After announcing the launch of its St. Lucia’s investment immigration program in October 2015, St. Lucia has become yet another Caribbean nation offering economic citizenship to wealthy international applicants.
St. Lucia requires applicants to have a minimum net worth of $3 million. Further, they must fulfill one out of the three investment options—$200,000 in a sovereign fund; $300,000 in real estate; or $500,000 in bonds.
Investment immigration programs help nations attract foreign investment offering benefits to investors including like fast-track residence, travel privileges, economic and political stability. These programs are creating a new class of citizens—global citizens who can travel and reside in countries all over the world.
St. Kitts and Nevis was the first nation to offer citizenship through investment. Canada was the first developed nation to grant permanent residence to wealthy investors by introducing its program in 1986. While the once popular Canadian program was replaced last year with a new version that has minimal international interest, other nations soon followed including the USA (1990) and the UK (1994). Today, about 24 nations offer investment immigration programs with seven nations offering direct citizenship through investment.
These programs are a valuable source of foreign investment for small nations with challenging economies. The revenues generated from such programs facilitate infrastructure development, diversification of the economy, and a balanced budget. While there are worries about commoditization of citizenship, the benefits far outweigh the risks for smaller nations.
While a growing number of US citizens are looking at the benefits of a second passport for taxation reasons, these programs are very popular among wealthy individuals residing in the Middle East, China, Russia, and Central Asia. Most applicants seek an improved lifestyle, access to higher education options and employment opportunities for children, political and economic stability, and visa free travel privileges.
However, these programs are always at the risk of being misused by undesirable elements to conceal their criminal background, bypass sanctions, or to carry out money laundering transactions.
In May 2014, the USA’s Department of Treasury warned of misuse of the St. Kitts’ investment immigration program for illegal financial transactions. Later in November that year, Canada revoked its visa-free travel privileges to holders of the SKN passport.
Such risks arise primarily due to lack of transparency, inadequate regulation of expenditure of the program’s revenues, and absence of specific economic and social goals to be achieved by the program. Such issues can put the program at risk of being blacklisted by the international community, which can have significant detrimental effects on the host nation.
In order to avoid such risks, St. Lucia must ensure the program does not serve as a basis for terror financing, tax evasion, laundering of funds, or evasion of international sanctions. The most effective safeguard is a rigorous due diligence process. The government must ensure each and every institution involved in the process must vet applications thoroughly.
This requires a sharing of information between stakeholders along with the political will to avoid viewing the program, or creating the perception it is being used purely as a source of quick revenue generation. Detailed procedures and strict compliance will ensure the program does not fail.
Further, adoption of Code of Ethics, effective Know Your Customer practices, and holistic engagement with regulatory, compliance, policy, and law-enforcement agencies will minimize risk of abuse. Effective coordination with international institutions and governments can help nations like St. Lucia benefit from access to a wider range of tools for due diligence.
Greater transparency can be achieved by clearly specifying how the revenues generated by the program shall be utilized. Appointment of reputed industry partners, outsourcing of non-core activities, a dedicated platform for liaison and communication between government and public data to all stakeholders will help minimize risks.
Allowing the investment immigration program to be misused will lead to negative consequences for the applicant, existing citizens, its government and the industry as a whole. Emphasis on mitigation of security risks and a holistic structure facilitating detailed due diligence will help St. Lucia reap the benefits of a long term economic citizenship program.
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- Economic Citizenship is a Preferred Choice for US Citizens Seeking a Second Passport
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