The Citizenship by Investment (CBI) industry has witnessed an exponential boom driven by the need for wealthy individuals and families to protect themselves. In turn, this has become a financially lucrative initiative for countries to boost foreign direct investment. We look at lessons learned through the abolition of Cyprus’ Citizenship by Investment Programme and what caused its termination.
As more countries have seen the positive impact that CBI Programmes have on the national economy there are new initiatives popping up across the globe. However, to guarantee success in the industry, it is vital to learn from existing programmes as well as those that are no longer in operation. Take Cyprus’ Citizenship by Investment Programme for example…
News of the abolition of Cyprus’ CBI programme rocked the investment migration industry. In operation since 2013, it was considered one of the most popular European programmes. It transformed Cyprus’ struggling economy by attracting significant foreign investment.
What went wrong with Cyprus’ Citizenship by Investment Programme?
The tides turned when an Al Jazeera investigation dubbed “The Cyprus Papers” revealed that several questionable applicants, including criminals, had become Cypriot citizens. It also unearthed how politicians, real estate developers and officials aided and essentially turned the other cheek to provide dubious characters with citizenship.
Shortly after, the European Commission launched infringement proceedings against the country. The Commission alleged that the Programme allowed individuals that did not have ‘genuine links’ to the country to become citizens, thus granting them unhindered access to the rest of the EU.
The piling evidence left Cyprus with no choice but to suspend the programme, leaving behind a blueprint of what not to do for the rest of the industry and those that hope to introduce similar initiatives.
The Importance of Due Diligence
If there is one factor that can make or break a CBI Programme, it’s due diligence. Experts have said due diligence is the cornerstone of the industry and lays the foundation for what makes a successful programme that stands the test of time. It is essential to have a multi-layered process that utilises both internal and external agencies to conduct a thorough investigation that ensures the applicant can prove a clean source of funds.
Due diligence procedures span the entire CBI application processes from assessing applications through agents, to final decision making by authorities.
What is due diligence and why is it so important?
Due diligence is a comprehensive term to describe a sequence of investigative processes that:
- validate, and
- verify information about an individual.
Effective due diligence, when it comes to any CBI programme, is critical. These processes verify an investor’s identity, background, financial status and reputation. More importantly, it aims to clarify whether the wealth of the applicant is acquired through legitimate means and to identify valid sources of income.
Caribbean countries are leading the way
The Caribbean, a pioneering region for CBI, has mastered the art of due diligence, perfecting the system throughout its decades of experience. This annual CBI Index recognises the region’s authority in providing efficient security checks. Countries that top the charts every time include Dominica, Grenada, Saint Lucia and St Kitts and Nevis.
In fact, St Kitts and Nevis’ head of the CBI unit, Mr Michael Martin, has just recently added even more processes to ensure the integrity of their programme. You can explore the latest St Kitts and Nevis CBI updates here.
Ensuring a robust due diligence framework is directly linked to the programme’s reputation. If its international standing is endangered, so is its future.
Also Read: Reliable Citizenship by Investment – St Kitts and Nevis and Most reputable CBI programmes.
Optimising Real Estate
Effectively, CBI Programmes help support the economy by creating jobs while contributing to national development. Most programmes commonly have two investment channels: a contribution to a government fund or real estate purchase. These investment options should work together to create a diverse economy.
The challenge is to get this right without tipping the scales too much. For example, when investments go directly to developers and not wider society, it’s counterintuitive and could be damaging.
Cyprus’ Citizenship by Investment Programme had real estate as the cheapest route to citizenship. Subsequently this meant that investors rarely opted for the fund. This also contributed to property prices skyrocketing, meaning that locals were priced out of buying homes which triggered economic instability and political backlash.
Also Read: Real estate investment in Dominica
Evolve, Evolve, Evolve
A successful CBI programme is not afraid to evolve. Circumstances change, whether political, economic or social. Therefore, it is vital to frequently assess a programme, keeping the aspects that work and adapting what doesn’t. This is the best way to identify failures before they negatively impact the programme.
The industry’s oldest programmes continue to alter their processes. This may include smoothing out the application procedure, introducing new dependants that can be added or tightening its due diligence framework. This meticulous approach differentiates programmes that are here for the long term and those that are only interested in a quick pay-out.
How to choose a reliable CBI programme
It can be hard for would-be applicants to determine whether or not their programme of choice is legitimate. We’ve put together this guide on how to identify legal citizenship by investment programmes, which highlights some key questions which can help you identify legal citizenship programmes.
Partnering with an investment migration industry expert can give you great reassurance that you are making the correct informed decisions regarding your second citizenship. CS Global Partners has been successfully empowering individuals with sustainable solutions for over a decade. With our expert guidance, we can help you navigate the path to building a brighter future for yourself and your family through second citizenship.