Tag Archives: Citizenship

Have Caribbean Citizenship by Investment Programmes Run Their Course?

Alicia Nicholls

Caribbean Citizenship by Investment (CBI) programmes, and to a lesser but growing extent, residence by investment (RBI) programmes, are facing a rough ride. The latest blow came when the Paris-based Organisation for Economic Cooperation and Development (OECD) deemed CBI/RBI programmes operated by 21 jurisdictions, including those in the Caribbean, as “high risk to the integrity of the Common Reporting Standard”. While the OECD has clarified that this was not a blacklist, the list puts another glaring spotlight on Caribbean CBI/RBI programmes which are already battling to justify their existence to an increasing choir of skeptics.  In October, the European Union (EU) released a report analysing the state of play, issues and impacts of its own members’ programmes. With the mounting scrutiny being placed on Caribbean countries’ CBI/RBI programmes and stiffened competition from other investment migration programmes globally, have Caribbean countries’ CBI programmes run their course?

What are CBI Programmes?

CBI programmes are one of the two main types of investment migration programme – programmes which offer high net worth (HNW) investors accelerated citizenship or residence of the host country in exchange for a pecuniary contribution. Unlike RBI programmes which only confer accelerated permanent residence status, CBI programmes grant a qualifying investor, upon making a specified economic contribution to the host country (usually in real estate, investment in a business or in a specified government fund), accelerated citizenship for himself/herself and his/her qualifying spouse and/or dependents, once all relevant fees are paid and due diligence requirements are met. It means that a person can acquire citizenship or residence of another country in just a few months, compared to several years under regular naturalisation procedures.

Five Caribbean countries currently operate CBI programmes: St. Kitts & Nevis (the world’s oldest CBI programme), Dominica, Grenada, Antigua & Barbuda and St. Lucia. International examples include the EU member states of Austria, Cyprus and Malta, and the Pacific island nation of Vanuatu.

Second citizenship is a booming international industry reportedly worth US $3 billion, according to Citizenship by Investment.ch. There are now over one hundred CBI/RBI programmes worldwide, which seek to lure an expanding and highly mobile class of global High Net Worth Individuals (HNWIs) seeking the advantages a more favourable second passport could bring for themselves and their families. These advantages include greater mobility and security, tax planning advantages, and business opportunities.

The British Overseas Territory of Anguilla is the most recent Caribbean jurisdiction to commence a RBI programme, but versions of these programmes are also operated in the Bahamas, Barbados, Montserrat and Turks & Caicos, for example. Examples of RBI programmes in developed countries include the United States’ EB-5 programme and the United Kingdom’s Tier 1 Visa.

Challenges to Caribbean CBI/RBI programmes

Those Caribbean countries which operate them view these programmes as a pathway for economic diversification and development, bringing greatly needed foreign exchange and foreign direct investment (FDI) inflows, infrastructure development, and employment opportunities. In its Article IV Report on Dominica, which had been badly affected by category five Hurricane Maria in September 2017, the International Monetary Fund (IMF) noted that “fiscal performance deteriorated sharply due to the fall in tax revenue after the hurricane, but was partially offset by a surge in grants and buoyant Citizenship-by-Investment (CBI) sales revenues.”

Despite their economic benefits, CBI programmes have always been controversial due to some governments’ philosophical aversion to what many have called the “commodification of citizenship” or “selling of passports”. Indeed, CARICOM Member States remain philosophically divided on the desirability of CBI programmes.

There have also been, in some cases, legitimate concerns about the efficacy of the due diligence procedures, the perceived absence of a ‘genuine link’ between recipients of citizenship under CBI programmes and the host country, and reports of alleged instances of misuse of passports obtained under CBI programmes, which have brought increased international scrutiny of Caribbean countries’ CBI programmes.

One of the pull factors of Caribbean countries’ CBI programmes is the visa free access. For example, on the Henley & Partners Passport Index published by the world’s leading investment migration firm, Henley & Partners, St. Kitts and Nevis ranked the highest among Caribbean CBI countries in the strength of its passport,  providing visa-free access to 151 countries. Unfortunately, this advantage may be undermined if third countries, as is their right, decide to revoke visa-free access to citizens originating from countries offering CBI programmes, due to national security concerns. For example, Canada imposed visa requirements for citizens from St. Kitts & Nevis in 2014 and from Antigua & Barbuda in 2017 over similar concerns. Both countries have subsequently made changes to their programmes, but their citizens have not yet regained visa-free access to Canada.

