented new CBI applications from being submitted while more evidence was gathered on the risks of CBI to public order, state security corruption and money laundering. In the end, the CBI program was eventually repealed on 18 June 2020. No further applications will be processed although existing applications will continue to be assessed.
Why was CBI repealed in Moldova?
To explain why the CBI scheme was repealed and the scheme short-lived we need to look to how Moldova’s political landscape has shifted, as well as the external incentives to end the CBI scheme.
Since parliamentary elections in February 2019, an electoral bloc of anti-corruption parties—ACUM and PAS—has gained ground. They were also able to build an unlikely government coalition with the Socialist Party (PSRM) during the summer of 2019, with PAS’s leader Maia Sandu as Prime Minister. While this government coalition did not survive the end of 2019, in late 2020 Maia Sandu was also elected as Moldova’s President. In sum, there are now active forces in power in Moldova that are pushing an anti-corruption agenda in a meaningful way, even if they face a difficult job because of other parties in the political system, namely PSRM and the Democratic Party.
But there was also pressure to repeal the CBI scheme so that Moldova could receive the second tranche of EU macro-financial aid. There was also concern that the CBI program could jeopardise Moldova’s EU visa liberalisation regime with the EU who warned against using visa liberalisation to incentivise citizenship acquisition. Indeed, the EU welcomed Moldova’s repeal of CBI given the risks of corruption, tax evasion, and money laundering.
Moldova’s CBI scheme, therefore, was short-lived and raised just €545,000 for Moldova’s state budget after promising €1.3 billion. As of January 2020, 20 applicants and 32 family members have acquired via CBI, with only 5 applicants and 3 family members doing so before the first moratorium at the end of July 2019. Media suggests there are currently 97 investors from Russia, Great Britain, China, Australia, and the US who have filed applications.
In explaining why governments might support and seek CBI schemes, as well as repeal them, we should not under-estimate the concern that these schemes pose within states. In Moldova’s case, governments and political parties already engaging in corruption were incentivized to introduce CBI not only to raise money but also to legitimise illicit activities. Even with external pressure from the EU to repeal CBI quickly, new governments and political parties in Moldova took the opportunity to roll back CBI as part of new and substantive anti-corruption programs to protect against further selling off the state and its citizenship.
This article builds on the recently published report on Recent Updates to Moldovan Citizenship Legislation published by Eleanor Knott.
References
Ayelet Shachar, and Rainer Baubock (2014) ‘Should Citizenship Be for Sale?’ Robert Schuman Centre for Advanced Studies Research Paper No. 2014/01, Available at SSRN: https://ssrn.com/abstract=2380665 or http://dx.doi.org/10.2139/ssrn.2380665
Kristin Surak (2021) ‘Millionaire mobility and the sale of citizenship’, Journal of Ethnic and Migration Studies, 47:1, 166-189, DOI: 10.1080/1369183X.2020.1758554