Significance of 'Due- Diligence' for an Economic Citizenship Programme

Caribbean: Due Diligence is one of the most dominant factors in the success or failure of any economic citizenship programme of the country regardless of the demographic position. This factor is currently affecting countries that have or had poor vetting procedures for the applicants. Possessing a multi-layered due diligence system, the Caribbean region plays a role as a guide to all countries across the world which offer economic citizenship programmes to high net-worth individuals. Most of the Caribbean countries having Citizenship by Investment programmes follow stringent due diligence procedures, which are carried out by third-party firms such as UK’s FACT, US’s Thomson Reuters and many other renowned agencies. A fee of about $7,000 extra is charged by the government entirely for due diligence during citizenship application.

In a bid to provide a safe and secure future to people who opt-in for economic citizenship, the Caribbean region has led the way in enshrining multi-tiered due diligence regimes in their programme regulations. These regimes include:

1. Background Checks - A background check is a procedure that allows a person or company to verify that an individual is who they say they are, and it allows them to examine and validate the accuracy of that person's criminal record, education, employment history, and other past activities. Background checks vary in frequency, purpose, and legitimacy depending on the country, industry, and individual. A background check for citizenship application is usually done when someone applies for an economic citizenship. These checks are carried out using a variety of ways, including a detailed database search and personal references by renowned firms. This also includes worldwide checks on anti-money laundering and anti-terrorism financing before giving approval to any applicant. 2. Source of Funds – This is also included under the process of due diligence and refers to the funds that are being used by citizenship applicant for the transaction of application. The sole function of this process is to check “Where did the money for the transaction come from.” 3. Criminal Record – Bona fide criminal records are checked for the applicant if he or she was involved in any criminal activity in the past, in some cases it also includes police verification. 4. Visa Refusal – In case a person’s visa application was rejected by any country that gives visa-free access through Citizenship by Investment will not be allowed to become a citizen of any Caribbean country. The application would be rejected during the vetting process.

All these checks are carried out by specialized firms who carry out independent due diligence on citizenship applications where several agencies are involved, including inter-governmental agencies, Interpol, joint regional communication Centre and partners in other countries such as US, Canada, UK, and others. Waiting procedure also includes the form of band nationality policies – excluding people from countries where accurate due diligence cannot be performed.

There are instances that people who visit European nations apply for asylum or find jobs, but in the case of economic citizenship, this is not an option as a single application costs over $150,000 which any ordinary individual across the world can not afford. Most of the persons who have obtained economic citizenship are either visiting Europe for tourism purposes or shopping – which will eventually help the country’s economy. Furthermore, it is said that vetting procedures carried out by FACT or Thomson Reuters are more stringent than any check carried out by the government itself, whether it is for visa application or citizenship application.

Vanuatu’s economic citizenship

Recently, Vanuatu’s economic citizenship programme was criticized by the European Commission (EU Commission) as it proposed on January 12, 2022 for a suspension of visa-free travel agreement due to its inter-governmental due diligence of applications. All persons, who received passports of Vanuatu since May 2015 will not be allowed visa-free travel to European countries. According to EU executive, the country’s vetting system was deemed risky and lacked sufficient screening during application.

However, the government of Vanuatu still has an opportunity to calm the actions by the EU commission against their economic citizenship procedure by implementing stringent due diligence procedure and conducting rigorous vetting of all applicants who received citizenship since May 2015. FACT Due Diligence

FACT has the expertise and experience to check and verify applicant information both online and in-person, ensuring that all applicants meet the standards for getting a new nationality. The UK based organization employs over 150 police officers from Scotland Yard, FBI and Interpol, who carries out due diligence checks on its clients.

Apart from this, In April 2019, many Caribbean countries were featured in a study released by Smith & Williamson, a financial services firm based in the United Kingdom. The study titled, Citizenship vs Residency: The Taxation Implications of Citizenship by Investment Programs examined the tax consequences of a person participating in the Citizenship by Investment Program.

The detailed research by Smith & Williamson concluded Citizenship by Investment Program has no negative impact on the country or on jurisdictions that had taxed the individual prior to his becoming an economic citizen.

"Smith & Williamson believe that citizenship by investment does not pose a risk of facilitating tax evasion," the researchers added, emphasizing that "Because citizenship alone is insufficient to secure tax residency of a country, and an individual is only liable to tax in countries where they are tax resident, subject to an existing double taxation treaty."

The sound economic citizenship due diligence structure of the Caribbean countries is a model which must be followed by the UK, Greece, Portugal and many others.

Steps of obtaining economic citizenship in the Caribbean

1. Selection of Government approved agent for application of citizenship.

2. Applicants get in touch with their agent and provide required documents.

3. All persons who are included in an application are vetted in a thorough due diligence background checks. (Third Party firms will confirm if the person is clear in due diligence or else the application is rejected.)

4. Payment and certification of citizenship.