The US Government has also repeatedly flagged Caribbean CBI programmes as possibly being used for financial crime, including in its International Narcotics Control Strategy Report 2017. With the current US administration taking an even tougher stance on national security,  US scrutiny of Caribbean CBI programmes is likely to continue or even intensify.

The European Commission has already sounded the alarm about the potential security risks that golden passport programmes operated by its own members could pose to the bloc. It reiterated this in its recently released report on those programmes operated in the EU.  But this scrutiny is not limited to EU CBI/RBI programmes. In a recently released report, global NGOs, Transparency International and Global Witness, also recently called on the EU to review its visa waiver schemes with those Caribbean countries operating CBI programmes.

In light of this scrutiny, other CARICOM Member States which do not operate programmes have feared that they themselves may suffer reputational and security risks due to the CBI programmes of other Member States. The CARICOM Secretariat has been examining the issue of CBI programmes operated by member states, but there appears to be no public information on what have been the outcomes of this examination thus far.

The other risk comes from increased global competition. The list of countries offering some kind of CBI or RBI programme has grown exponentially in the years since the global economic and financial crisis. For instance, this year Moldova started its own CBI. Moreover, while St. Vincent & the Grenadines is currently the only independent member of the Organisation of Eastern Caribbean States (OECS) to not offer a CBI programme due to the current government’s philosophical opposition to these programmes, the leader of St. Vincent & the Grenadines’ opposition party recently reaffirmed his support for launching a CBI programme there. What this shows is that countries around the world still see the economic potential of these programmes and it also means that competition is increasing.

Caribbean countries’ CBI programmes have ranked high on the Professional Wealth Management (PWM) Index. Regrettably, the increased competition between Caribbean CBI programmes both inter se and with other CBI programmes internationally has led to an apparent ‘race to the bottom’ among Caribbean CBI programmes in the form of price competition.

The OECD Challenge to CBI/RBI programmes

In early 2018, the OECD announced that it was examining CBI/RBI programmes as part of its Common Reporting Standard (CRS) loophole strategy and requested public input into the misuse of these programmes and effective ways of preventing abuse. The CRS is an information standard approved by the OECD Council in 2014 for the automatic exchange of tax information among tax authorities of countries which are signatories. CRS jurisdictions are required to obtain certain financial account information of their tax residents from their financial institutions and automatically share this information with other CRS jurisdictions on an annual basis. Most Caribbean IFCs are early adopters of the CRS.

While noting that CBI/RBI programmes may have legitimate uses, the OECD stated that CBI/RBI programmes are a risk to the CRS because they can be misused by persons to hide their assets offshore and because the documentation (such as ID cards) obtained through these programmes could be used to misrepresent an individual’s jurisdiction of tax residence. This, the OECD noted, could occur when persons fail to report all the jurisdictions in which they are resident for tax purposes.

In April 2018, the OECD published a compilation of the responses it had received, which also included responses by countries in the Caribbean offering CBI programmes. In its list of ‘high risk CBI/RBI” programmes to the integrity of the CRS” published in October 2018,  the OECD focused on those CBI/RBI programmes which gave access to a lower personal income tax rate on offshore financial assets and those which did not require an individual to spend a significant amount of time in the host jurisdiction.

It should be noted that reporting for CRS purposes is based on tax residence and that just because an investor has obtained citizenship of a country under a CBI programme, does not mean that he or she is automatically deemed to be a tax resident of the country. For example, a person may obtain St Lucian citizenship under St. Lucia’s CBI programme pursuant to the Citizenship by Investment Act and regulations, but under the St. Lucia Income Tax Act, he or she is only deemed to be resident for income tax purposes in St. Lucia for a given income year if he/she has been physically present there for not less than 183 days in that income year.

While the OECD has clarified that the list of ‘high risk CBI/RBI programmes’ was not a blacklist, there is concern about what reputational impact this list may have on the countries whose programmes were named. Financial institutions have been told by the OECD to bear in mind its analysis of high-risk CBI/RBI schemes when performing their CRS due diligence, which potentially brings increased scrutiny for Caribbean countries, which are already suffering the loss of correspondent banking relationships due to de-risking practices by risk-averse global banks.

Have CBI programmes run their course?

