CBI a valuable tool for those who see themselves as global citizens

Participants in an industry which offers citizenship for predominantly smaller nations, in exchange for investments in local facilities including tourism and infrastructure, report increasing demand for their services. They put this down to growing wealth and the tendency for high net worth individuals to become more globally minded. 

They also see this acquisition of citizenship, for a price, as a legitimate device to help people from restricted countries travel more freely. A second citizenship or passport can also be a good insurance policy if things turn ugly back home.

Demand, they say, is now spreading to all corners of the globe. 

“Investors from unstable regions will use citizenship by investment (CBI) to shield assets from nationalisation, social unrest or revolutionary risk,” says one senior private banker.

Legal consultancy firms which specialise in providing CBI solutions for many jurisdictions, including CS Global Partners and Henley & Partners, both based in London, say the main reasons their clients need second passports are security, plus broadening opportunities for their families in business, travel and education.

Chinese demand

Due to its massive population and growing economy, China offers one of the most lucrative hunting grounds for CBI scheme providers. Its inhabitants, and those of other regions of growing wealth, are demanding greater mobility and are prepared to pay for citizenships which allows this.

Chinese applicants account for approximately 45 per cent of applications approved by the major Caribbean CBI programmes, according to Christofer Ashby, managing director of L’esterre Holdings Inc, a Grenada-based property developer specialising in CBI projects. 

For Chinese clients, investment migration is often driven by the education of their children, for whom they normally prefer Western, especially US, universities. Grenada’s CBI programme, for instance, offers a multiple E-2 visa treaty with the US, allowing approved applicants to live and work there with the majority of the benefits of a resident, but without the costs or time of obtaining an EB-5 US visa, according to Mr Ashby.

Commentators assert that because there is now such a long waiting list for US and UK residence visas, “spill-over” clientele are directing their applications to CBI schemes from other centres.

Industry specialists report that the majority of CBI applications are for schemes from the likes of Dominica, Grenada and St Kitts and Nevis in the Caribbean, and Cyprus and Malta in the European Union.

St Kitts & Nevis was the first nation to implement a CBI programme, while Dominica’s is hugely important to its economy, helping mitigate the devastating damage wreaked by Tropical Storm Erika in 2015 and Hurricane Maria in 2017.

Well regarded

At Errington Bose Immigration Services in London, St Kitts and Nevis and Antigua and Barbuda are seen as particularly popular for CBI applications, among the firm’s clientele, which has strong Middle Eastern, Russian and Central American contingents.

“For clients with multiple citizenship strategies, these jurisdictions tend to fit their circumstances better than others,” says John Errington, the specialist law firm’s managing director. 

Travel documents issued by other countries which are involved in CBI schemes are not always so well respected, he suggests.

 “There is definitely a hierarchy, in descending order of disdain for countries that sell their citizenships too cheaply. It is not illegal, but it is not the purpose of EU treaties,” warns Mr Errington.

Maltese and Cypriot economic citizenship programmes have been recently criticised by members of the European Parliament, calling for them to be phased out.

Both Henley & Partners and CS Global Partners say any programme deploying enhanced due diligence would not accept applicants that break any rule that could lead to criminal prosecution in their home country in order to provide their CBI investment stake.

Caribbean property developers say that most investors from outside the region buying into real estate through CBI programmes already have legal funds both inside and outside their home jurisdictions.

Critics of CBI schemes often imply that the hubs which provide passports accept migrating tycoons who have broken strict exchange controls in their own countries, in order to expatriate the substantial sums needed to buy real estate or invest in industry.

But this is countered by the law firms. “Most of the ultra-high net worth investment clients that we deal with already changed their domicile years ago and now look to further optimise their current situation with regard to residence and citizenship planning,” says Dr Juerg Steffen, Group CEO at Henley & Partners. “This means they don’t fall under the capital transfer limitations.”

This is confirmed by the CEO of a major global private bank, who says most clients from politically volatile jurisdictions have already made “alternative plans”.

These plans continue to evolve as the geopolitical situation develops. “When visiting Lebanon and Jordan, even Israel, every single conversation in the Middle East is about contingency planning, about what to do if there is an escalation of insecurity or an outright war,” says the well-connected banker. “What is their Plan B, C or D? Syria or Venezuela can happen anywhere, any day.”

Before, most wealthy individuals chose to move to the UK or US, but these destinations may have lost something of their traditional appeal. 

“A lot of Middle Easterners don’t want to come to the US, just as  a lot of Europeans don’t want to come to the UK anymore because of Brexit,” he says. 

“Families are looking at Malta, Portugal and Cyprus in the EU. These are the countries opening their doors with investor visas and offering facilitation of citizenship and investment projects.”

Henley & Partners also talk about a notion of “sovereign equity”, where assets from wealthy individuals are transferred to developing countries through their CBI programmes to help create significant sovereign and societal value.

Through engaging with the global community of high net worth investors, developing nation governments can achieve fiscal independence and address growing imbalances and inequalities inherent to traditional sovereign debt financing, runs this argument. 

And while full disclosure of the use of CBI proceeds is not yet universal, there is often much work which benefits society going on behind the scenes.

L’esterre’s Mr Ashby talks about how Dominica uses CBI proceeds to create “material positive impact”  and a “clear social dividend”.