(Thursday, 26th July 2018)
by Don Eales
One of the essential elements of any CBI programme is the quality of the individual requesting citizenship and the traceable source of the potential investment funding. Due diligence is applied to establish that the finance is not from an illegal source or from funding organisations that are not fully legal.
America has requested that nations in the Caribbean with citizenship-by-investment programmes must make absolutely sure that each individual application provides the highest level of correct due diligence. Antigua, Barbuda Dominica, St Lucia, St Kitts and Nevis all have schemes which grant passports to individuals in return for investment levels that are specified by each country individually.
The US Embassy in Barbados has issued a statement warning each of the above nations to make sure that they are not granting citizenship to undesirables with links to criminal or terrorist organisations. “The United States strongly believes that all countries have an inherent responsibility to their citizens and the international community to review fully all applicants who seek a nation’s citizenship,” the statement said.
Dr Timothy Harris recently stated that his country’s programme included the best due diligence procedure currently anywhere in the world. This comes after an overhaul of their system in response to a decision by Canada to impose a visa restriction on St Kitts passport holders over concerns about the type of candidates being granted citizenship. The US also specified it’s concerned that the programme was also being used to bypass sanctions on Iran.
“We believe that we have now one of the strongest due diligence mechanisms,” the prime minister said.
The US statement added that it respected the right of any nation to generate revenue using investment immigration, provided the right checks were being made. It added, “The United States does not approve or disapprove individual aspects of citizenship by investment programmes.”
“While the United States government is willing to consult with governments on their citizenship investment programmes, the ultimate decisions to offer and how to operate such a programme, including the issuance of citizenship and related identifying documents, such as passports to applicants, lie with each individual government and not with the United States.”
The US offers its own permanent residency-through-investment programme, the EB-5, which can lead to citizenship in the long term.
The Organisation for Economic Cooperation and Development (OECD) based in Paris, is overseeing the global move towards an automatic disclosing of information known as the Common Reporting Standard (CRS), which the 98 countries below have agreed to.
Signatories of the multilateral competent authority agreement on automatic exchange of financial account information and intended first information exchange. This is the current global status as of 15 January 2018
1. ALBANIA September 2018
2. ANDORRA September 2018
3. ANGUILLA September 2017
4. ANTIGUA AND BARBUDA September 2018.
5. ARGENTINA September 2017
6. ARUBA September 2018
7. AUSTRALIA September 2018
8. AUSTRIA September 2018
9. AZERBAIJAN September 2018
10. BAHAMAS September 2018
11. BAHRAIN September 2018
12. BARBADOS September 2017
13. BELGIUM September 2017
14. BELIZE September 2018
15. BERMUDA September 2017
16. BRAZIL September 2018
17. BRITISH VIRGIN ISLANDS September 2017
18. BULGARIA September 2017
19. CANADA September 2018
20. CAYMAN ISLANDS September 2017
21. CHILE September 2018
22. CHINA (PEOPLE’S REPUBLIC OF) September 2018
23. COLOMBIA September 2017
24. COOK ISLANDS September 2018
25. COSTA RICA September 2018
26. CROATIA September 2017
27. CURAÇAO September 2017
28. CYPRUS September 2017
29. CZECH REPUBLIC September 2017
30. DENMARK September 2017
31. ESTONIA September 2017
32. FAROE ISLANDS September 2017
33. FINLAND September 2017
34. FRANCE September 2017
35. GERMANY September 2017
36. GHANA September 2018
37. GIBRALTAR September 2017
38. GREECE September 2017
39. GREENLAND September 2017
40. GRENADA September 2018
41. GUERNSEY September 2017
42. HUNGARY September 2017
43. ICELAND September 2017
44. INDIA September 2017
45. INDONESIA September 2018
46. IRELAND September 2017
47. ISRAEL September 2018
48. ISLE OF MAN September 2017
49. ITALY September 2017
50. JAPAN September 2018
51. JERSEY September 2017
52. KOREA September 2017
53. KUWAIT September 2018
54. LATVIA September 2017
55. LEBANON September 2018
56. LIECHTENSTEIN September 2017
