The citizenship-by-investment industry is in crisis.
CBI has become a core part of the revenue model of several Caribbean island nations—and some other countries—over the last 40 years.
The model is fairly simple. In exchange for their investment funds—typically $100,000 and up—the investor is granted citizenship in the country, with the right to live there permanently and carry the country’s passport.
As I wrote last month, a second passport—a second citizenship—is a valuable commodity. It is the ultimate “backup plan,” precisely because it gives you the right to live permanently in another country if things turn sour at home.
A second passport can also grant the holder visa-free travel to more countries than their original passport (the citizenship they were born with).
Citizenship-by-investment today is a cottage industry of various firms that match wealthy clients with CBI programs, enabling clients to obtain second passports.
For wealthy globetrotters, a second (or third or fourth or fifth) passport is a powerful asset that opens doors to more countries and gives you a “Plan B” residency…
Typically, the visa-free travel aspects of holding a second passport have received more attention—and held more appeal—than the fact that the passport gives you the right to live in the issuing country.
For wealthy Chinese, Russians, and Middle Easterners, for example, without visa-free access to the EU and the U.K., a second passport from, say, a Caribbean Commonwealth nation, can grant this access.
And it’s this CBI “backdoor” access to Europe and the U.K. that’s at the heart of the current industry crisis…
Access Denied
U.K. Home Secretary Suella Braverman last month put a stop to visa-free access into Britain for citizens of two CBI nations—also members of the Commonwealth—Vanuatu and Dominica.
Braverman specifically named the countries’ citizenship-by-investment programs as the reason she was shutting down visa-free access. “Careful consideration of Dominica’s and Vanuatu’s operation of a citizenship by investment scheme has shown clear and evident abuse of the scheme, including the granting of citizenship to individuals known to pose a risk to the U.K.,” she said in a statement.
The Dominican government had been trying to alleviate the U.K.’s concerns—by revoking some of the CBI passports it had recently issued. This was too little, too late.
Dominica had given passports to individuals in the UAE
UAE
The U.K. action on Vanuatu follows a similar path taken by the European Union. The EU withdrew Vanuatu’s visa-free access to the Schengen Zone (27 countries) last year following allegations of improper vetting and the selling of passports to dodgy people, including the Gupta brothers, Indian nationals linked with corruption in South Africa; and a Turkish banker imprisoned for harboring an alleged murderer.
The percentage share of revenue the Vanuatu government gets from its CBI program has plummeted by 50% since then.
All Vanuatu and Dominican citizens now have to go through the cost and time of applying for visas to travel to the U.K. and EU, because of the actions of a few bad actors.
Crisis Management
If you’re interested in getting a second passport through investment, Vanuatu and Dominica might be the “two worst CBI passports” in the world right now—because of all the bad press and the fact that countries’ CBI schemes have clearly lost favor with some Western governments.
You do have several other options. Aside from Dominica, the other four Caribbean nations with CBI programs are Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, and St. Lucia.
After the British decision on Vanuatu and Dominica, the European Commission reportedly gave an ultimatum to Caribbean CBI countries, listing multiple demands that they would have to meet in order to retain visa-free access to the EU. These included enhanced due diligence, mandatory applicant interviews, and an increase in investment thresholds.
St. Kitts and Nevis’ CBI Unit promptly released a statement that addressed the EU’s concerns, including an announcement that it was doubling its minimum CBI investment to $200,000.
Vanuatu and Dominica are hardly the first CBI countries to face allegations of corruption, lack of due diligence, or passports being sold to bad people.
Indeed, St. Kitts and Nevis nine years ago was at the center of a similar scandal, after selling passports to alleged bad actors, including the son of the president of Equatorial Guinea, who faced corruption charges in America and France; the governor of a Nigerian state, who stood accused of organizing secret killings; as well as three individuals at the center of a U.S. Treasury Department investigation for evading U.S. sanctions against Iran.
The St. Kitts program has been very eager to clean up its act since then.
Allegations of poor management and poor due diligence hit government-run programs around the world all the time… CBI is not immune.
But despite current and past crises—and though visa-free arrangements may change back and forth over time—citizenship by investment is here to stay.
As long as governments are in search of money, they will offer access to investors willing to invest.
The U.S. government itself recently acknowledged that CBI was a legitimate way for Caribbean nations to attract capital.
That begs the question… For the investor, what truly is the value of citizenship by investment?
Does Visa
V
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If you’re an individual investor looking to get a second passport, is the travel document itself—and the number of countries to which it gives you visa-free access—the most valuable thing?
Or is citizenship in another country… the rights and privileges it bestows… truly the more valuable commodity?
My husband and I both have two passports (American and Irish). We didn’t get either through investment, but nevertheless I can speak on the value of holding dual citizenship from personal experience.
There’s no doubt we’ve enjoyed some travel privileges because of our second passports. During the pandemic, Americans were banned from traveling to Europe and Europeans couldn’t enter America. But because my husband and I held both EU and U.S. passports, these rules didn’t apply.
Americans will soon need a visa again to enter Brazil. But I’ll be able to continue to travel to Brazil visa free, with my Irish passport.
However, there’s only a marginal difference between the number of destinations you can access without a visa on a U.S. passport versus an Irish passport.
A U.S. passport, according to the latest Henley & Partners Passport Index, gives you visa-free access to 184 countries, while an Irish passport will get you to 188 visa free.
The destinations I can get to on my Irish passport visa free, but not my U.S. passport, include Venezuela and Iran… not places I have a burning desire to visit right now.
Of course, the travel benefits of a second, more “powerful” passport increase significantly if your original passport is from, say, Bahrain (88 visa-free destinations) or China (80 visa-free destinations).
Nevertheless, visa-free travel is just one consideration that comes into play when you’re looking at your options for second citizenship.
Visa-free travel gets a lot of attention, reinforced by the column inches devoted to indices like the Henley Passport Index.
But the more significant benefit of a second passport is having another country to call home. Usually, you can pass this right on to your children too.
Investing in a “second home” (a second citizenship) is a somewhat different prospect than choosing a CBI country based on its travel document (passport).
It involves different calculations about your centers of vital interest, where you’d be happy to spend significant amounts of time, and your family’s future.
It’s potentially a far more rewarding investment.
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