Former Minister of Interior and current Minister of Finance Konstantinos Petridis has never been a fan of the Cyprus Investment Program (KEP), said in his statement before the Commission of Inquiry into exceptional naturalizations, saying that from the beginning he had “concerns about the risks”.
In his statement on November 24, 2020, secured by KYPE, Mr. Petridis – who served as Minister of Interior during the period May 2017-December 2019 – expressed the belief that the program “benefited, but should be limited to the first years” . Mr. Petridis read a written statement, while also answering questions from the Chairman and the Members of the Committee.
“Mistakes were made, there were inherent weaknesses, maybe we should end the program faster or change it,” he said, noting that the program created “dependencies” and “interests”.
He admitted that the outcome of the KEP, partially overturned the “excellent image that we had built with effort and beneficial policies” since 2013. However, he added that the image of the country today is not comparable to the situation before 2013 and is more easily reversible, but “We have definitely been hit hard.”
According to Mr. Petridis, the credibility of Cyprus was affected because, firstly, suspects of historical background were naturalized and secondly, the perception was created internationally that Cyprus “sells passports”, which created a political-legal issue in the relations between Cyprus and EU.
If only selective naturalizations of investors were made individually and at the discretion of such investments, Cyprus would not even fall within the scope of the European Commission report, which “marked the beginning of the political dimension of the program at EU level. ” he said.
He said that the publicity that the whole issue received internationally, further damaged the image of Cyprus to serious, institutional investors abroad.
According to Mr. Petridis, “what is wrong with the KEP is not related to any administrative shortcomings, but to issues such as the lack of criteria for high-risk individuals from the beginning, the lack of proper tools for due diligence Which, as he said, was later corrected, but also “the abuse by the 'industry' that was created”.
Mr. Petridis said that he gave acceleration in only 27 cases of investors, of which 18 concern shareholders and Executives of an internationally renowned company.
Responding to questions from members of the Commission, Mr. Petridis said that he was under pressure even from MEPs and MPs, while he also referred to a case of mediation for the naturalization of a person who later turned out to have a casino in the occupied territories and was involved in smuggling.
“I had worries from the beginning”
“From the outset, I have been concerned about the dangers posed by this part of government policy, of which I have never been a fan, despite the economic benefits undoubtedly in the field of land development and construction, especially in the first period after the 2013 crisis.” said speaking before the Research.
He said that upon assuming his duties at the Ministry of Foreign Affairs, he requested immediate information about the program. “It was obvious that there were many problematic aspects and many gaps in the program that needed to be corrected in order to preserve the credibility of Cyprus,” he noted.
He also said that in the first few months he noticed an increasing number of applications from high-risk individuals, such as Politically Exposed Persons (PEPs), as well as people from countries linked to European or international sanctions, or corruption, such as Iran, Syria, Afghanistan. .
He went on to say that a number of service providers had resorted to “controversial methods and had launched an aggressive advertising campaign – mainly abroad and online – which clearly referred to the sale of passports, which undoubtedly caused damage to the country's name”.
He also stated that “ten years after the introduction of the KEP, there was no reliable mechanism for conducting due diligence, while there was absolutely no provision for high-risk 'investors' or exclusion criteria” and there was no provision for regulating the providers of the Program. .
A large “industry” of interests and investor attraction had already been created without these necessary regulations, which, according to Mr. Petridis, made it very difficult to try to correct the bad ones afterwards.
Among other things, Mr. Petridis said that during my term of office it was decided and applied an additional evaluation of the applicant investors and their family members through a subscription commercial database (World-check), while from August 1, 2018 only those who applied for naturalization were registered in the “Register of Service Providers” and a “Code of Conduct” was introduced.
According to Mr. Petridis, “there were very significant gaps in the program regarding the mechanisms of due diligence on the part of the state”, since, as he stated, before taking office, the control was limited to the submission of a white criminal record, and the exchange of information with state security authorities and online control.
In relation to the Government, Mr. Petridis stated that “not only all the necessary, but also very strict control mechanisms were adopted”, but said that inherent difficulties remained in controlling the providers and the private sector in general.
Mr. Petridis referred in detail to the control by organizations and supervisory authorities for the fight against suspicious transactions and the relevant legislation, saying that “there are serious issues regarding its observance” for both the entities it covers and the Supervisory Principles defined by law.
He went on to say that “the legislation was in force and everyone had to implement it, both the administrative service providers and the competent Supervisory Authorities” to add that the Ministry of Foreign Affairs could never be a supervisor of these entities, such as banks.
“The whole system adopted by the state was based on the assumption that all the involved entities that fall within the scope of the above laws would act with due diligence and based on the directions they had from their supervisory authorities,” he added.
Regarding the criteria for exclusion of high-risk individuals, he said that this is “the biggest gap from the government side”. Mr. Petridis cited as an example individuals who were subject to criminal investigation in their countries, even for serious offenses, who had a white criminal record and therefore were not banned from naturalization in Cyprus. He also said that there was absolutely no provision for WFP, even if they came from countries linked to corruption or human rights abuses.
