Don’t Be The Last To Know: The Importance Of Monitoring

Residency- and citizenship-by-investment (RCBI) programmes have to meet the challenge of not only weeding out unsuitable applicants at the time of application, but also identifying those who could bring disrepute after they go through the application process and receive approval. Meeting this challenge involves employing a multi-pronged approach of enhanced due diligence along with real-time, ongoing monitoring, writes Karen Kelly, Exiger’s Director of Strategy and Development.

The need for thorough, professional, enhanced due diligence on applicants to RCBI programmes is a standard highlighted regularly by industry advocates and programmes themselves. The risks of not implementing a comprehensive due diligence process have become evident in cases where applicants with ties to criminal activity and corruption have been named publicly and programmes were subsequently forced to re-examine their procedures and consider options for revoking citizenship or residency. However, even programmes with otherwise robust due diligence processes can be caught unaware by serious events that impact an approved applicant after an approval is granted.

Applicants can and do experience material changes to their circumstances in the months or years following their approval. External factors, such as sanctions programmes that target new jurisdictions or sectors, would be near impossible for an RCBI programme to predict. Likewise, yet to be announced investigations against applicants or future suspect business dealings present a challenge when due diligence can only reasonably (and realistically) examine what has already transpired or is in progress.

Red Flags

By monitoring subjects through a technology platform for adverse developments in the months and years after initial due diligence, one observes that sometimes smaller red flags can precipitate more serious adverse findings in the future. Such red flags may include pending litigation, judgments, investigations, or regulatory actions against a subject or their businesses. The following examples are relevant to the investment migration industry:

• A retired state official with a high net worth that far exceeds reported income and investments. Media outlets report an investigation into his financial activities has started, but law enforcement cannot confirm or deny such rumours at the time of due diligence. Five months later, the individual is charged with financial crimes and detained.

• A business owner who heads a group of companies had a recent falling out with his companies’ shareholders and left his position as a result of related litigation, which has not yet progressed through the courts. He is later charged with multiple violations of local Anti- Money-Laundering and Anti-Terrorism Financing regulations and is already thought to have fled the jurisdiction.

• Individuals with large personal or business debts due or judgments rendered around the time of application, already residing in a new jurisdiction in anticipation of avoiding payment.

• Individuals whose political exposure and relationships have changed over time as new government officials take office, or as they enter new roles and industries.

RCBI programmes make decisions regarding prospective applicants based on the information available at the time of the application. Holding off on decisions where an applicant is involved in an active legal case that could have a serious impact on the applicant’s reputational, legal, or financial standing can mitigate the risk of pending outcomes. But in cases without black and white findings, programmes assess the risks using the information at hand and make decisions accordingly.

A Proactive Response

Ongoing, real-time monitoring of applicants, after the initial due diligence report has been delivered, is fast becoming a standard tool for an RCBI programme to ensure it is alerted should serious findings come up after an applicant is processed. It is in a position to proactively respond, rather than scrambling to react to media reports and public pressure. Ongoing monitoring also presents a learning opportunity when applied to applicants that were not accepted or are still being considered, as it can validate the programme’s risk assessment framework and identify patterns to look out for in future applications.

Monitoring across an applicant population does not need to be a heavy lift for a programme. Artificial intelligence-powered monitoring can scan thousands of sources in multiple languages in real time, eliminating false positives, and continuously refining an applicant’s risk profile. The right technology can be leveraged to scan for specific types of events and red flags for which a programme wants alerts, such as ties to sanctions or criminal proceedings. RCBI programmes that add technology-enabled monitoring to their toolbox for assessing applicants, and that are transparent about its implementation, have an added deterrent against bad actors. A combined approach of third-party due diligence and ongoing monitoring makes it more difficult for those looking to escape future consequences and strengthens a programme’s reputation for accepting only the highest-calibre individuals.

Author: Karen Kelly, Director of Strategy and Development at EXIGER