Why the EU has nothing to fear from Caribbean CBI programmes

Thought leadership by Nuri Katz, Founder of Apex Capital Partners

In October 2020, the European Union initiated “infringement procedures” against Cyprus and Malta, claiming that their golden passport programmes undermine the “essence” of European citizenship. Furthermore, the EU claimed that these programmes were a potential risk to European security and could lead to a risk of money laundering and tax evasion.

This decision to criticise the European programmes has led to a series of events whereby the European Union is now looking at the citizenship by investment (CIP) programmes in the Caribbean with an eye to understanding if they are also a risk to the security of Europe. They are not.

It is important to consider the history of what has happened in Europe and the differences between the European citizenship by investment programmes and those in the Caribbean region. This can help us to understand the opportunities that Antigua & Barbuda and the other Caribbean countries have with these programmes going forward.

The European Union has shown over time that it has little understanding or does not care to understand that neither the programmes in Europe nor elsewhere can possibly lead to tax evasion or money laundering. In some ways it is understandable, as there have been many scandals in Europe regarding their own citizenship by investment programmes. Malta’s CIP has been mired in corruption scandals, from the way the programme was first developed in 2013 to the Bank of Valletta scandal, as well as many others that partially contributed to the resignation of the former prime minister of Malta. Admittedly, much has changed with the programme, and now the requirements are stricter and are widely adhered to.

“The European Union has shown over time that it has little understanding or does not care to understand that neither the programmes in Europe nor elsewhere can possibly lead to tax evasion or money laundering.”

Cyprus used its citizenship programme to work its way out of its very serious banking crisis of 2012. As the programme was all about real estate investments, with the minimum investment being €2 million, in a mere few years, Cyprus attracted billions of euros. With the huge amount of high-end real estate projects being built, the whole skyline of Cyprus changed. However, in October 2020, Al Jazeera reported on the Cyprus programme, which exposed corruption at the highest levels of government. Shortly afterwards, the citizenship by investment programme was closed down.

After these concerning but isolated events, it is no wonder that the EU is anxious about these programmes. Simply put, the way some European CIPs have been managed has made it look like all programmes are poorly managed and pose a danger to the world. However, this is simply not the case with Antigua & Barbuda or, indeed, any of the other Caribbean CIP programmes.

When it comes to the Caribbean, the EU is concerned about several matters. Firstly, that Caribbean passports will not be used to evade taxes or launder money in Europe. Secondly, they are worried about the risk to the physical security of Europeans.

The first concern is just not viable; it simply shows that the EU bureaucrats seem to misunderstand the difference between tax residence and citizenship. Besides the United States, every country in the world taxes people based on their residence. In simplified terms, where one lives is where one pays taxes. Citizenship does not affect tax obligations in any country. Gaining a second citizenship by investment in Antigua & Barbuda, for example, does not in any way change the tax obligations of the individual who has obtained that citizenship. Therefore, there can be no tax evasion simply by gaining citizenship of a second, third or fourth country.

The issue of money laundering should also not be of concern as the European banks that are based in OECD countries and which have signed up to the agreements related to the Common Reporting System have an obligation to make sure they know their client. As such, they must know not only the country of residence of their clients, but they also must report on all bank accounts opened by residents of any foreign country. Again, citizenship and passports do not have anything to do with where a person lives and their tax obligations. Indeed, the banks themselves will ensure that all countries are made aware of their residents having bank accounts opened in Europe.

Finally, and most importantly, is the issue of the strength of the due diligence performed by the government of Antigua & Barbuda (as well as other Caribbean governments) on candidates for citizenship by investment. This process, which includes engaging the services of the top due diligence companies in the world and using the resources of international law enforcement agents, makes it simply the best due diligence system known to man. The risk of criminals or other “bad” people receiving citizenship is negligible. The proof, as they say, is in the pudding. Of the tens of thousands of people who have applied in Antigua & Barbuda and the rest of the Caribbean, a statistically insignificant amount of people with any criminal history or intentions have, in fact, been awarded citizenship.

To conclude, there is no doubt that if the EU actually looks closely at the CIP programme in the twin islands, they will understand that, as opposed to what they are used to in Europe, the safeguards in place do not put Europe at risk, but conversely protect their interests.