International CBI Units Put Extra Focus on Due Diligence Processes Amid Global Risks: CS Global Partners

News Americas, London, May 13, 2022: The Financial Times’ Private Wealth Management (PWM) magazine has hosted a virtual panel discussion on the impact of global risks on countries with Citizenship by Investment (CBI) programmes.

As part of its PWM Perspectives series, the four-part panel discussion shares the views and insights of notable experts from major due diligence investigation agencies including Karen Kelly, director of strategy and development at Exiger; Eddy Leviton, chief operating officer at Fact WorldWide and Heyrick Bond Gunning, chief operating officer at S-RM.

In the last instalment, the panel moderated by Yuri Bender, editor in chief of Professional Wealth Management magazine, discusses how international CBI units are putting extra focus on due diligence processes amid global risks.

Global political risks are unfortunately a reality for many people across the world and investors across a number of jurisdictions are constantly looking for ways to distance themselves from restrictive regimes. This means that suitable safeguards need to be in place to ensure that the verification of applicants from territories deemed to be of higher risk which poses potential difficulties is of the strictest measures.

In response to this, Karen Kelly, director of strategy and development at Exiger says “Any risk needs to be viewed in context – whether its political exposure or jurisdictional risk. Each CBI country has their own risk appetite or threshold.”

“Intelligence agencies are not there to make decisions on behalf of countries as to who should or should not be approved but rather, they provide client countries with the facts and information needed to arm the CBI Units with the details they need to say this person is above or below the risk threshold we have for acceptance. It is important to also keep in mind that CBI Units will also consider the information they get from other sources such as law enforcement agencies.”

In response to Yuri Bender’s question of whether it is necessary to apply a deeper and enhanced due diligence process on high-risk applicants and a lighter version for others, Eddy Leviton, chief operating officer at Fact WorldWide says “We carry out the same stringent levels of investigations and checks for all applicants and dependents. We do not discriminate because when we get an application, we do not know whether that applicant will be high risk or low risk – whether they declare that they are wealthy or if they have managed to scrape enough money to purchase alternative citizenship, we apply the same verification and due diligence process to all applicants. We provide a risk profile to the client to enable them to make the ultimate decision.”

There is never a scenario where a ‘lighter’ version would be applied to an applicant when it comes to due diligence. All applicants undergo the same level of scrutiny, and should an applicant be flagged as high risk, additional due diligence will be applied.

A multi-layered due diligence system is an essential element of any successful CBI programme, as it combines internal government checks with research by specialist third-party due diligence firms and assessments by regional and international bodies. The rigour put around due diligence ensures that individuals of only the highest integrity are successful.

The Caribbean has been under immense pressure over the last few years – with deadly hurricanes increasing in number and tourism decreasing due to the pandemic. This has led some to believe that these jurisdictions sometimes ignore red flags instituted by pan-regional anti-crime bodies because they badly need the money.

Heyrick Bond Gunning, chief operating officer at S-RM says that these Caribbean nations are taking a “longer-term view in terms of the integrity of their programmes.”

“Caribbean nations have realised how vital CBI funds are to their economies and maintaining the integrity of the programmes is essential for the entire region. There’s no point in having a quick win if it will jeopardise their status, which could result in the banks not wanting to do business with them meaning the programmes fall over straight away anyway.

“Caribbean nations are working very hard to fix mistakes made in the past as they are acutely aware of the scrutiny they are under at the moment, and therefore we have not seen any problematic individuals being accepted into these programmes recently.”

When responding to how the COVID-19 pandemic has impacted the CBI industry and the due diligence which enables its functioning, Gunning adds, “There has been a huge reliance on tourism which has really dropped away over the last couple of years and that has certainly put a lot more pressure on the units.

“It’s important to note that the units have become a lot more focused on their processes and how they run themselves to become as efficient as possible so that they can ensure that they are making the most of opportunities in terms of the applicants presenting themselves, within that there hasn’t been a compromise on the due diligence as they understand how important a part it plays and they want to be able to hold their hands up and say ‘we have external third parties auditing all our applicants at least twice but usually three or four times when you bring in to play the security agencies or Organisation of Eastern Caribbean States (OECS) to ensure that there isn’t a compromise on due diligence.”

Proper due diligence practices show a nation’s commitment to ensuring that its programme remains transparent and effective at evaluating potential candidates for citizenship. It is, therefore, a measure of that programme’s integrity.

Increasingly, strict anti-terrorism and anti-money laundering legislation has prompted some governments to exclude applicants of certain nationalities from their programmes or to restrict funds transferred from certain jurisdictions, in order to ensure compliance with international sanctions.

A multi-layered due diligence system, rooted in law and subject to procedural rules and policies, is an essential element of any successful CBI programme, as it combines internal government checks with research by specialist third-party due diligence firms, and assessments by regional and international bodies. Failures in due diligence harm the reputation of a host country and its programme, and these failures often have widespread consequences for the entire industry.

Funds from CBI programmes often provide a vital source of income for some countries, especially in times of crisis – as is often the case for Caribbean countries devastated by hurricanes – these countries value the investment that goes into their economies as it allows them to be economically self-sustainable.

“Caribbean nations are some of the most transparent in terms of reporting on their due diligence processes which has positively impacted their brand and reputation in the international market,” adds Paul Singh, director at CS Global Partners – an international government marketing agency.

“We have been doing ongoing work to help countries realise the importance of protecting and enhancing not only their reputation in the international community but also ensuring that their citizens and applicants know that they are investing in reputable and trusted brands for their businesses and families.”

Professional Wealth Management, from the FT Group, is the premier resource for private banking and mutual fund coverage in Europe, Asia and beyond.

Watch the full four-episode PWM Perspectives series on due diligence here.