Given the growing array of challenges outlined, have CBI programmes run their course? While I do not think Caribbean CBI programmes have run their course, I think that there needs to be strong consideration by each of the countries concerned, and their citizens, of whether the economic benefits justify the increasing reputational and security risks, and to consider what further changes could be made to make their programmes more sustainable.

Caribbean countries are well aware that it is not in their interest for their CBI/RBI programmes to be perceived as loopholes for tax evasion or other criminal activity. It is, therefore, in their interest to work with the OECD to address the concerns raised about the potential for misuse of their CBI programmes.

According to the communique released at the 66th Meeting of the Organisation of Eastern Caribbean States (OECS) Authority, that organisation’s highest body, it was noted  as follows:

“The Heads engaged in extensive discussions on the matter, noting the unreasonableness of the OECD position, and resolved to undertake comprehensive reviews of the respective CBI and RBI Programmes to ensure that areas where they may be limitations are identified and strengthened.”

This is a promising development and it is hoped that these reviews will be conducted in a timely manner, that the results will be made public in the spirit of transparency and that the recommendations made will be implemented.

To their credit, there already exists cooperation among the Citizenship by Investment Units or equivalents of the Caribbean CIP countries through the Association of the Citizenship By Investment (CIPA). They have also been receiving the assistance of  the Joint Regional Control Centre arm of the CARICOM Implementation Agency for Crime and Security (IMPACS).

There is the real risk that countries may become overly dependent on CBI programme revenues for their fiscal and macroeconomic stability during boom times, leaving them vulnerable during periods of leaner revenue inflows. Since 2010, revenues from its programme have buoyed St. Kitts & Nevis’ economy, but the IMF in its Article IV Report of 2017 warned that “ the recent slowdown in CBI-related inflows and the ending of the five-year holding period for CBI properties call for close monitoring of the implications for the financial sector through the real estate market and banks’ exposure to real-estate-related activities.”

On a broader note, a comprehensive study of the economic contribution these CBI programmes have made and are making to the economies and societies of these Caribbean countries is recommended. This would provide empirical evidence of whether the macroeconomic benefits outweigh the reputational and national security risks. In this regard, the recent EU study on its own programmes could provide a good model for CARICOM or the OECS in terms of analysing the state of play and the impacts of Caribbean countries’ CBI/RBI programmes and making recommendations for mitigating the risks identified.

Such a study will require sound data. This brings me to another problem with these programmes – the transparency deficit, which was also highlighted by Transparency International and Global Witness in their report. Obtaining data on these programmes remains regrettably difficult due to the unfortunate reluctance by some authorities to share data publicly, even with researchers. Though some data on the macroeconomic contribution of these programmes may be obtained from those countries’ IMF Article IV reports, other data, such as employment generated by these programmes, are not.

Making data on these programmes publicly available will not only negate the perceived opacity of these programmes’ operation, but facilitate evidence-based planning, monitoring and evaluation of these programmes.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

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Golding Commission concerned about Caribbean Citizenship by Investment Programmes

Alicia Nicholls

The CARICOM Review Commission, whose report was tabled in the Jamaica Parliament last week, has expressed concern about the administration of Citizenship by Investment programmes (CIPs) currently operated by five CARICOM Member States, and has called for the establishment of a CARICOM framework agreement on their operation.

CIPs were among the many diverse issues examined by the Commission whose mandate was to review Jamaica’s relations within CARICOM and CARIFORUM. CIPs are currently operated by five CARICOM Member States: namely, Antigua & Barbuda,  Dominica, Grenada, St. Kitts & Nevis and St. Lucia, and have been the subject of much scrutiny regionally and internationally.

Though recognising the economic importance of CIPs to these countries, the Commission, chaired by former Jamaica Prime Minister Bruce Golding, raised several issues with their current administration:

  • The programmes are driven more by short-term revenue benefits than long term investment gains
  • The lack of a minimum period of residency
  • The lack of a regional agreement on the operation of such programmes, especially given the national security and other implications for non-CIP operating CARICOM territories
  • While referrals to the CARICOM Implementing Agency for Crime and Security (IMPACS) are made, the State is not obligated to accept the advice of IMPACS
  • Concerns raised by third States (namely the US and Canada) about Caribbean CIPs and the fact that two CIP-operating Member States (St. Kitts & Nevis and Antigua & Barbuda) have already lost visa-free access to Canada due to these concerns
  • Cases of persons granted citizenship under these programmes who were later found to be less than savoury characters
  • The risks to the Community in light of ever more sophisticated trans-national crime
  • The alleged issuance of diplomatic passports to some new citizens
  • Varying due diligence procedures used by CIP-operating Member States

As such, one of the thirty-three recommendations made by the Commission in its Report is for the establishment of “an agreed framework with appropriate protocols and safeguards regarding the terms, conditions, qualifications and restrictions in relation to the operation of Citizenship by Investment programmes including prior consultations or sharing of information with other Member States”.