57. LITHUANIA September 2017
58. LUXEMBOURG September 2017
59. MALAYSIA September 2018
60. MALTA September 2017
61. MARSHALL ISLANDS September 2018
62. MAURITIUS September 2018
63. MEXICO September 2017
64. MONACO September 2018
65. MONTSERRAT September 2017
66. NAURU September 2018
67. NETHERLANDS September 2017
68. NEW ZEALAND September 2018
69. NIGERIA September 2019
70. NIUE September 2017
71. NORWAY September 2017
72. PAKISTAN September 2018
73. PANAMA September 2018
74. POLAND September 2017
75. PORTUGAL September 2017
76. QATAR September 2018
77. ROMANIA September 2017
78. RUSSIAN FEDERATION September 2018
79. SAINT KITTS AND NEVIS September 2018
80. SAINT LUCIA September 2018
81. SAINT VINCENT AND THE GRENADINES September 2018
82. SAMOA September 2018
83. SAN MARINO September 2017
84. SAUDI ARABIA September 2018
85. SEYCHELLES September 2017
86. SINGAPORE September 2018
87. SINT MAARTEN September 2018
88. SLOVAK REPUBLIC September 2017
89. SLOVENIA September 2017
90. SOUTH AFRICA September 2017
91. SPAIN September 2017
92. SWEDEN September 2017
93. SWITZERLAND September 2018
94. TURKEY September 2018
95. TURKS & CAICOS ISLANDS September 2017
96. UNITED ARAB EMIRATES September 2018
97. UNITED KINGDOM September 2017
98. URUGUAY September 2018
These countries share information among themselves and recently published a consultation document on the potential misuse of these citizenship-by-investment schemes as part of what it calls its “CRS loop-hole strategy’. The document details how citizenship-by-investment schemes can potentially be exploited to evade the CRS due diligence procedures; “reminds stakeholders of the importance of correctly applying relevant CRS due diligence procedures in order to help prevent such abuse”; and what measures might be used to ensure that this doesn’t happen, while still permitting such schemes to remain in place.
“Citizenship-by-investment/residence by investment schemes can potentially be exploited to help undermine the CRS due diligence procedures”, the OECD consultation notes.
“This may lead to inaccurate or incomplete reporting under the CRS, in particular when not all jurisdictions are disclosed to the reporting financial institution.
“Such a scenario could arise where an individual does not actually reside in the relevant jurisdiction, but claims to be resident [there] for tax purposes only, and provides his financial institution with supporting documentary evidence (e.g certificate of residence; ID card; passport; utility bill of second house).”
Among the countries that have well-established citizenship-by-investment schemes are Cyprus, Malta, St Kitts and Nevis, the US, UK, Australia, France, Greece, Hungary, Portugal, Spain, Latvia, Antigua and Barbuda and Dominica.
Canada used to have an investor visa programme that saw more than 35,000 investor visas issued, but discontinued it unexpectedly in 2014, after having suspended it two years earlier, amid concerns that it was contributing to inflated house prices in such cities as Vancouver, which was and remains popular with wealthy Chinese investors
The American EB-5 programme recently was extended in its current framework to 23 March at its current US$500,000, but remains the subject of debate in Washington about how – if at all – it should continue, with some lawmakers arguing that the investment amount should increase to US$1.35m.
UK Finance and AFME2 response to the OECD consultation document named “Preventing abuse of residence by investment schemes to circumvent the CRS” published on 19 February 2018 was to welcome its proposals and quoted “We believe that this approach is to the benefit of both policymakers and businesses and helps to avoid any unintended consequences arising from the OECD’s initial proposals”. And “We recognise the importance of increasing transparency in cross-border transactions and promoting compliance with tax obligations. This is demonstrated by the significant investment financial institutions have made to ensure that they comply with the CRS and FATCA”. They also stated that in order to maintain the integrity of the CRS regime, they recognised how important it is to prevent misuse of CBI. If there are particular jurisdictions operating RBI/CBI programmes, and they are not willing to co-operate with the OECD, these jurisdictions could be specifically listed on the OECD’s website. If the jurisdiction operating such scheme has a network of double tax treaties, the operation of treaty “tie breaker clauses” in such cases should be expressly set out.
