The desperate need for investment for hurricane relief has prompted several Caribbean citizenship-by-investment programs (CIPs) to cut thresholds, raising due diligence concerns.
Hurricanes are an unavoidable part of life in the Caribbean and nations in the region have long been forced to rely on external aid to recover from the havoc wreaked by natural calamities.
In 2017, hurricanes Irma and Maria caused devastation in dozens of islands in the region. This prompted a response from the several CIPs operating in the region. Nations like Antigua & Barbuda, St. Lucia and St. Kitts & Nevis are garnering funds for reconstruction through a temporary reduction in their CIP investment thresholds.
In September 2017, St. Kitts set up a hurricane relief fund that allowed investors to buy the country’s passport for a reduced investment of $150,000, a discount of $100,000. The lower threshold is available until March 30, 2018.
Antigua followed suit and cut its investment requirements from $200,000 to $100,000. Grenada opted for a $50,000 reduction to its threshold to $150,000. Grenada and Dominica, meanwhile, are already offering passports in return for a $100,000 investment, leaving little room for discount.
FDI through CIP constitutes significantly to the GDPs of Caribbean nations, around 25 per cent in St. Kitts and 20 per cent in Antigua. While the leaders of these nations vehemently criticize investment reductions, the option provided a significant boost inflow of FDI at a crucial time.
CIPs, especially in nations that offer visa-free access to a large number of countries, have always been under the scanner for concerns about due diligence.
In February 2014, three Iranians bought St. Kitts citizenship and sought to invest in the USA. This eventually led to the USA issuing an official warning against the country’s CIP and saw Canada move to revoke visa-free travel privileges to St Kitts passport holders.
Lower investment requirements may attract interest from drug cartels, corrupt government servants, tax evaders, and money launderers. Other nations fear that the Caribbean nations may cut corners with due diligence in order to draw more funds towards hurricane relief.
In June 2017, Canada also revoked visa-free travel privileges to citizens of Antigua, which was a big blow for the nation’s CIP since investors often look for access to developed countries, including the EU region, when comparing programs and options.
CIP Nations Committed to Due Diligence
Nations offering such programs are quick to point out that minimum investment requirements are not linked to quality of due diligence. Due diligence fees charged by the Caribbean nations remain unchanged.
The nations also say stringent vetting serves as the foundation for CIPs. Granting citizenship to all and sundry without proper background checks just to boost immediate flow of investment may lead to large-scale revocation of visa-free travel privileges, additional security checks, and, in extreme cases, international sanctions.
Finally, nations point to their excellent track record stretching over decades and highlight that no system, however well managed, is ever perfect.
Four of the five Caribbean nations offering CIPs, with Antigua the exception, have no physical presence requirement.
Recent cuts in CIP investment requirements have accentuated fears that short-term need for FDI is being prioritized over the long-term credibility CIPs.
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