The full report of the Golding Commission may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

 

How can Caribbean CIPs survive increased global and regional competition and scrutiny?

Alicia Nicholls

Citizenship by investment programmes (CIPs) operated by five Caribbean small island developing States have been receiving increased international competition and scrutiny, with some arguing that a veritable “race to the bottom” has begun. Indeed, these programmes face increased competition not just inter se, but globally as more countries worldwide are turning to citizenship or residency programmes for attracting much needed investment.

The CIP-operating countries in the Caribbean are currently St. Kitts & Nevis (the world’s longest running), Dominica, Grenada, Antigua & Barbuda and most recently, St. Lucia. As all five of these countries are part of the CARICOM Single Market and Economy (CSME), investors who obtain citizenship under one of these countries’ CIPs are also entitled to the freedom of movement privileges under the CSME, which has caused legitimate national security concern in some non-CIP operating CARICOM countries.

  1. Eliminate price as a factor

Although Caribbean CIPs are already the most affordable in the world, there are irrefutable signs of increased price competition among Caribbean CIPs.  In January of this year, St. Lucia amended its regulations to, inter alia, reduce the minimum qualifying investment to US$ 100,000 to the National Economic Fund. In the wake of the passage of Hurricane Irma, St. Kitts & Nevis added a lower cost option (US$150,000 plus applicable fees) in the form of the temporary hurricane relief investment option (until March 2018), whereby the invested funds would be earmarked for assisting hurricane-affected areas. This latter change was sharply criticised. Even more recently, Antigua & Barbuda cut the investment threshold for the National Development Fund by 50%.

Any semblance of price competition among Caribbean CIPs is problematic for several reasons.  Although the majority of persons seeking alternative citizenship do so for the ease of business and travel a good quality passport brings, lowering the minimum investment threshold makes Caribbean CIPs more accessible to those persons who may seek alternative citizenship for nefarious purposes. Even if the due diligence processes remain unchanged, a perceived price war could cause third States to either reimpose visa restrictions or apply more scrutiny to passport holders of those States  (or of other Caribbean States!), which diminishes the value and attractiveness of those CIP-countries’ passports. It lessens the perceived value of the citizenship offered by those countries which may actually be a turn-off to some High Net Worth Individuals who may be more attracted to exclusivity.

What this speaks to is the need for CIP-operating Caribbean countries to eliminate price as a factor of competition by harmonising their minimum investment threshold, a point I made in a paper I delivered on this topic earlier this year.

2. Increase due diligence cooperation

Cooperation among CIP-operating Caribbean countries should also extend to cooperation on issues of due diligence to ensure that an applicant who fails one country’s due diligence requirements is not accepted under another’s. Based on my research, it appears that there is some due diligence cooperation already occurring, but more can be done. Additional options could be to harmonise due diligence requirements and to formulate a harmonised list of excluded countries instead of national lists as currently obtains in some CIP-operating Caribbean countries.  This would also address some of the national security concerns of non-CIP operating Caribbean countries, and third States.

3. Improve transparency

Lack of transparency remains a major problem plaguing the perception of Caribbean CIPs. Antigua & Barbuda’s legislation makes it mandatory for a 6-month report to be published and this information is found online. However, generally speaking, there is little information made available about Caribbean CIPs’ operation, except for the economic data found in the IMF’s Article IV consultation reports. With few exceptions, officials are often very reluctant to share data on these programmes’ operation, whether out of fear of competition or negative publicity.

Failure to share information only adds to the shroud of secrecy plaguing the programmes and it also makes it difficult to analyse the socio-economic impacts of these programmes.

It would be useful if CIP-operating Member States would use the framework for information sharing as mentioned in the Strategic Plan for the Caribbean Community Plan 2015-2019 to share data on the operation of their programmes for transparency purposes, including their approval and disapproval rates.

