Touts Citizenship Due Diligence but no Word on FinCEN Warning
Chief executive officer (CEO) of the St Kitts and Nevis Citizenship by Investment Unit (CIU), Les Khan, gave some insight into the current due diligence process of the citizenship by investment (CBI) programme, implemented after 2015.
“Due diligence is an area that we take really seriously and more than any of the other islands. We have instituted additional steps in ensuring that the individual is of good repute,” he said on last week’s radio and television programme “Working for You.”
However, according to an advisory issued in May 2014 by the US Treasury’s Financial Crimes Enforcement Network (FinCEN), foreign individuals were abusing the St Kitts and Nevis CBI programme to obtain passports for the purpose of engaging in illicit financial activity.
Specifically, FinCEN believes that illicit actors are abusing the St Kitts and Nevis programme to acquire citizenship in order to mask their identity and geographic background for the purpose of evading US or international sanctions or engaging in other financial crime.
For example, FinCEN said that several Iranian nationals designated by the Office of Foreign Assets Control (OFAC) obtained passports issued through the St Kitts and Nevis CBI programme.
In particular, FinCEN advised that US financial institutions should conduct risk-based customer due diligence to mitigate the risk that a customer is disguising his or her identity with an St Kitts and Nevis passport in order to evade sanctions or engage in other financial crime.
This due diligence may include verifying the customer’s identity using a form of government-issued identification other than, or in addition to, the SKN passport, or using non-documentary methods that enable the financial institution to form a reasonable belief that it knows the true identity of the customer, including the customer’s country of origin.
If a financial institution knows, suspects, or has reason to suspect that a transaction conducted or attempted by, at, or through the financial institution involves funds derived from illegal activity, is an attempt to disguise funds derived from illegal activity, is designed to evade regulations promulgated under the Bank Secrecy Act, or lacks a business or apparent lawful purpose, the financial institution may be required to file a suspicious activity report.
In March of this year, US Ambassador Linda Taglialatela said the FinCEN advisory is not likely to go away anytime soon.
“We are working with St Kitts and Nevis to look at how we can work with the Department of Treasury on the FinCEN advisory. I am not sure that the advisory will go away but what we’re hoping is that they will be able to refine it and make it less restrictive,” she said.
The American ambassador acknowledged that the US has concerns about CBI programmes in the region, especially in the area of due diligence.
While Khan highlighted a number of different steps in the due diligence process conducted by the CIU, he made no reference to the ongoing difficulties that may be experienced by holders of St Kitts and Nevis passports in conducted financial transactions in the US as a result of the still extant FinCEN advisory.
Meanwhile, the St Kitts and Nevis CBI programme, which is frequently touted as “platinum standard”, has recently announced a third investment option that offers a 50 percent reduction in the contribution required from new economic citizens.
Addressing widespread criticism relating to the timing of the introduction of this new CBI option, which came just after its regional citizenship competitor Dominica was devastated by Hurricane Maria, Khan admitted that the timing could have been better, but claimed it had been conceptualized prior to the disaster in Dominica.
He nevertheless asserted that that the new Hurricane Relief Fund contribution option is legally sound, acknowledging concerns expressed following claims by the opposition that it is a “buyer beware” situation.
Opposition leader Dr Denzil Douglas claimed that the new citizenship option is “a watered down CBI initiative that has not been ratified by Parliament”.
He said in statement last Wednesday that “it raises legitimate serious questions as to the validity of the citizenship and the passport that will be derived from it”.