Reasonable Doubt

Terrorists, Criminals, and Money Launderers Are NOT Using Caribbean CIPs, So What’s the Real Objection?

Reasonable Doubt
With David Lesperance

A contrarian expert on contingency plans for the wealthy delivers uncomfortable truths.

There is no lack of entirely legitimate reasons someone would be interested in obtaining a second citizenship and passport through a Citizenship by Investment Program (CIP). The motives might include seeking a better travel document, executing a US expatriation tax plan, or ensuring mobility should their current passport be canceled by home country authorities because they decided to move abroad or for political reasons. 

Critics including journalists, lobbying entities, and politicians in the EU and UK argue that CBI programs are exploited by individuals involved in criminal activities, money laundering, terrorism, or spying – in other words: “scoundrels”. They state with certainty that these scoundrels will use the acquired citizenship to evade law enforcement, gain access to sensitive information, engage in money laundering, or hide proceeds of crime.

In fact, the UK and the EU have recently used this reasoning to either cancel visa-free travel or to impose new criteria on Caribbean CBI programs to maintain their current visa-free travel privileges. 

However, when these concerns are examined more closely, it is evident that such objections lack any merit. In this article, I counter these widespread criticisms simply by looking at the logical decision-making process of a typical scoundrel.

As IMI readers are well aware, all the Caribbean CBI programs require that applicants undergo thorough background checks and due diligence to ensure the country weeds out any individual with a questionable background. Furthermore, this due diligence process adds several months to the process of acquiring citizenship, resulting in total processing times of 6 months or more. Finally, once all the costs are calculated, Caribbean citizenship by investment generally costs a minimum of US$150,000.

Knowing that a scoundrel will be well aware of these three realities, let us look at the options available to a scoundrel interested in acquiring a second passport. 

  • Option 1) Purchase a Caribbean CBI:
    • Submit to – and pass – detailed due diligence;
    • Pay a minimum of US$150,000; and
    • Wait a minimum of 6 months for a travel document that does not even allow them to live in a first-world country.

  • Option 2) Purchase a fake first-world (e.g., EU, UK, US, UK, Aus/NZ) passport which has been put into that country’s registry:
    • No due diligence;
    • Costs approximately US$7,500;
    • Processing time is approximately ten working days to secure a travel document that has extensive visa-free travel and the ability to live in a first-world country.

  • Option 3) Purchase a stolen first-world passport:
    • No due diligence;
    • Costs approximately $13,500 US;
    • Processing time is approximately ten working days to acquire a travel document that has extensive visa-free travel and the ability to live in a first-world country.

  • Option 4) Purchase fake lineage documentation to support a claim for a real citizenship/passport in a first-world country:
  • No due diligence;
  • Costs approximately US$5,000;
  • Processing time of 12 to 24 months (depending on the country) to acquire a travel document with extensive visa-free travel and the ability to live in a first-world country.

For scoundrels, it is abundantly clear that in no universe is Option 1 a viable consideration. This is especially true for money launderers who then have to use their new passport to go through bank due diligence to open an account. Their Caribbean CBI passport is always going to have their original country of birth, which will result in the financial institution automatically asking for additional documentation to pass their KYC and AML process.

For those who correctly point out that scoundrels have previously sought and received CBIs, I would note the following:

  1. Some jurisdictions did poor due diligence and are being rightly criticised;
  2. Some scoundrels got their CBI passport before there was any criminal charges or red flags that would have turned up in a due diligence check; and finally
  3. Due diligence checks have significantly improved over the last few years.

So if use by scoundrels is not a viable reason for opposition by foreign governments to Caribbean CBI, what is the real motivation? To paraphrase the radio character The Shadow… “Who knows what evil lurks in the hearts of politicians? However, let’s not let this mystery prevent me from trying to speculate.

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Some have postulated that this hostility is a remnant of colonialism. There may be some truth in this, but this argument is somewhat undermined by the opposition the EU has expressed about residence by investment programs in non-colonised EU countries like Portugal, Ireland, and Spain. 

My own theory is that politicians are emotionally repulsed by the idea that another nation would exercise its sovereign right to attract foreign direct investment through a residence or citizenship by investment program. If true, then ultimately there is nothing short of closing their CBI programs that will appease these foreign politicians.

Given this reality, what is the future of Caribbean CBI programs if/when the UK and Schengen impose visa requirements in the future?

It is worth acknowledging that those who acquire Caribbean CBIs for the legitimate reasons outlined previously are – by definition – wealthy enough to easily get UK or Schengen visas. The real question of the future of the programs rests with the locals – AKA voters!

As these locals head to the polls, their vote for Politician A (who supports CBI) or Politician B (who wants to abolish it) will depend on that voter’s perception of whether the benefits of CBI to them (vs. developers or the government) outweigh the hassles they now face in getting UK and/or Schengen visas. 

Understand that with prior visa-free travel, locals could simply book a ticket at the last minute. Now they need to plan their trip well in advance; book an appointment; travel to another island to apply (as there is probably not an embassy/consulate on their small island); and pay a fee to apply. In addition, they will not be able to book their flight or know they can travel until they have the required visa in hand. 

Smart current politicians will do everything in their power to show the value of the direct foreign investment of CBI while at the same time going to extraordinary lengths to try and make the acquisition of UK and Schengen visas as easy as possible. This might include having their government pay to fly in UK and Schengen officials regularly for visa appointments.

My prediction is that some programs will survive. Some programs will get shut down by voters. The survivors will then have less competition.

More from David Lesperance’s Reasonable Doubt column

David Lesperance AuthorSubscriberParticipant

David Lesperance is a global leader of international tax and immigration advisors.

A published author in the field, his personal interest in these areas of law grew from his experience working as Canadian immigration and customs officer while studying law. Since being called to the bar in 1990, he has established his expertise with major law firms, his own law firm and as a private consultant. David has successfully advised scores of high and ultra high net-worth individuals and their families, many of whom continue to seek his counsel today. In addition he has provided pro bono advice to many governments on how to improve their Citizenship by Investment, Residence by Investment or Golden Visa type programs to better meet the needs of his global clients. David is supported by a team of professionals, some of whom have worked with him since the early 1990s.

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