4. Compete on quality

Competition among Caribbean CIPs should be on quality of service and product without compromising standards. Caribbean countries already have inherent natural advantages which are pull factors for HWNIs, such as their natural beauty, pleasant climates, stable democratic societies and quality of life. But these alone are not enough. What the latest World Bank Doing Business Report 2018 shows is that there are several indicators on which Caribbean countries, including CIP-operating countries, can improve their attractiveness as investment destinations by improving the ease of doing business. Jamaica, which does not offer a CIP, is a good example of a Caribbean country which has been making sound reforms in the quest for  ‘best in class’ status as an investment destination.

5. Good governance

Good governance is key to the long-term sustainability of Caribbean CIPs. This includes ensuring that due diligence standards are robust, as well as that transparency and efficiency remain paramount to the programmes’ administration. It also entails keeping the programmes free of political interference.

6. Residency Criterion?

Currently, all five Caribbean CIPs are direct citizenship programmes which means that there is no requirement on the investor to reside in the jurisdiction for a fixed period of time before citizenship is granted. The lack of a residence requirement is one of the unique selling points of Caribbean programmes, but it is also one of the reasons why some third States are increasingly critical of these programmes.

The addition of  a short residency requirement, similar to Malta’s 12-month requirement, could be a possible option for Caribbean CIPs as it would remove some of the transactional nature to the process.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

BREXIT fuelling British demand for alternative citizenship?

Alicia Nicholls

Nearly two weeks after the British people by a narrow margin voted in favour of the United Kingdom (UK) leaving the 28-member European Union (EU), it seems that the historic BREXIT vote may be having yet another impact.  Although the UK has not yet notified its intention to leave the EU under Article 50 of the Treaty of Lisbon, various news reports have reported an increase in enquiries and applications by Britons for alternative EU citizenship.

Russian media house RT reports “an explosion” of Belgian citizenship requests from British expatriates living in that European country. Bear in mind that Brussels, as one of the “three capitals of the EU”, is home to a large expatriate community, including bureaucrats and consultants working in EU organs and EU-related organisations. According to Sveriges Radio (Radio Sweden), in the immediate days following BREXIT, over 100 Britons applied for Swedish citizenship compared to 440 applications last year.

There is a good reason why some Britons are seeking to ensure that they keep an EU passport neatly tucked away for a rainy day. Article 20(1) of the Treaty on the Functioning of the European Union (TFEU) confers EU citizenship on every citizen of an EU country.  EU citizenship is additional to and does not replace citizenship of the member state. Currently, British nationals, as EU nationals, have the same rights to “move and reside freely within the territory of the Member States” per Article 20(2)(a) of the TFEU as the nationals of any other EU state.

There are possible economic reasons as well. The Office for National Statistics reports that in June 2016, the UK’s unemployment rate was just 5% and the number of unemployed fell during the first few months of the year. Despite this, unemployment could rise should the uncertainty from BREXIT lead to a slowdown in the UK’s growth and an exodus of businesses from the UK as some predict. An EU passport would give those Britons the right to look for work in the remaining EU countries should this occur.

While a contentious issue and believed to be one of the driving factors which influenced the “leave” vote, freedom of movement within the EU single market has benefited many young Britons who currently work and live in other EU member states, as well as British investors who have established businesses in other EU countries. For the reported 1.3 million UK nationals who currently live and work freely in other EU countries, this may change when the UK eventually leaves the EU should freedom of movement concessions not be part of the negotiated agreement. German Vice-Chancellor Sigmar Gabriel has been quoted directly in this article as suggesting that young Britons who live in Germany, France and Italy should be offered EU citizenship.

Dual Nationality

According to this report in the Irish Newspaper, The Journal, there has been an 80% increase in applications for Irish birth certificates since the referendum, as well as an increase in enquiries and applications for Irish passports at UK post offices. Under Irish law, a person with at least one parent who was an Irish citizen at the time of the person’s birth is entitled to Irish citizenship by descent. Those Britons who qualify for dual citizenship of another EU country, whether due to descent or marriage, are more likely to file applications for citizenship now that their rights to work and live in remaining EU countries are uncertain.

Citizenship by Investment

Current drivers of demand for citizenship under CBI programmes include the desire of high net worth individuals, particularly in emerging economies, for passports with greater mobility or to flee instability in their home countries, as well as nationality-based taxation and the reporting requirements the Foreign Account Tax Compliance Act (FATCA) in the case of Americans. However, it seems that there may be greater demand for EU citizenship by investment programmes like Malta’s and Cyprus’ in the wake of BREXIT. Golden Visas notes that “[their] website has seen a surge in enquiries of over 40%”. This is not unexpected as any person who is willing and able to make a qualifying investment (plus meeting the residency requirement) in one of these programmes is able to acquire an EU passport/nationality without much fuss.

