Staying Ahead: Due Diligence in Residence and Citizenship by Investment Programmes


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Create Date July 25, 2018
Last Updated July 25, 2018
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Executive Summary

Citizenship by investment programmes have come under attack for allegedly selling passports in a way that not only devalues citizenship but also threatens international security. Residence programmes have been similarly criticised.

Critics generally allege an absence of due diligence in the screening of would-be citizens and residents and are quick to publicise cases where due diligence may have fallen short and where international security may have been threatened as a result.

This report aims to demonstrate that while there have been occasional lapses, the norm is for due diligence to be taken seriously and for due diligence processes to be established and correctly followed. This report also aims to show that the vast majority of these programmes, which generate investments that lead to the creation of jobs for local citizens, were not only commenced with laudable objectives but are actually managed in a way that minimises threats to international security.

The programmes address the security risk by instituting robust due diligence processes which vet applications for citizenship and residence. The report recognises the temptation faced by political players to overlook applicants’ apparent weaknesses, when they promise to inject large amounts of money into the economy in return for citizenship or residence rights. In most jurisdictions this temptation is addressed by ensuring that the agencies operating the programme are operationally independent from the government, and transparent in their work.

This is however not the case in all jurisdictions. Recommendations made in this report therefore include strengthening the independence and professionalism of the agencies responsible for programmes.

Since one bad experience affects the entire industry, agencies are urged to coordinate effectively with competing agencies with a view to enhancing the reputation of their industry. It is in the collective interest of all migration investment programmes to work together in this way. International organisations such as the Investment Migration Council can be enormously helpful in guiding programmes to focus on due diligence, without which the industry has no future.

Due diligence is however not a responsibility for the state alone. Applicants also conduct their own due diligence on the states they intend to become citizens or residents of. It is therefore in a state’s interest to be transparent, uphold the rule of law, conduct due diligence and maintain a reputation for fairness.

Of course, a state’s responsibility to conduct due diligence on applicants will often come to nothing if it does not create appropriate institutions to manage its investment migration programme, and commit to managing state affairs transparently.