The due diligence process in residence and citizenship by investment (RCBI) programs has undergone substantial transformation over the past two decades. What began as basic document reviews has evolved into comprehensive multi-stage investigations involving both private firms and government agencies.
David Lesperance of Lesperance & Associates recalls the early days when “some countries did a poor job in carrying out due diligence on applicants,” noting how one Caribbean program’s report listed “Saudi Arabia, Riyadh and Jeddah” as separate countries. Lesperance recalls that his humor about their incompetence was “gone by September 12th of that year [2001].”
Lesperance describes how the UK once relied on outside financial institutions’ due diligence, which he calls “a recipe for disaster as financial institutions at the time were much more ‘forgiving’ regarding the source of wealth, as they were much more focused on getting assets under management.”
When authorities later discovered several problematic individuals had secured residence status, he notes that “critics pointed to the admittance of these scoundrels to kill the Tier 1 visa program,” describing this as “throwing the baby out with the bath water.”
Lesperance observes that governments now understand that “letting in even a single ‘bad apple’ is dangerous as it can result in not only a loss of reputation but also loss of visa-free travel for ALL citizens.”
The Two-Stage Gatekeeping System
Patrick Peters, CEO of ClientReferrals, describes the process through a banking analogy: “Due diligence can be performed by the private industry but can never replace the background checks carried out by a government.”
Peters explains that “migration firms are incentivized to onboard clients, not turn them away, therefore any due diligence procedures [they produce] are inherently biased and should not be relied upon [alone].”
He argues that governments alone command the necessary resources and access, as “private firms do not have the same resources that governments; we do not have access to intelligence agencies, nor do we fully understand each government’s geopolitical and regulatory commitments.”
Peters details his firm’s initial screening process: “Collect and review identity documents, including copies of the passports, National ID cards, and birth certificates; Review of the travel history; Web-based and open-source verifications of the individual and family members through the Refinitiv system, and through other social media and search engines.”
He adds that “our partners around the globe get to know each applicant and their family, and usually see where they live and work with their own eyes.”
Peters claims that “Caribbean CBI due diligence is the most comprehensive of the RCBI industry. It’s not even close.” Government-level investigations include collaboration with law enforcement agencies, interviews with applicants, and comprehensive background checks that specialized due diligence companies perform.
Red Flags and Detection Methods
Lesperance has developed what he terms a “bullshit meter” over 35 years. He identifies “a classic dead giveaway is inquiries from people that claim to be ultra high net worth individuals, yet do not know that KYC and AML screening is a part of all financial dealings.”
However, he emphasizes that “one would be foolish to believe that gut instinct and experience are enough.” He recommends “checking with the referral source” combined with “commercial services like WorldCheck and open source internet searches.” He notes that governments occasionally “turn up something that an advisor did not find.”
Peters explains that governments require documentation showing applicants “have earned their funds from legal commercial activities.”
Navigating the Process Successfully
Lesperance advocates that “clients help themselves by giving FULL disclosure to the advisor” so potential barriers can be identified early, saving them “a great deal of time, money and disappointment.”
Peters strongly recommends that clients “provide a complete and accurate set of documents and information from day 1,” noting that in his experience the “smoothest and fastest applicants spend extra time upfront gathering all the necessary documents, and it usually pays off.”
He notes that “Caribbean governments no longer take due diligence lightly” and that applications “take several months to complete, on average,” due to comprehensive review processes that “require a lot of resources and administrative work.”
He also emphasizes document consistency, explaining that his team cross-checks documents “such as bank statements, employment letters, et,c to ensure the figures match the declared income or assets; otherwise, the CIU is confused and can lead to frustration within the CIU’s processing team.”
Peters observes that “when a completed application is presented nicely to the CIU, the reviewing officer will have an easier time navigating the application and actually want to pick up the file and move it to the next stage.”
Common Client Struggles
Lesperance frequently encounters disappointed applicants whose problems stem from “either a lack of information on alternative solutions and/or the undisclosed tax issues that accompany the status.” He notes that “the higher the net worth, the greater the repercussions.”
He explains that “clients need to have explained to them the sometimes arcane reasons why certain documents are required” and must understand they are “dealing with a different legal framework (e.g., civil vs common law) and local bureaucratic customs.”
Finally, he observes that disappointed applicants “later come to understand that the ‘free advice’ given was worth less than they paid for it and could not replace the design and execution of an integrated strategy.”
