CRIME AND CIT­I­ZEN­SHIP: THE SE­CU­RITY RISKS OF CIPS

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT

Cit­i­zen­ship by In­vest­ment Pro­grammes (CIPs) are a hot po­lit­i­cal topic in the Caribbean and around the world. The schemes set up by nu­mer­ous re­gional gov­ern­ments of­fer a speedy path­way to cit­i­zen­ship to high net worth in­di­vid­u­als (HNWIs) who com­mit to mak­ing a sub­stan­tial in­vest­ment in a na­tion and, in re­turn, re­ceive a pass­port.

We’ve de­tailed be­fore at The STAR Businessweek the po­ten­tial ben­e­fits of CIPs, and that there are in­deed shades of grey in the process, for bet­ter or worse. A CIP’s ca­pac­ity to of­fer safe har­bour to global cit­i­zens flee­ing per­se­cu­tion else­where is surely a good thing; the risk of a CIP’s abuse for those with crim­i­nal in­tent is not.

So what are the key risks of CIPs as a crim­i­nal tool? And what can Caribbean na­tions do to min­imise these risks?

CIPS ARE GLOBAL

Within our re­gion CIPs have been sub­ject to fierce de­bate. Op­ti­mistics point to the ap­peal of lur­ing HNWIs to na­tions among the re­gion, with the hope the ini­tial in­vest­ment their make via a CIP will be fol­lowed by fur­ther in­vest­ment down the line.

Crit­ics point out the ex­is­tence of CIPs along­side off­shore bank­ing — es­pe­cially when linked to the rev­e­la­tions of the Par­adise and Panama pa­pers — com­bine to make a deeply un­set­tling com­bi­na­tion to so many ev­ery­day cit­i­zens of the re­gion.

There is also the risk that a Caribbean na­tion with a com­par­a­tively small pop­u­la­tion and econ­omy could find that a new HWNI ci­ti­zen may seek to play havoc with lo­cal busi­ness and gov­ern­ment, all in the name of un­der­min­ing and desta­bil­is­ing a na­tion, es­pe­cially if their clear-cut in­vest­ment via a CIP is ac­com­pa­nied by money laun­dered and passed along un­der the ta­ble.

Such a risk may seem un­likely to oc­cur or suc­ceed but events in Europe show the deep anx­i­ety around CIPs gen­er­ally, and the risks that are shared glob­ally.

MALTA AND THE EU

Re­cent times have seen Malta seek to navigate the quick­sand that’s arisen fol­low­ing the EU’s crit­i­cism of the na­tion’s CIP. First launched in 2014, the pro­gramme was in­tended to be capped at 1,800 ap­pli­cants, be­fore the gov­ern­ment an­nounced plans to ex­pand it.

Mil­lions have been earned via the pro­gramme but there is the risk of sheer num­bers in terms of pass­ports. For a na­tion of just 430,000, the ad­di­tion of 1,800 new HWNIs as pass­port hold­ers comes with the po­ten­tial of a new and sat­u­rated se­cu­rity risk.

Mem­bers of the Euro­pean Par­lia­ment have crit­i­cised the Mal­tese gov­ern­ment’s ad­min­is­tra­tion of the pro­gramme stat­ing it un­der­mines the con­cept that cit­i­zen­ship must be earned, and that, in turn, Malta’s con­duct puts at risk the se­cu­rity of the Schen­gen area (free move­ment of Euro­peans in Europe) that Euro­peans en­joy.

Even if an­other EU state is pru­dent about who it is­sues pass­ports to, the ef­forts could ul­ti­mately be in vain if an­other na­tion is is­su­ing pass­ports too read­ily with­out due dis­cre­tion.

At the same time this has been oc­cur­ing, Malta has been mak­ing in­roads to be­come a lead­ing cryp­tocur­rency cap­i­tal in Europe.

CIPS AND CRYPTOS

For crit­ics anx­ious about the po­ten­tial se­cu­rity risks that comes with CIPs and cryp­tocur­rency, a na­tion tak­ing a lib­eral ap­proach to the first, and in­tend­ing to do so for the sec­ond, raises real anx­i­ety. For its part, Val­letta has ruled out mak­ing a di­rect link be­tween the two, in­di­cat­ing that cryptos will not be ac­cepted as pay­ment in the CIP.

