The European Commission has launched procedures against Cyprus and Malta over their "golden passport" programmes which allow wealthy people to acquire EU citizenship in exchange for an investment.
The EU's executive said the lucrative schemes are in violation of EU law and undermine the "essence of EU citizenship".
Cyprus recently announced that it was ending its programme amid allegations that a top state official and a veteran legislator were trying to bypass strict vetting rules.
Cyprus says it will end its programme from November 1, though the Commission notes that the country plans to continue processing current applications.
The Cypriot programme was introduced in the wake of a 2013 financial crisis that brought the country to the brink of bankruptcy and forced it to accept a financial rescue programme from creditors.
Like a similar programme in Malta, it has attracted many foreign investors because a passport from those EU countries automatically grants the holder access to the entire 27-nation bloc.
Around 4,000 Cypriot passports have been issued to investors under the programme, generating more than seven billion euros (£6.4 billion).
"The schemes remain in place for the time being in both member states concerned and could be replaced by similar investment schemes," said EU Commission spokesman Christian Wigand.
"Malta has in fact informed the commission that it envisages a prolongation of citizenship foreign investment."
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The commission set a two-month deadline for both countries to reply to letters of formal notice and can ultimately decide to refer the matter to the Court of Justice.
In a report last year, the commission also criticised Bulgaria for offering passports in exchange for money to investors without any real connections to the country.
Mr Wigand said the commission has also sent a letter to Bulgarian authorities asking them to phase out their citizenship scheme and provide detailed information about the programme within a month.
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