The European Commission said on Tuesday it is launching “infringement procedures” against Cyprus and Malta by issuing “letters of formal notice” regarding their investor citizenship schemes, also referred to as “golden passport” schemes.

The schemes allow wealthy foreigners to buy citizenship in exchange for an investment of around €1 million in Malta and €2 million in Cyprus.

The Cypriot and Maltese governments have two months to reply to the letters of formal notice.

Without changes, the Commission could refer the countries to the EU’s Court of Justice and ultimately it can ask the court to impose penalties.

“The Commission considers that the granting by these Member States of their nationality – and thereby EU citizenship – in exchange for a pre-determined payment or investment and without a genuine link with the Member States concerned, is not compatible with the principle of sincere cooperation enshrined in Article 4(3) of the Treaty on European Union,” said the Commission.

“This also undermines the integrity of the status of EU citizenship provided for in Article 20 of the Treaty on the Functioning of the European Union.

“Due to the nature of EU citizenship, such schemes have implications for the Union as a whole.

“When a Member State awards nationality, the person concerned automatically becomes an EU citizen and enjoys all rights linked to this status, such as the right to move, reside and work freely within the EU, or the right to vote in municipal elections as well as elections to the European Parliament.

“As a consequence, the effects of investor citizenship schemes are neither limited to the Member States operating them, nor are they neutral with regard to other Member States and the EU as a whole.

“The Commission considers that the granting of EU citizenship for pre-determined payments or investments without any genuine link with the Member States concerned, undermines the essence of EU citizenship.”

The Commission said it is also writing again to Bulgaria to highlight its concerns regarding an investor citizenship scheme that country operates “and requesting further details.”

The Bulgarian government has one month to reply to the letter requesting further information, following which the Commission will decide on the next steps.