“This in my opinion was the most significant gap in the program since its launch,” he said.
“The most important decision to secure the program from its launch date was – in my view – the introduction of strict exclusion criteria for high-risk investors,” he said, adding that he submitted a proposal to exclude high-risk individuals on July 25, 2019, which was “Particularly strict and restrictive, so that in combination with the strongest possible due diligence system, to reduce if possible to zero the possibility of exposure of Cyprus by persons of dubious credibility.”
Proof of the particular rigor of the decisions of the Council of Ministers of July 2019, is the fact that the regulations that were approved by Parliament itself, were much more flexible in terms of exclusion criteria, he added.
The exclusion criteria came into force immediately for all pending applications, despite strong objections and pressure from providers and landowners, he said.
Regarding the role of the Ministry of Foreign Affairs, he said that the naturalization process had two parts, with the first concerning issues of policy and policy proposals in relation to the Program together with the Ministry of Finance and the second conducting due diligence audits according to applicable criteria. as well as the procedural / procedural role.
“This was perfectly normal since the KEP and its evaluation were not based on the individualization of the application or the investment, but on a broader standardized system of systematic granting of citizenship based on standard formal criteria” which, as he said, “suffered before the introduction of strict control measures and exclusion criteria, “he said.
Mr. Petridis stated, among other things, that when he took office, a competent official – whom he names – handled the program on his own. “Significant efforts have been made to strengthen it despite the fact that it was a period of freezing appointments, with all sections of the public sector declaring understaffing,” he said.
He also stated that in 2018 it was decided, after his own insistence, the complete separation of responsibilities between the Ministry of Education and the Ministry of Education. “YPOIK would not just send opinions but would be responsible for checking the financial criteria related to the program, checking the retention of investment after acquiring citizenship for the required period of time, as well as collecting statistics related to the economy” he said
Regarding the proposals submitted to the Council of Ministers, he said that the KEP was a standard program, and the Ministry received information on whether or not the applications met the formal criteria set by it.
According to Mr. Petridis, “what is wrong with the KEP is not related to any administrative shortcomings, but to issues such as the lack of criteria for high-risk individuals from the beginning, the lack of proper tools for due diligence – something that was later corrected – but also the abuse by the 'industry' that was created “.
“I am convinced that the General Manager, the responsible officer and all the persons who dealt with the issue procedurally and administratively handled the institutionalized process with great adequacy but also a large volume of work, under difficult and pressing conditions, always according to the current criteria “he added.
According to Mr. Petridis, there was a huge number of providers pushing for speeding up the examination applications, as, according to the perception he gained, “there was a great competition for securing accelerations, either by phone or by sending general and unsubstantiated letters”. That is why I instructed the providers to be informed that no accelerations will be given and that a strict chronological order will be observed, he said.
He said that during his tenure at the Ministry of Foreign Affairs, he hastened only 27 cases of investors, of which 18 are shareholders and executives of an internationally renowned company, which he named, for a very important, as he said, investment. “This investment could not be compared to the others and I considered it absolutely right to accelerate,” said Mr. Petridis.
The other 9 cases reported that they involved investor facilitation following health or other humanitarian reasons.
He said there was no reduction in the control procedure in cases of acceleration. While he stated that the application for a naturalization of the 9 that were expedited was rejected due to the results of the audits we conducted as a Ministry. The fact that a very small number of accelerations were given “shows that this discretion was not abused at all,” he said.
Regarding the discretion provided by Article 111A to the Council of Ministers for naturalizations beyond the scope of the standard KEP criteria, Mr. Petridis stated that it was exercised in a few exceptional cases and on a case-by-case basis, after complete documentation, for naturalizations of shareholders or executives. made large investments in Cyprus, without possibly meeting the minimum financial criteria of the standard program of systematic granting of citizenship, due to the amount, importance and public benefit of the investment.
He referred to a case where 18 nationalities were granted on request to investors / shareholders / company executives, saying that this investment until the year 2019, and before the completion of the final project, contributed more than 19 million euros to state coffers in the form tax, spent on salaries over 42 million euros, and on Cypriot companies over 138 million euros on construction and other projects.
“It already employs more than 700 people on a permanent basis plus several hundred people employed in construction work. “Upon completion of the project, it will offer around 3,000 permanent and well-paid jobs,” he said.
He also said that in the public debate over the so-called “passport scandal”, the case “instead of becoming a positive example of significant, personalized investments with real added value that could fall within the framework of a non-problematic naturalization program, an attempt was made to highlight the case as a scandal stone “.
According to Mr. Petridis, the Parliament was always informed about the process of the program and no further information or clarifications or objections were requested in this context. The information was detailed and complete, he said.
As Minister of Foreign Affairs, he continued, my position was full cooperation, information, transparency, but also a willingness to discuss policy issues with the Parliament.