Strength of UK passport

BREXIT may not only be fuelling demand by Britons for alternative EU citizenship but may impact on the strength of the UK passport. The president of one of the top global firms assisting clients in obtaining alternative citizenship has posited in this CNN Money article that BREXIT may reduce the power of the British passport which currently ranks among the top most powerful passports in the world.

As this very useful BBC article explains, there are five main models which could be the basis for the negotiated agreement between the EU and the UK. Only two of which I will briefly discuss as these involve freedom of movement. Like non-EU members Norway, Liechtenstein and Iceland, the UK could become a member of the European Free Trade Area (EFTA) and still be a part of the EU’s internal market via the European Economic Area (EEA) which provides for free movement of goods, services, people and capital. Alternatively, it could follow the model of Switzerland, also a member of the EFTA, but is not a part of the EEA. Its access to the EU single market is framed by several bilateral agreements. However, it is unclear which or whether any of these models will frame future EU-UK relations.

In a time of uncertainty like this where it is unknown what rights UK nationals will have in the EU once the UK and EU have negotiated the UK’s withdrawal, it seems that applying for second EU citizenship, whether through descent, naturalisation or by investment, is a source of comfort or an insurance policy for Britons should the worst happen .Nonetheless, for those many Britons who are currently living and earning a living in other EU countries, and do not qualify for alternative citizenship under any of these avenues, BREXIT brings much uncertainty and angst.

It is hoped that the negotiated outcome will permit British nationals to still enjoy some of the same rights to work and live in EU countries as they currently do. It should be noted though that the remaining 27 EU countries are unlikely not to demand reciprocity on the part of the UK in regards to any such freedom of movement concessions, which is quite ironic given that immigration concerns were part of the reason many Britons voted to leave the EU in the first place!

Turning to the Caribbean, it will be interesting to see what impact, if any, this development may have on the citizenship by investment programmes being offered by some Caribbean countries.  Will BREXIT lead to greater demand for EU based programmes like Malta’s and Cyprus at the expense of Caribbean programmes which (due to visa waivers) only give access to the Schengen area but not the right to live and work in the EU? Very little data is available on these programmes and their client bases but given that it would appear from reports that wealthy Chinese, Russians and Middle Easterners are among the main investors in Caribbean CBI programmes, it is unlikely that they will receive any major fallout from BREXIT. However, only time will tell. Suffice it to say, these are interesting times.

 Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Barbados passport tops Caribbean passports in ease of visa-free travel

Alicia Nicholls

Barbados has the best passport among Caribbean countries. This is according to Henley & Partners’ recently published Visa Restrictions Index 2016 in which Barbados has topped Caribbean countries in the ease of which its citizens/passport holders can cross international borders.

Barbadian citizenship/passport ranked 26 out of the 199 nationalities (passports) evaluated with its passport holders enjoying visa-free access to 141 countries. Last year Barbados ranked 24 on the Index with visa-free access to 138 countries.

Henley & Partners is the global leader in residence and citizenship planning and produces its Visa Restriction Index in cooperation with the International Air Transport Association (IATA). The index, which it has produced for the last ten years, ranks countries’ citizenship/passport according to the total number of other countries which they can access visa-free.

Besides Barbados, the other Caribbean countries whose citizenship/passports ranked in the top 50 are the Bahamas (27), Antigua & Barbuda (30), St. Kitts & Nevis (32), Trinidad & Tobago (34), St. Lucia and St. Vincent & the Grenadines tied (37), Grenada (39) and Dominica (41). Some of these tied in ranking with other countries.

Some other Caribbean countries’ rankings are as follows: Belize (55), Guyana (57), Jamaica (61), Suriname (64), Cuba (78), the Dominican Republic (83). The lowest ranked among Caribbean passports was Haiti (89) with a score of 48 countries to which visa-free travel is granted to Haitian citizens/passport holders.

Internationally, Germany topped the index again this year with a score of 177 countries to which visa-free travel is granted to German citizens/passport holders, while the worst was Afghanistan which ranked 109 with its citizens enjoying visa-free travel to only 25 countries.

