Cyprus is suspending a scheme that grants citizenship and guarantees visa-free travel throughout the EU for those who invest a minimum of €2m (£1.8m).
It comes after Al Jazeera reporters filmed Cypriot officials using the scheme to assist a fictional Chinese businessman with a criminal record.
One of those filmed was Cyprus’s parliamentary speaker, Demetris Syllouris, who said he would step down until an investigation was completed.
The move comes into force next month.
Mr Syllouris, who is Cyprus’s second-highest ranking official, said he was abstaining from his duties shortly after the government announced the suspension of the scheme – the citizenship for investment programme – following an emergency session on Tuesday.
Cyprus, which joined the EU in 2004, currently provides passports to non-EU nationals who make sufficient investments in the country.
Last year, the EU Commission told EU states to tighten checks on non-EU nationals who acquired citizenship through investments. It said the programme could be abused and used for tax evasion and money-laundering.
The commission added that applicants could acquire citizenship of Cyprus – and hence EU citizenship – “without ever having resided in practice in the member state”.