He said that despite the political controversies, which were mostly declarative, “no political proposal came from any political space, inside or outside Parliament, concerning either the termination of the program or the change of its philosophy and concerns. EU”.
“The 'industry' created by the KEP benefited people from all over the political landscape, as the Al Jazeera video shows,” he added.
According to Mr. Petridis, there is an issue “due to the lack of a clear legal framework of incompatibility, which does not allow state officials of the legislature (but also the executive) to exercise other professional activity in addition to the position they hold.”
“Because of this, there is a phenomenon of MPs having law firms or land development companies and at the same time being associated with services for the KEP, a fact that reasonably created a conflict of interest, but also other distortions such as those presented in the Al Jazeera report of October 12. 2020 »he said.
Regarding the naturalization of individuals exposed by Cyprus, he said that the bad image for the country is due to the fact that individuals were acquiring citizenship due to the lack of a proper regulatory framework, combined with the abuse observed by an unregulated provider industry, involved and interests that benefited from the KEP without having any moral barriers themselves. “The money was a lot,” said Mr. Petridis.
He went on to say that his service at the Ministry of Foreign Affairs “was a continuous and painstaking effort to improve the program, which was not without resistance. But I feel that I have done my duty since during my service the most important measures were taken to protect Cyprus from the inherent dangers of the program “
He referred to the regulation of the issue of providers, but also their obligation to carry out the first level of control and expressed the certainty that if these measures had been taken since the introduction of the program, or even earlier, then most cases, which saw the light of publicity and related to dubious quality or suspicious investors, would have been prevented, since they relate to naturalizations that took place before July 2019.
“If even today, all the people who acquired Cypriot citizenship through the KEP were re-checked and their name has seen the light of day due to a negative history, based on the system as it came into force in July 2019, I believe that the vast majority of applicants would have been rejected. “Something that I am not sure would happen if there was a review based on the significantly more flexible regulations that passed the Parliament in 2020”, he added.
He said that indicative of the importance of the controls and the criteria applied was that in 2019, six times more applications (37) were rejected compared to 2018 (8), 2017 (8), 2016 (8), 2015 (3), 2014 (5), 2013 (2) even if the exclusion criteria were applied from the second half of the year.
He also said that due to the change of the Regulations of July 2019, the submission of an application by several applicants was prevented, due to the fact that they knew in advance that the criteria would be applied which they would not be able to meet.
Mr. Petridis stated that despite the changes, even the 2020 Regulations, the European Commission did not consider that the KEP was a credible program and reminded that in April 2020, after the adoption of the Regulations, the European Commission invited Cyprus to gradually terminate the Program.
He said that the real problem with the EU was created due to the philosophy of the KEP. “The inherent characteristics of the KEP were the institutionalized and systematic granting of citizenship, against a predetermined level of investment (ie price), without a real link between the country and the investor (as interpreted by the Commission). These characteristics were what are considered by the EU and others as the root cause of a self-sustaining corruption by such plans, beyond any criteria that accompany them. “This was the reason for creating a political issue with the EU, with what this implies for the image of the country, and not any possible irregularities, or mistakes that may have been made in the long course of the Program, as some people perceive,” he said.
He said that if the Program was limited to the real discretion of the Council of Ministers in individual or “exceptional cases” then neither the EU nor the international news agencies would raise the issue, adding that “of course, no billions would be invested in real estate development, many of which were potentially crucial to economic recovery and tackling the serious problems of the banking sector. “
Pressure from “MEP, Member of Parliament and Law Office”
Asked if he, as Minister of Interior or as Minister of Finance, later had any objections to specific exceptional naturalizations, Mr. Petridis answered in the affirmative, saying that he rejected them “after a lot of pressure” and gave specific examples.
In particular, he said that there was a case in which he was met by people, whom he names, in his office for the naturalization of a person who was on the list of sanctions of the European Union for the annexation of Crimea. “It was so intense that one of them almost called me a traitor and I would damage the relations between Cyprus and Russia, because I did not want to naturalize a person, this gentleman had gone to the presidency to bother” he said.
He also referred to the case of a man from India, as well as “another case in which I was harassed by a former MEP, a former MP, part of a different political party office and a well-known law firm, who had broken phones everywhere for such to add that all these applications had been rejected.
Asked to name the MEP, MP and the law firm, Mr. Petridis said that “the MEP did not know specific things, some people had bothered him and considered it appropriate to bother him.”
“I was trying to ensure my credibility and I oppose and I am against such pressures and that is why I remember it characteristically,” he said, referring to lawyers-representatives of the applicants, saying that in one case one tried to go to the Presidential Palace.
“They were trying through these offices, okay, who has the above policies, more connections, we can do something about this thing,” he said.
Mr. Petridis also spoke about cases of mediators with “good intentions”. He referred to a case in which, following reports from the Metropolitan, he hastened, but then it was found that the application had to be rejected, as they found from the KYP that he had a casino in the occupied territories and that the applicant's name was involved in cigarette and smuggling stories. .