Flawed RCBI Due Diligence: An Indictment of Due Diligence, Not of RCBI


Before becoming a private-sector RCBI service provider, I served for three years as CEO of the Malta Residency Visa Agency. Having been on both the applying and approving ends of the investment migration table, I think I am in a position to evaluate both sides of the coin. 

For three consecutive years, I approved hundreds of applications from investors applying for the Maltese Permanent Residency Program from all over the world. I spent weeks and months traveling to countries like China, India, Vietnam, Russia, Turkey, South Africa, and many others to meet people seeking clarifications about applying for permanent residency in Europe.

The demonizing of decent people on the basis of their origins
My face-to-face exchanges with several hundred RCBI-applicant families gave me the kind of insight into who they really are that the politicians who label them money-laundering suspects and corrupt businessmen have never had.

Investor migrants’ motivations for participating in RCBI programs were varied widely: They were families who wanted to provide their children with better opportunities to study abroad and to settle in safer countries. They were looking for cleaner and less polluted environments, wanted to improve their quality of life, and to get better healthcare for their loved ones. They aspired to buy their dream house in a country where real-estate prices were still reasonable. They wanted better employment opportunities or to expand their business elsewhere. They were people just like you and me, except in one, crucial, respect; they happened to be born in geographic circumstances that severely limited their travel and settlement freedoms.

Though they had a hundred different reasons for becoming investor migrants, what almost all of them had in common was their standing as people of good faith and repute. They were the kind of people any country should be happy and proud to welcome.

They are the kind of people the European Commission now wants to prevent from obtaining citizenship and residency permits in the EU. The small fraction of applicants that are undesirable has come to represent, in the Commission’s view, investor migrants in general.

We implement systems that safeguard levels of equity and people’s rights to curtail discrimination with great rigour and passion. But there are elements of society that want to deny people of different nationalities and cultural backgrounds the opportunities to improve their well-being by staying and living in a different country of origin.

RCBI programs contribute directly to the destination country’s economy. These are public funds that come without strings attached; governments need not raise taxes nor go into debt to make them available. The ten biggest RCBI programs alone raised an estimated EUR 10 billion last year. And those were only the direct, quantifiable amounts. It doesn’t count the thousands of jobs they created, in sectors like professional services, sales, real estate, tourism, marketing, tech, financial, and manufacturing. In Malta and many other RCBI jurisdictions, governments made use of the funds generated through such programs to build hospitals, schools, and social housing.

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Can the detractors of RCBI see nothing positive in this?

Yes, there are problems with RCBI due diligence
Though I would happily sing the praises of the overwhelming majority of applicants, there are, without a doubt, a few bad eggs. In recognition of that, our programs have developed sophisticated vetting mechanisms designed to sift these out. These procedures are not perfect, however.

I can certainly affirm that a lack of adequate due diligence systems and effective governance is a real problem in some cases. Approving applicants that don’t deserve to be approved is not right. No excuse can justify the approval of someone with a shady source of wealth or funds, who was involved in money laundering, terrorism, drug sales, human trafficking, or who is blacklisted, sanctioned, or involved in any other politically nefarious or criminal activity. This is a very sensitive and serious business and no errors should be tolerated. 

All programs must design and implement rigorous due diligence exercises. The recruitment of trustworthy and skilled people able to conduct effective due diligence, people who can smell problems in an application miles away, is vital for this industry’s survival. I still recall, during my tenure at the Malta Residency Visa Agency, checking the findings of each and every background verification report (BVR) conducted on main applicants and dependents to ensure maximum transparency.

Recognizing that some systems of RCBI due diligence are flawed, however, is no indictment of the concept of RCBI as such, in the same way that recognizing that some international banks knowingly engage in money laundering is no indictment of international banking as such. Will the European Commission request a “phase-out” of banking? I think not.

In all such cases, policymakers must weigh the positives against the negatives. The Commission, however, has studiously avoided considering the positives of RCBI and is now aiming to throw the baby out with the bathwater by outlawing such programs altogether.

Should that happen, it would not only be an absurd overreaction to a relatively small problem that could be fixed with tighter regulations; it would also be a grave injustice perpetrated against the overwhelming majority of investor migrants who are guilty of nothing except being born outside the European Union.

Roderick Cutajar AuthorSubscriber
CEO , Immvest
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