Citizenship by Investment: A Year of Transformation in the Caribbean

The year 2023 has ushered in a series of significant alterations in the citizenship by investment (CBI) pathways of several Caribbean nations. Yet, the pressing question remains: has the overhaul genuinely persuaded the skeptics among international partners and critics?

In 2023, the Caribbean investment migration nations witnessed the “Brussels Effect” in full force. Coined by Columbia University Professor Anu Bradford, this term refers to the EU’s unmatched ability to shape global rules and standards, extending far beyond its own geographical boundaries. Companies and nations worldwide find themselves compelled to pay attention to the requirements of one of the world’s most influential markets. Last year, the EU exerted significant pressure and introduced rules with the potential to profoundly affect investment migration in non-EU countries.

Historical Background

Investment migration has been a heated topic in the European Union ever since Malta decided to offer its passport in exchange for investment in the country’s economy back in 2013. While the practice had existed for some time outside the EU, it largely escaped public scrutiny until then. However, Malta’s pathway became a focal point of discussion due to the country’s EU membership, which grants Maltese citizens not only freedom of movement but also the freedom to settle in all other EU countries.

Citizenship by investment (CBI) first emerged in islands in the Caribbean and the Pacific, shortly after they became independent from colonial powers and were looking for new economic growth drivers. In 1984, St. Kitts and Nevis blazed the trail, pioneering the concept just a year after gaining independence to reduce its reliance on the dominant sugar industry. Fast forward to today, and the nation’s CBI pathway contributes more than 20% to its GDP.

In the subsequent years, additional Caribbean nations, including Dominica, Grenada, St. Lucia, and Antigua and Barbuda, followed suit. One of the primary advantages linked to Caribbean investment migration pathways has been the option of visa-free travel to both the EU and the US. However, discomfort has been growing in the EU, the US, and the UK regarding this practice, due to concerns about inadequate due diligence checks, a lack of transparency, and insufficient oversight.

US Intervention

In the US, two Members of Congress took steps to amend the Immigration and Nationality Act with the introduction of the No Travel for Traffickers Act in 2022. This legislation aimed to disqualify any country from participation in the US visa-waiver programme if it allowed individuals to obtain citizenship through investment.

While the initiative was not successful, the US convened a roundtable meeting, urging the five Caribbean CBI states to undergo substantial reforms. Consequently, these Caribbean nations collectively embraced several principles proposed by the US, with some countries having already voluntarily adopted some of these principles prior to the meeting.

The agreed-upon principles included a collective approach to handling denied applications, conducting interviews with applicants, performing additional checks with the country’s Financial Intelligence Units, annual or biennial audits following international standards, requesting law enforcement help to recover revoked passports, as well as suspending processing applications from Russians and Belarusians.

In turn, the US recognised the importance of investment migration for the prosperity and prospects of the countries, and the CBI states requested that the US Government facilitates a similar engagement with the EU and the UK.

UK Visa Restrictions

However, in July 2023, the UK took a decisive stance by imposing stringent visa restrictions on Dominica and Vanuatu, both of which offer citizenship by investment pathways. This measure was rooted in concerns regarding potential misuse and exploitation of these citizenship routes. Prior to this, in 2022, the UK had closed its tier 1 investor route due to significant anti money laundering (AML) apprehensions. Moreover, signaling its firm stance, the UK expressed its intent to broaden visa requirements to include passport holders from St. Lucia, Grenada, Antigua and Barbuda, as well as St. Kitts and Nevis if these countries continued offering citizenship by investment. This proactive step raised expectations of a possible echo in the European Union, potentially leading to the exclusion of these nations from the Schengen Visa waiver programme.

Proposed EU Regulations

In October 2023, the European Commission proposed regulations aimed at simplifying the process for the EU to suspend visa-free travel from countries offering citizenship through investment migration. Currently, the European Union has a “suspension mechanism” in place that allows member states to temporarily halt visa-free travel for a specific country in the event of a sudden and significant rise in irregular migration or security concerns.

However, the Commission, which proposed the regulations to the European Parliament, would like to make the visa suspension mechanism easier to trigger, arguing that citizenship by investment poses a threat to “the public policy or internal security of the member states.” This threat, according to the EU, encompasses issues such as organised crime infiltration, money laundering, tax evasion, and corruption.

