Position paper: the new amendments to the Citizenship Law – a risk of legalizing fraudulent financial means

In December 2016, a group of members of the parliament headed by Andrian Candu, the Speaker of the Parliament of the Republic of Moldova, had a legislative initiative concerning the liberalization of the capital and fiscal stimulation, known as the “illegally obtained capitals amnesty”. The representatives of the civil society have condemned this new law draft initiative, believing that it would lead to the legalization of the illegally obtained money and would compromise the anti-corruption fight in the Republic of Moldova.[1] A join effort made by civil society organizations, experts and development partners, this draft law was blocked and in February 2017 – it was removed from the parliamentary agenda, even though it was voted in the first reading. At the same time, the anti-corruption expertise conducted by the National Anti-corruption Center has concluded “…. the capital liberalization concept becomes thus equal to the legalization of illegal capital, being closer to the illegal money laundering concept”. Thus, this intention to legalize certain dubious funds has failed.

In parallel to this legislative “initiative”, amendments to the Citizenship Law of the Republic of Moldova no. 1024 – XIV of 2 June 2000 were pushed forward. [2] The initiative registration date, as well as the authors/signatories of the project are the same as in the case of the capital liberalization/ fiscal stimulation project. Through these amendments the opportunities of receiving Moldovan citizenship have increased. Thus, as of 27.06.2017 the following provisions are in effect[3]:

Notwithstanding par. (1), the citizenship of the Republic of Moldova can be granted upon request to a foreign citizen or a stateless person, who knows and observes the Constitution and meets the following conditions:

  1. Has a good economic and financial reputation;
  2. Does not present any danger or risk to public order and state security;
  3. Contributes to the public investments fund for sustainable development or has performed and maintains for a period of 60 months investments in at least one of the strategical development areas of the Republic of Moldova, as approved by the Government”.

The amended law also foresees that the granting of the Republic of Moldova citizenship, according to the conditions specified above, shall be limited to 5000 persons, however it does not clarify if this refers to the total number or to a number of persons within a given period of time.

These legal provisions create major direct or indirect, personal or through intermediaries legalization risks of dubious financial means.

In order to implement these new provisions, the Ministry of Justice has drafted a Governmental Decision Bill on the granting of citizenship by investment.[4] Besides the fact that the drafted bill has deviated from certain provisions of the above mentioned law (including deadlines), it could also legalize dubious financial flows, dragging the state institutions and the citizens of the Republic of Moldova in new extortion schemes by issuing internal public debt instruments.

Thus, this Governmental Decision draft determines, among other things, that “foreign citizens or stateless persons, who apply for the acquisition of Moldovan citizenship by investment, according to art.17 par. (11) provisions of the Citizenship Law no. 1024 – XIV of June 2 2000 has to meet the following conditions:

  • To deposit in local currency or in freely convertible currencies on the territory of the Republic of Moldova a non-refundable contribution worth at least 100 (one hundred) thousand EURO in the Public Investment Fund for sustainable development through ESCROW type bank accounts of the public institution “The Sustainable Development Fund of Moldova” OR
  • Has made and maintains an investment in at least one of the strategic development areas of the Republic of Moldova, based on a business plan accepted by the citizenship application Examination Board by participating in the investments program in the Republic of Moldova (hereinafter the Board) for a period of at least 60 months, amounting to at least 250 (two hundred fifty) thousand EURO.

At the same time, in this draft, the authors have identified the following “areas of strategic development”:

  1. the development of the real estate sector by owning uninterruptedly for a period of 60 months one or more buildings of a total market value of at least 250 thousand EURO, and
  2. the development of the public financial sector and of the public investments by purchasing and owning state securities for a period of 60 months of a total value of at least 250 thousand EURO.

To be mentioned that these two areas don’t have strategic importance for Republic of Moldova; these are sectors described by financial speculations. Both sectors would allow only a temporary allurement of free foreign financial resources, representing a form of legalizing resources, and subsequently removing them [from the country].

Currently the real estate sector is oversaturated by real estate offers, which are not absorbed due to the low buying capacity and the decreasing economic activity in the Republic of Moldova. Some developers and investors are confronted with reduced return on investments and they are interested to receive any type of support through different formula, including financial engineering with the involvement of the state, so that the price trend could be reversed so that it could grow again. Acquiring Moldovan citizenship by purchasing goods in the country wouldn’t represent anything else but a form of temporary absorption of foreign financial resources, aiming at distorting the internal market, benefiting investors and inefficient construction companies, and respectively, forcing the citizens of the Republic of Moldova to massively migrate abroad.

To be mentioned also that the state securities purchase in the context of granting citizenship doesn’t represent an investment, but, actually, a loan imposed on the state of the Republic of Moldova. According to the Governmental Decision draft, the owners of foreign financial resources could acquire the citizenship of the Republic of Moldova if they lend 250 thousand EURO to the state Republic of Moldova for a period of five years. And the Republic of Moldova, all the taxpayers, legal citizens, is forced to return to this foreigner (“fresh citizen”) the entire sum and also the interests when the five years expire. Thus, this mechanism could be seen more as a form of extortion planned by a group of citizens, who have financial resources and who, through intermediaries (who are offered the citizenship, meaning the protection of the Moldovan authorities) want to continue to extort clean and legal money from the state budget.

Unfortunately the Government disregards the traditional sectors, truly important for the strategic development of the Republic of Moldova, e.g. education, informational technologies, agriculture, food industry, energy efficiency, etc. and which need real direct investments. Thus, the Moldovan authorities identify as “strategic” those sectors which can be easily integrated within the international money laundry schemes.

In this context, a situation when the “citizenship by investment” applicants will prefer to, mainly, lend to the state and not revert to the non-refundable contributions to the Public Investment Fund for sustainable development is predictable. Apparently, the authorities intentionally create utopic options to divert [the attention] and support their arguments to easily approve group interest bills.

Transparency International – Moldova (TI-Moldova), as well as other NGOs have underlined often the risks and the consequences of promoting and adopting norms and laws detrimental to the public interest, and supporting the interests of a small group of beneficiaries, who look for ways to legalize in the Republic of Moldova fraudulently acquired financial resources[5]. These projects undermine the efforts of fighting grand corruption, of investigating bank sector frauds, as well as block the justice and integrity system reform.

Based on the above mentioned, TI-Moldova expresses their concern that the new provisions of the Citizenship Law of the Republic of Moldova, promoted and adopted in December 2016, as well as the Government Decision draft, launched by the Ministry of Justice, could represent a new attempt of legalizing dubious financial means.

In this context, TI-Moldova brings notice to the Moldovan society, development partners and especially to the European Union, the governments of the United States of America, Germany, Romania, as well as to the International Monetary Fund and to the World Bank on the inadmissibility of the legalization under any form or shape of the illegally acquired capitals, covered by some laws and Governmental Decisions deviating from the constitutional provisions, against the public interest and the international commitments of the Republic of Moldova, especially of the Association Agreement with the European Union.

Also, TI-Moldova calls upon the development partners to take a stand concerning the intentions of the officials to make state securities available to investors, who access fraudulent financial means and who could subsequently enter the international and regional financial circuit.

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