Citizenship by investment programs bring, certainly, a significant inflow of cash and capital investment to the countries providing it, but at the same time, it raises a high risk of financial impropriety or money laundering, and criminal activities. This has led countries and regulators to implement effective due diligence processes to ensure that only reputable and honest investors are granted citizenship.
Therefore, applications submitted by investors or high-worth-net individuals require a careful audit to alleviate any security, financial crime, and reputational risk.
Due Diligence in the context of citizenship
Due diligence is a critical step in the citizenship by investment program (CBI) process. It means doing the homework and acquiring the required knowledge before providing applicants citizenship, and entails a thorough investigation of the economic, legal, fiscal, and financial situation of an investor or individual applying for citizenship or residency. Its main objective is to ensure that applicants are a safe addition to any country and have no criminal history to prevent criminal activity such as theft, money laundering, and embezzlement. Host countries need to fully understand to whom they are bestowing citizenship. Caribbean nations that offer CBI, have developed an in-depth due diligence process to better understand individuals or investors and their dependents who are applying for alternative citizenship.
Basic due diligence requirements
The due diligence process is the longest part of any residency or citizenship by investment program. It takes months and several parties to guarantee that all aspects of an applicant\’s background are covered. The basic documents and forms required for this process include the identifying documents of the applicant to check if they are not fraudulent, as well as the bank account numbers and statements to determine if an applicant has enough money to afford citizenship by investment programs along with the whole future costs. In addition, business conduct and reputation history are examined, and an in-depth search is made for hidden liabilities. Countries also investigate education credentials, employment records, licenses, certificates and awards, personal references, and criminal history to check whether the applicants threaten the country’s security. This may comprise a comprehensive search through various databases and collecting on-the-ground intelligence from local and foreign entities such as Interpol and the FBI.
Why due diligence is vital?
For citizenship or residency by investment program to survive, a robust, multi-layered, and high level of due diligence is required. This process combines internal government checks with research by specialist third-party firms and assessments by regional and international bodies. Properly executed due diligence protects not only the nation and its population but also the reputations of the program and its international partners. If governments fail to take the due diligence processes seriously, it could cause reputational damage to the host country, which could result in a premature end of its citizenship program. Introducing new people into the community is a significant responsibility, and the government must ensure that the newcomers are safe and responsible. All the successful CBI programs know how important a role due diligence plays in maintaining the reputation and popularity of their programs.
Typical prospective applicants for CBI programs are hard-working entrepreneurs looking for safety, security, and a safe haven for their families, along with opportunities to develop their business interests. Therefore, there are very few instances of fraud or forgery of documents. However, if an applicant was a criminal looking to avoid prosecution in a country, obtaining a second citizenship is not the easiest route. These applicants are clearly detected because of the system in place that allows third-party agents to cross-reference multiple databases and physical records. This procedure eliminates the possibility of adding offenders to the community while also ensuring the safety and security of the country and its new residents and citizens.
Due diligence scores
According to the CBI Index 2022, Dominica, Grenada, Malta, and St Kitts and Nevis retain perfect scores for the Due diligence Pillar, due to their stringent and comprehensive requirements. These countries require the provision of either fingerprints or a biometric passport and have robust external due diligence procedures. This includes on-the-ground checks and assistance from international law enforcement agencies, police certificates from the country of residence and citizenship, enhanced due diligence on applicants of certain nationalities, and comprehensive information on an applicant’s source of funds. St Lucia, Antigua and Barbuda, and Montenegro follow closely with a score of nine.
Based on the fundamentals of due diligence, Citizenship applications that do not raise any “red flags” are granted to individuals who can afford the cost of citizenship. Due diligence fees differ depending on the CBI program, but it starts from $5,000 and can increase depending on the program. To know more about the due diligence process in the citizenship by investment programs, please visit HERE.