St. Kitts and Nevis’ Measures

Meanwhile, in response to the international pressure, some Caribbean countries took action to safeguard investor benefits. In July 2023, St. Kitts and Nevis announced several changes to its pathway. To strengthen due diligence, the country introduced mandatory interviews for all applicants, either conducted virtually or in person, with checks conducted by independent professional firms.

St. Kitts and Nevis’ Prime Minister Dr. Terrence Drew stated that the government has “done some deep introspection,” analysed the programme, spoken to its international partners and decided to show the world that the country’s “citizenship is not accessible to those who do not value our citizenship or understand what St Kitts and Nevis has to offer the world.”

St. Kitts and Nevis also introduced the Sustainable Island State Contribution (SISC) as a new investment option. The SISC replaces the previous Sustainable Growth Fund (SGF) and aims to advance the country in seven key areas, including local food production, green energy, economic diversification, sustainable industries, the creative economy, pandemic recovery, and social protection. Moreover, it raised the minimum investment requirement across all options. For example, contributions for the SISC start at $250,000 for one applicant and increase for spouses and dependents. The minimum investment for the Developer’s Real Estate Option is now $400,000, with a requirement to hold the property for seven years before it can be resold to another potential CBI applicant.

“While we have always been the benchmark of the global investor immigration industry, we understand that in order to remain as one of the most soughtafter economic citizenship programmes in the world, we need to continue to evolve and forge a path for ourselves that is sustainable in the long term,” Michael Martin, who heads St. Kitts and Nevis’ CBI unit, added.

Dominica’s Changes

Elsewhere, Dominica also unveiled a series of comprehensive changes to its CBI pathway. One of the most noteworthy changes is the introduction of mandatory interviews for all CBI applicants over the age of 16. Furthermore, citizens from the Kurdistan region in Iraq, Russia, and Belarus will not qualify for citizenship in Dominica. These regions have been flagged as high risk by international security authorities.

The government also introduced legislation to provide an enhanced due diligence fee for applicants from specific countries. This fee will provide additional resources to thoroughly scrutinise applicants from these regions, ensuring that the pathway maintains the highest standards of security.

Speaking on these developments, Dominica’s Prime Minister Roosevelt Skerrit affirmed the country’s commitment to ensuring the highest standards of due diligence and risk mitigation in the CBI pathway. “We take this matter very seriously and will increase our efforts in showcasing our robust due diligence and risk mitigation efforts on all fronts,” the Prime Minister said.

In addition, the government strengthened its Citizenship by Investment Unit (CBIU). A US-based firm has conducted extensive training in antimoney laundering and counter-terrorism financing for all CBIU staff. The Unit was also restructured under the supervision of a compliance officer, ensuring that all procedures were updated, quality control measures strictly followed, and all IT systems upgraded.

Further, Dominica announced its intention to revoke the citizenship of those who made false declarations or misrepresentations in their applications. This measure particularly targets applicants with previous visa rejections from countries with which Dominica has visa-free treaties. Moreover, Dominica implemented biometric travel documents and updated its naturalisation certificate with enhanced security features. Additionally, it has issued regulations to restrict citizens from changing their names to maintain transparency and security.

Grenada and St. Lucia’s Enhancements

Following their Caribbean counterparts, Grenada also introduced mandatory interviews for all applicants over the age of 17, while St. Lucia also added a new interview and identity verification stage to its CBI application process. Along with the interview, an additional due diligence fee of $500 has been proposed; however, only the primary applicant will be required to attend the interview. The St. Lucian government stated this change aims to “enhance the authentication of critical biodata information and eliminate any information gaps that can potentially exist in the application process.”

What’s Next?

The proposed and implemented changes within the Caribbean mark a positive evolution. However, the pivotal concern remains: will these alterations sufficiently meet the expectations of the international community? Industry experts highlight that the changes already encompass many of the recommendations outlined in a joint report published by the OECD and the Financial Action Task Force (FATF) in November 2023.

Moreover, an important aspect to consider is the enduring appeal of these pathways in light of potential restrictions on visa-free access to other regions. While specialists in investment migration emphasise that visa-free travel is just one component of the larger equation, the loss of this privilege will undoubtedly impact demand and subsequently harm the revenue of Caribbean nations. Hence, raising standards becomes imperative for the Caribbean countries to safeguard the future of their investment migration pathways.