For further information and access to the full Index 2016, please visit Henley & Partners‘s website.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Economic Citizenship Programmes in the Eastern Caribbean: A Brief Look

Alicia Nicholls

In a world of eroded preferences for traditional Caribbean exports, the small island states of the Eastern Caribbean have had to find non-traditional ways to bolster their small open economies. There is growing global demand for alternative and second citizenship by mobile High Net Worth Individuals (HNWIs), a phenomenon on which an increasing number of states have sought to capitalise. At the Global Citizen Forum 2015 in Monaco last week, Prime Minister of St. Lucia, the Hon. Dr. Kenny Anthony announced his country’s intention to become the latest Caribbean state to offer economic citizenship. St. Lucia will join four other Caribbean countries: St. Kitts & Nevis, Antigua & Barbuda, Dominica and Grenada which operate direct citizenship by investment programmes. This article explores the current programmes in the Eastern Caribbean and whether the offering of economic citizenship is worth the risks involved.

The concept of citizenship, that is, the status of holding the nationality of a State, is imbued with a whole package of legal, political and other rights and duties. All states of the English speaking Caribbean have citizenship on a jus soli basis, that is, the right to citizenship by virtue of being born in the territory, as well as citizenship through descent and naturalisation. Those states which offer economic citizenship stretch the notion of citizenship to give qualifying investors the right to full legal citizenship and the right to hold a passport for themselves and their families through making a qualifying investment into the local economy.

Many of these mobile HNWIs are from China, the Middle East and Russia, seeking economic and political security, a more favourable tax climate, and the benefits of hassle free travel a good second passport could bring. According to The Wealth Report 2015, “it is estimated that 76,200 Chinese millionaires emigrated or acquired alternative citizenship over the 10 years to 2013”. Additionally, the US’ system of nationality based taxation and the onerous reporting requirements under FATCA have caused many Americans living abroad to renounce their American citizenship in record numbers (1,335 in the first quarter of 2015 according to this article).

Economic citizenship and residency programmes are not unique to the Caribbean. Several countries such as Malta and Cyprus operate direct Citizenship by Investment programmes. Some countries offer Immigrant Investor Programmes which use the prospect of citizenship or permanent residence to attract highly skilled HNWIs. The US’ EB-5 visa is a prime example. Similar programmes are also offered by the United Kingdom, Australia and New Zealand. Outside of this, there is a whole wealth and tax planning industry which has built up around advising HNW clients and their families on how and where they can get the best passport for their buck.

As countries known for their high standards of living, democratic principles, political stability, respect for the rule of law and healthy reputations internationally, it is little wonder several Eastern Caribbean countries have sought to leverage these pull factors and seek to get their share out of the second passport pie. The expected benefits to the host economy include foreign direct investment through purchasing real estate, funding for infrastructure development and the other economic benefits to be derived from HNWIs and their families spending in the economy.

The investor must meet the application requirements and go through stringent application procedures and invest in one of the options available which differs by country. In return, investors which take advantage of economic citizenship offered by one of those Eastern Caribbean states gets visa free travel to over 100 countries, a second passport, no requirement for residency, as well as second citizenship for themselves and their spouse and dependents. They also can take advantage of the tax benefits offered by a low tax jurisdiction, including no capital gains, wealth or inheritance taxes.

Below is a brief description of each programme:

St Kitts & Nevis – It is the oldest continuously operating citizenship by investment programme and has been in existence since 1984. Two options for investment: (1) making a non-refundable donation to the Sugar Industry Diversification Programme of a minimum of US$250,000 plus processing fees or (2) by investing in an approved real estate project worth at least US$400,000 plus registration and other costs.  While the investment in real estate is recoverable, the investor must hold the property for a minimum of 5 years. The next buyer also qualifies for citizenship. For further info: http://stkitts-citizenship.com/

Antigua & Barbuda – Three methods of investment: (1) Investment of at least US$400,000 in  an approved real estate project to be held for a period of no less than five years, (2) contribution of at least US$200,000 in the National Development Fund, (3) An investment of a minimum of US$1,500,000 directly into an eligible business as a sole investor or a joint investment involving at least 2 persons in an eligible business totalling at least US$5,000,000 and each of those persons individually invests at least US$400,000. For further info: http://cip.gov.ag/citizenship/