It’s also un­apolo­getic in its dec­la­ra­tions that cryp­tocur­rency is ul­ti­mately “the fu­ture” of money, and time may well prove it right. Yet the gov­ern­ment has also had a num­ber of high pro­file fi­nan­cial scan­dals in re­cent times, lead­ing to con­cern that what it says on pa­per won’t al­ways be im­ple­mented in prac­tice. If a real gap here did grow, so too could greater se­cu­rity risks.

At its core, ev­ery gov­ern­ment around the world has to deal with is­sues of crime like theft and forgery. But the nexus be­tween the easy ac­qui­si­tion of cit­i­zen­ship and easy flow of cryp­tocur­rency laws leaves many un­set­tled. Even keen cryp­tocur­rency en­thu­si­asts and ad­vo­cates have looked on

with worry, con­cerned that any fu­ture up­heaval in Malta sur­round­ing its crypto pol­icy could make it harder to achieve fair and com­mon sense reg­u­la­tion for cryptos in other na­tions.

OLD BOR­DERS, NEW PRO­GRAMMES

The Mal­tese ex­pe­ri­ence il­lus­trates the hur­dles for CIP na­tions near and far: that there’s a grow­ing ten­sion be­tween the abil­ity of a coun­try to have a CIP and a free mar­ket fi­nan­cial sys­tem.

In many re­spects this ten­sion has al­ways ex­isted — de­spite al­ready be­ing a global me­dia ty­coon in the 1980s, Aus­tralian­born Ru­pert Mur­doch fa­mously could not buy a US TV sta­tion un­til he be­came an Amer­i­can ci­ti­zen — so crit­ics can­not fairly sug­gest all is­sues with na­tional cit­i­zen­ship in a world of global fi­nance are new.

But though the Caribbean may not hold the same for­mal struc­ture as the EU, the Mal­tese ex­pe­ri­ence shows that the close ties held by na­tions in the Caribbean fam­ily mean that a bad CIP is not only a na­tional risk, but a re­gional one.

Even if many Caribbean na­tions have taken a dim view of some of the EU’s at­ti­tudes to­wards the re­gion — no­tably putting nu­mer­ous Caribbean na­tions on a tax haven black­list in De­cem­ber last year but failing to in­clude the UK on it — the shared ex­pe­ri­ence here surely has cur­rency.

CIPs may be rel­a­tively new but the prox­im­ity and his­tor­i­cal links that many na­tions have with one an­other is old, al­low­ing for the easy move­ment of peo­ple and busi­ness be­tween states.

Un­less these ties were sub­ject to re­vi­sion each time a new CIP is cre­ated, it’s not pos­si­ble for one na­tion to cre­ate a CIP and de­clare it strictly a mat­ter of na­tional con­cern, not when there are friendly travel and trade agree­ments with other na­tions around it.

A CI­TI­ZEN’S RIGHTS

Achiev­ing a re­gional con­sen­sus, much less a global one, on CIPs is not go­ing to hap­pen any­time soon. Nei­ther a new level of re­stric­tions upon the norms of cit­i­zen­ship seen around the world which com­monly pro­vide that once some­one be­comes a ci­ti­zen, they are wholly one, ir­re­spec­tive of whether they were born in the na­tion, or to par­ents from the na­tion (and not­with­stand­ing cer­tain ex­cep­tions sur­round­ing re­nounce­ment and dual cit­i­zen­ship).

But it is clear that as our world be­comes more eco­nom­i­cally bor­der­less, the free flow of money and cit­i­zen­ship would not be a risk to one na­tion, but a risk to all na­tions. In the ab­sence of find­ing con­cen­sus on CIP reg­u­la­tion, strong in­roads be­ing made against money laun­der­ing and other global fi­nan­cial crime could find com­mon ground. It may not abate the con­cerns that crit­ics of CIPs have, but a greater crack­down on money laun­der­ing crime in the Caribbean would serve as a warn­ing to would-be crim­i­nals that the re­gion’s CIPs are not worth the price of en­try.

It’s true that any­one with de­signs on a CIP for crim­i­nal in­tent would ob­vi­ously not sup­port such a crack­down; but ev­ery good ci­ti­zen would, how­ever they came to hold that ti­tle.

Though the Caribbean may not hold the same for­mal struc­ture as the EU, the Mal­tese ex­pe­ri­ence shows that the close ties held by na­tions in the Caribbean mean that a bad CIP is not only a na­tional risk, but a re­gional one

Mem­bers of the Euro­pean Par­lia­ment have crit­i­cised the Mal­tese gov­ern­ment’s ad­min­is­tra­tion of the pro­gramme stat­ing it un­der­mines the con­cept of cit­i­zen­ship

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