The Misnomer of Citizenship by Investment: Why a Name Change is Long Overdue

Richard Hallam
St. George

The concept of obtaining a second citizenship in exchange for a significant investment has been around for decades. However, one of the most prevalent misconceptions in our industry pertains to the acronym CBI (Citizenship by Investment).

It’s time to set the record straight and propose a more accurate name that better reflects the industry today and the marketplace in which we operate.

The primary issue with the term CBI is that it implies investors automatically receive citizenship, which is not the case. In reality, every applicant, specifically those originating from Caribbean jurisdictions, undergoes a rigorous multi-step due diligence process.

This process encompasses pre-submission checks by recipient banks and post-submission reviews by local authorities such as the JRCC (Joint Regional Control Center), which then have access to international government and border security agencies.

Additionally, individual units conduct private due diligence checks based on the information provided by applicants.

Only after these comprehensive checks and an in-person interview can authorities grant or deny the applicant’s citizenship request.

The “investment” issue

The name CBI suggests an investment component. According to Merriam-Webster, investment is “the action or process of investing money for material result or profit.”

While many marketing agents and developers attempt to persuade investors that this is the case, in reality, it is not, as the construction schedules, cash flows, and business models simply do not allow it over the short term.

The majority of hospitality developments in the Caribbean, which serve as the primary investment vehicle, have construction schedules spanning a minimum of three years, contingent upon their size.

It takes at least two years for a hotel to attain a stable profit and loss, necessitating an investment period of approximately six to seven years before a hotel can even hope to recoup its investment for investors. Even then, the return on investment (ROI) will be modest.

The primary issue lies in the erroneous marketing of “Investment with Citizenship,” where agents and practitioners completely disregard the inherent value of the citizenship itself.

It is almost as if citizenship represents a supplementary benefit to the investment rather than the converse.

This misrepresentation leads applicants to believe their investment will yield substantial returns, which rarely occurs for most investors.

It is imperative, then, that we redirect and realign our industry’s focus to the paramount significance, sovereignty, and substantial weight that comes with the bestowal of citizenship.

All parties involved must effectively communicate this to investors, from the government down to the authorized government entities, and most definitely by the approved practitioners and developers who create and market these perceived ‘investment vehicles’.

In case we have all forgotten, citizenship is an investment, and there are intrinsic transformative opportunities that citizenship bestows upon successful applicants.

These include the freedom to travel globally and exploit new business avenues in new territories while elevating personal quality of life.

Furthermore, citizenship grants children greater autonomy than their parents, opening up new possibilities for entire generations to commence anew in politically stable, economically viable, and conflict-free countries like those of the Caribbean.

These reasons should be what draw clients to our programs, not the superficial promises of investment returns, exit strategies, or profit schemes that rarely materialize within the statutory holding period for most investments.

Sure, there can be an upside, and there are many bonafide reputable developers offering opportunities that could result in some level of returns or appreciation, but we cannot continue to oversell the investment while underselling the real reason that clients seek out second citizenship.

My strategy, right or wrong, has always been to advise any client to consider citizenship as an investment.

I tell them to perceive citizenship as an investment in their family’s present and future. Therefore, they should classify anything above this as a bonus, whether an annual vacation entitlement, a reasonable and attainable dividend, or a return.

The knowledge that through their citizenship application, they have assisted a country in its efforts to create a better and more sustainable future for its population—a population of which the investor now becomes part—offers additional value.

In conclusion, while CBI programs can offer significant benefits, the term ” CBI ” represents a misnomer perpetuating unrealistic expectations. By adopting a more accurate name, we can promote greater transparency and understanding within the industry and provide a more realistic framework for individuals considering a second citizenship.

It’s time to retire the term ‘Citizenship by Investment’ and adopt a more accurate and descriptive name, one that better describes the transaction between the applicant and the host country.

It is, in essence, an ‘Application by Contribution‘; whether that contribution takes the form of a donation or investment in development, it allows the client the ability to apply for citizenship.

So, let’s keep it simple, and let’s get back to our ABCs.