CBI industry tightens due diligence in response to global dialogue
Due diligence practices in the CBI industry are amongst the strictest in the world.
Citizenship by Investment (CBI) is an attractive option for those seeking alternative citizenship. It allows investors to relocate to some of the world’s most attractive destinations, facilitates global mobility and provides increased protection from growing political and economic instability. Foreign Direct Investment (FDI) is utilised by developing economies to promote social and economic development for the benefit of their people. CBI is a win-win solution for both investors and CBI-offering countries. Unsurprisingly, CBI’s numerous benefits make it a popular investment option for high-net-worth individuals (HNWIs).
Contrary to the popularity of CBI for HNWIs, the global community’s attitudes towards the CBI industry are less encouraging, but there are signs of a change in the air. In 2023, we positively witnessed a revised attitude to CBI from some members of the global community. Important global partners, notably the European Union and the United States, are beginning to recognise the economic importance of CBI programmes, particularly those in the Caribbean and are proactively collaborating to ensure CBI programmes can continue to operate sustainably and securely.
United States – Six CBI Principles
On 25 February 2023, St Kitts and Nevis hosted the historic US-Caribbean Roundtable on CBI, where representatives of the Government of the United States met with Government officials of all five Caribbean CBI countries (Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis and Saint Lucia). The conference aimed to reach mutual agreement on a solution that addressed security concerns while preserving the programmes and allowing them to continue to operate more sustainably.
The joint press release by all five Caribbean CBI countries stated that “the US recognised at the Roundtable that CBI programmes provide a legitimate service and have provided revenues necessary for the survival of the small-island states’ economies, especially when these states are subject to adverse external shocks and challenges such as climate emergencies and the ongoing Ukrainian war. Investment revenues generated by CBI are also crucial for the funding of major infrastructural and development projects, especially during the period of post-pandemic recovery.”1
The US also accepted that “dismantling these Programmes would severely compromise the prosperity and prospects of the countries, triggering a plethora of negative social consequences domestically and potentially leading to an upsurge in criminality, among other pathologies”. Nevertheless, the need to preserve these CBI programmes must also be reconciled with the countries’ commitment to safeguarding their financial systems against potential security threats.
Consequently, all five Caribbean CBI countries reached agreement with the United States to implement six important measures (several of which were already in practice) that are expected to significantly strengthen the security and integrity of their CBI programmes. Download the report to read more.
The six CBI principles agreement demonstrates the United States’ recognition of CBI programmes’ value to these small island states and the countries’ commitment to preserving the integrity of their CBI programmes. The six CBI principles demonstrate a significant developmental reflection of all parties’ efforts in striking equilibrium between the value of CBI programmes and the security concerns associated with the CBI industry.
CBI Countries’ Response
Several CBI countries are already showing their commitment to upholding the integrity and reputation of their CBI programmes by promptly implementing additional measures to strengthen their due diligence and vetting processes. The Caribbean programmes already implement extremely robust due diligence systems – often underestimated as international partners are unaware of the level of scrutiny applicants undergo.
In July 2023, we observed significant proactivity by the top two ranked CBI programmes to tighten their programme requirements. Dominica trailblazed as the first of the Caribbean five to introduce mandatory interviews for all applicants aged 16 and over, as well as implementing enhanced due diligence requirements for certain high-risk nationalities. Less than a week later, St Kitts and Nevis enacted brand new regulations, making sweeping legislative changes to further enhance and solidify the reputation and integrity of its premium standard CBI programme. These measures include increased minimum investment thresholds, revised dependant eligibility, introducing promotional guidelines, strengthened monitoring and compliance requirements for licenced local and international agents and legislating mandatory interviews as part of the due diligence process.
Conclusion
In 2023, we witnessed the global community transition from a scrutinous to a collaborative attitude towards the Caribbean CBI industry. The current sentiment seems to be that the European Union and the United States have come to recognise the value of CBI programmes to these small island states’ economies, and in return, these countries continue to display their commitment to upholding the integrity of their CBI programmes by implementing further measures to alleviate their international partners’ security concerns.
It is hoped that this turn of the tide will see the CBI industry enter a new and exciting era of growth and success with the support of the global community.
