Bulgaria’s Anti-Corruption Body, Prosecution Close Their Eyes to ‘Loans for Passports’ Granted by Private Lender

by Атанас Чобанов

The Specialized Prosecutor’s Office (SPO) and the Commission for Combating Corruption and the withdrawal of illegally acquired property (KPKONPI) (sic) have been passing on a file on a complaint by Bivol about fraud committed by private lender First Investment Bank (FIB, FIBANK or FIBank), involving at least 46 foreigners. In the end, the SPO has terminated the case because, according to a decree by SPO prosecutor Hristova, it has not found any evidence of a crime.

The scheme was unearthed in an investigation by Bivol into granting citizenship against phony investments in Bulgaria. Foreigners, who have made use of it, do not bring any money from abroad, but receive a half-million-euro loan from a bank, along with a certificate that they hold such an amount in a bank account. Based on this, the Bulgarian Investment Agency issues an investor certificate, thereby establishing the permanent residence of the person by the Ministry of Interior.

Citizenship for only EUR 50,000 and no proof of origin

After acquiring a permanent residence permit in Bulgaria, the new investor must remain in the country for five years for at least 6 months annually. However, no one verifies whether this is really happening.
In the course of these five years, the bank receives 4% interest on the granted “citizenship loan” and then the principal can be repaid at once because the institutions are not interested in what happens with the phony investment.

Thus, against about EUR 50,000 transferred from one bank account in Bulgaria to another, anyone can acquire Bulgarian citizenship without having made any investment whatsoever in the Bulgarian economy.
On top of that, proof of origin for the money used to make monthly installments to repay the loan is not required because it is below the threshold of BGN 10,000 to trigger a report to the financial intelligence. Therefore, money of murky origin can be used quietly to buy a European Union (EU) passport, giving its owner all the privileges that come with it.

Citizenship loans are illegal if they are from Bulgarian banks

The scheme is currently still working, Bivol’s “mystery shopper” investigation established. A Bivol reporter posed as the assistant of a wealthy businessman from a former Soviet republic and called Citizenship and Investments Ltd., an agency that acts as an intermediary for Golden Visa services in Bulgaria. After paying a EUR 60 fee through Western Union, he was told by phone that it is possible to borrow money for citizenship, but not directly from a Bulgarian bank, because this is forbidden by law.

However, the agency representative explained that a foreign EU bank could arrange the loan.
We are working with the Belgian KBC Bank,” he said. “They have a low interest rate and it is a foreign bank. Loans from local banks are not accepted by law.” The candidate pays the interest and an agency fee, and at the end, the bank receives the principal back. The result is citizenship at a fraction of the investment if it was real.

The press office of KBC firmly denied that the bank makes citizenship loans. However, there is specific and official proof of such loans granted by Fibank and it is found in a 2012 report by the central bank, the Bulgarian National Bank (BNB). The so-called “citizenship loans”, which by 2010 amounted to several dozen, are listed among the numerous violations.

The BNB report established that in 2011, Fibank had logged in its credit portfolio 36 so-called “citizenship loans”, amounting to EUR 18.4 million.

The SPO has failed to examine the evidence in the BNB report, has not requested it officially and it has simply pretended that it does not exist, the prosecutor’s decree reveals. Instead, it has compared the number of certificates of deposits issued by Fibank, the number of certificates issued by the Bulgarian Investment Agency and data from the Ministry of Justice, and has made the ridiculous conclusion that “no discrepancies have been found”.

This, in fact, firmly confirms that the criminal scheme had been working perfectly well after 2011. According to the prosecutor’s probe, it has benefited not 36, but 46 people. There is no information in the decree whether the loans for citizenship, granted by FIBank before 2012, when they had been detected by the BNB, had been audited.
Thus, it turns out that even the intermediaries in obtaining citizenship are fully aware of what is legitimate and what is not, but the prosecution does not see any problem with the Bulgarian bank Fibank, which has granted such illegal loans.

Following an investigation by the Organized Crime and Corruption Reporting Project (OCCRP), the European Commission called for a suspension of the “golden visas”

Bivol’s investigation: Bulgaria’s Golden Visas: Missed Targets and a Banking Loophole (in English on the OCCRP site) is part of the Global Anti-Corruption Consortium Gold for Visas project, a partnership between OCCRP and Transparency International. Based on the results of this project, Transparency International prepared a report entitled “European Gateway: Inside the Murky World of Golden Visas”, which was presented to the European institutions in 2018. It explicitly mentions the case of loans for citizenship from Fibank.

Earlier this year, the European Commission presented a report criticizing Bulgaria, Malta and Cyprus’s “golden visas” programs. Then the Bulgarian government announced that it would end the program “citizenship against investment”.

So far, however, there are no indications that the numerous cases of granted Bulgarian citizenship based on the fraudulent bank scheme will be investigated and that these passports will be revoked.

A sign of this is the modest initiative of Prosecutor General Sotir Tsatsarov to seize the passports of three Russians and one Kazakh for whom it has been found not to have made the necessary investments. However, the number of foreigners who have received illegal citizenship is much higher and this is publicly known from investigations by Bivol, Free Europe and other media outlets. According to a publication by Free Europe, the prosecutor’s office has known for nine years that citizenship is being forged.

Hardly these citizenship frauds could happen if the institutions did not close their eyes to the origin of the capital and exercised post control of the fake investments. There is enough evidence of criminal inactivity, and possibly a corruption scheme involving Bulgarian officials. However, as shown by the decision of prosecutor Hristova, neither KPKONPII nor the SPO is concerned.

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