Dominica – Dominica’s programme requires the smallest minimum investment. Citizenship can be obtained through investment either in the Government Fund or the Real Estate Option. According to the website of the CBIU, the generated funds are utilised for public and private sector projects where a need is identified. To qualify for citizenship under the Government fund there are four investment categories with different contribution amounts, based on the number of dependents included in the application. For a single applicant, there is a non-refundable contribution of US$100,000 required. The contribution required increases where a spouse and dependents are involved. To qualify for citizenship of Dominica under the Real Estate Option under the Citizenship by Investment Program, an applicant must purchase authorized real estate to the minimum value of US$200,000 plus government fees which dependent on whether a spouse is included and number of dependents. For further info: http://cbiu.gov.dm/

Grenada – After a thirteen year hiatus, Grenada restarted its Citizenship by Investment programme in 2014. Application is by invitation only. Citizenship can be obtained by investment of a minimum of US$ 350,000 in an Approved Real Estate project plus fees and costs. The investment is subject to a minimum holding period of four (4) years. The second option is a non-refundable donation to the Island Transformation Fund which is not yet open. For further info: http://www.citizenship.gd/ 

St Lucia – St Lucia has indicated its programme will begin from January 2016 and details about the programme are not yet available.  It has stated that they expect significant economic benefits from the programme.

There is little data publicly available on the success of Caribbean CbI programmes. It would be interesting to know the number of applications received and approved on a yearly basis, the countries from which most applicants have come, and what have been the tangible benefits to the host countries. However, the IMF Staff Report  on St Kitts & Nevis noted the citizenship by investment programme in St. Kitts & Nevis, the region’s most successful CbI programme, is bearing fruit. It notes as follows:

Continued rapid inflows under the Citizenship-By Investment (CBI) program have led to a surge in construction activity, and supported a large increase in government and Sugar Industry Diversification Fund (SIDF) investments and spending, including on the People Employment Program (PEP). These factors, together with the ongoing recovery in tourist arrivals fueled rapid GDP growth of about 6 percent in 2013 and 2014.

Entangled in the notion of economic citizenship are a whole set of moral and legal issues. For one, the definition of ‘spouse’ in the legislation of these Caribbean countries still means either of a man or woman who are married to each other. In light of competition from other CbI programmes, will this definition eventually be amended to allow gay HNWIs and their spouses to take advantage of these programmes?

There are also regulatory and national security implications, including concerns about the potential use of second passports to facilitate money laundering, organised crime and terrorist activity. Of course, there are stringent screening methods, including requirements of police certificates of character. After all, all countries prefer to attract investors of good character who are self-sufficient, and willing to make a significant economic investment to the country in which they are seeking citizenship. Under the Antigua & Barbuda programme for example, a person can be deprived of citizenship in several instances e.g: fraud, conviction or failure to spend at least 35 days in Antigua & Barbuda during the period of five calendar years after his registration. There is the potential for attracting ‘undesirables’, even with a rigorous programme.

A few countries worldwide have found that the potential investment inflows were not worth the risk or they could not cope with the volume of applications. Canada cancelled its Immigrant by Investor Programme, while Hong Kong has suspended its CIES programme. Barbados has clearly stated that for policy reasons it will not go the route of economic citizenship. It currently offers the Special Entry and Reside Programme (SERP) for qualifying HNWIs and their spouses/dependants. In order to qualify as an HNWI in Barbados, the investor must have assets of at less than US$ 5 million. In spite of this, Eastern Caribbean CbI programmes not only have to compete amongst themselves but also face increased competition globally from potentially more attractive CbI and residency programmes worldwide.

Moreover, countries which offer economic citizenship programmes do open themselves to reputational risks, especially if other States have doubts about the rigor of their screening procedures. The US Treasury has accused persons obtaining St Kitts & Nevis passports for financial crime  and Canada imposed visa requirements on St. Kitts & Nevis nationals on November 22, 2014. The merits of these actions are debatable. However, these are the kinds of risks which countries operating these programmes face. Moreover, they may result in holders of those passports, including natural born citizens, being blacklisted or subject to more scrutiny by foreign jurisdictions, which may redound to more harm than good for that State and undermine the very programme itself.

In light of the foregoing, any Caribbean state considering a Citizenship by Investment programme must not only consider the possible investment inflows but weigh them carefully against the potential reputational, security and other risks, as well as the sustainability of such a programme.

Disclaimer: This article is NOT intended to provide investment advice and the Author is not accountable to anyone who relies on the information in this article. The information was taken from sources deemed to be accurate and correct at the time of publication. For further information on the respective CbI programmes stated above, please contact the relevant authorities in the respective countries.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, public international law and trade.