“Where I’m from is a bit of a difficult thing,” explained John Davis, who requested a pseudonym for anonymity. American by birth, he has resided in 12 countries including the United States, Canada, Turkey, Bulgaria, and France, and he has visited over 60 more.
While living in Europe during the early 2000s, his wife’s passport made it difficult to maintain their jetsetting lifestyle: “We were spending inordinate amounts to get her visas,” Davis explained. “For my wife to go to Germany, we would have to fly to [one country], spend a few days [there] to get her visa, fly back [home] and then go to Germany. As you can imagine, doing that for every country you want to go to gets really expensive very quickly.”
Thirteen years ago, Davis and his wife made the decision to apply for citizenship in the small Carribean country of St. Kitts and Nevis in hopes of leaving the headaches and expenses of travel visas behind.
While many families have applied for St. Kitts’ coveted citizenship, Davis stressed a unique part of his story. Not only did his family want citizenship with the country—as an elite group of an ambiguous number of people do—they also decided to settle there. St. Kitts and Nevis, beyond providing visa-less travel, could accommodate their growing family. They wanted to live in the Caribbean, English was the spoken language, and perhaps most appealing of all, “There’s no income tax,” he said, “It was just a good idea, so we raised the kids here.”
When St. Kitts and Nevis gained political independence from the U.K. on September 19, 1983, the island sought financial independence from a declining British sugar industry, yet simultaneously plunged itself into economic uncertainty. The solution came in the Citizenship Act of 1984, which legalized an innovative source of revenue that would come to generate 12.4 percent of the country’s GDP in 2015: selling citizenship to foreign investors.
The program is in fact quite simple: As of October 2018, it takes a $150,000 contribution to the Island’s Sustainable Growth Fund, a $250,000 contribution to its Sugar Industry Diversification Foundation, a five-year $400,000 real-estate investment, or a seven-year $200,000 real-estate investment to receive a St. Kitts and Nevis passport. (Due diligence and processing fees not included.) “There’s not much to say about the process. You submit your birth certificate, your normal documentation, your existing passports, your background checks, and then it’s hands off until you hear from [the government] in three to six months,” said Davis.
Since its inception, the program has kickstarted the islands’ economy. Les Khan, CEO of St. Kitts and Nevis’s Citizenship by Investment (CBI) Unit, a government agency within the Ministry of Finance, is responsible for both operating and promoting the program, emphasized the emerging benefits of this model: “We have been able to diversify our economy, in terms of hotels creating tourism and generating a small industry.” Khan also spoke of CBI-funded infrastructure and social programs including a “major road modification,” a social welfare program allowing “any family earning less than US$1,100 per month to get an allowance from the government,” and “other programs like training providing support to the youth in order to get them off the streets.”
The success has been replicated elsewhere: Malta’s cash-payment-based CBI program has produced astounding results: Since launching their Individual Investor Program (IIP) in 2014, Malta has had among the highest GDP growth rates (6.6 percent) and lowest unemployment rates (3.7 percent) in the E.U. With 76 percent of their €251 million surplus in 2018 funded by the IIP, Malta has also reduced their debt by 28 percent, citizenship-planning firm Henley and Partners told The Politic.
It comes as no surprise, then, that countries including Dominica, Malta, Cyprus, the United Kingdom, and even the United States have adopted St. Kitts and Nevis’s model in implementing some variation of a citizenship or residency by investment program. By 2014, it was estimated that about half of the European Union’s member states had specific immigrant investor routes.
Because of its high price, the passport remains an enigma. “Sometimes when I travel, Passport Control will stop me,” Davis explains, “Some of them have never seen a St. Kitts passport… ‘What is this?’ Some have heard of it but never seen one. I get friendly interest from Passport Control because it’s a curiosity.”
The global elite are lining up for additional foreign passports and permanent residencies, prepared to pay six- and seven-figure price tags for a coveted second nationality. Many are trying to buy their way into visa-free travel or lower taxes, while others are hopeful that a second passport can provide them with an escape route in the event of war or political upheaval at home. Countries may ask investors to channel their investments towards stimulating private-sector businesses, real-estate markets, or directly to government funds. Various countries with CBI programs, however, have seen different scales of economic development as a result of the program, stirring controversy as to whether citizenship should be a commodity.
In Khan’s experience, CBI applicants to St. Kitts and Nevis are primarily from China, Russia, and the Middle East. Among the most common reasons for investors to consider CBI in St. Kitts and Nevis, he explains, is visa-free travel to 80+ countries, including the Schengen Area. Henley and Partners notes that other investors express interest in the usual benefits of citizenship, including improved education and healthcare (if inaccessible in their home countries).
Khan was quick to discredit the assertion that the St. Kitts and Nevis CBI program is used primarily for tax evasion, a critique often levied at countries with similar programs. “We don’t have a tax residency program,” he insisted. A 2019 Ernst & Young report confirmed that CBI in St. Kitts and Nevis does not allow investors to file tax there.
Davis—a dual-citizen of the U.S. and St. Kitts—again saw his position as unique. Because he resides there, he is able to avoid paying taxes on foreign income, capital gains, gifts, wealth, and even inheritance. “For Americans,” he said, “that’s the incentive. For the rest of the world, the incentive is generally the ability to travel and go to Europe without having to get visas through bureaucratic processes.”
Henley and Partners is one of many firms that guide investors through the CBI application process. Their role, as they described in a statement to The Politic, is to “carefully and thoughtfully evaluate potential applicants’ individual needs and aspirations”—factors like their motivations, budget, and intentions to visit versus move to the country—“and those of their family, before offering our professional advice on which of these options might be most suitable.”
Henley and Partners performs a thorough background check before an investor’s application is sent to national governments. “This is especially important because we would never seek to forward a client’s application for processing by a sovereign government if we believed the client would not pass a strict background check,” Paddy Blewer, Director of Group PR at Henley and Partners, told The Politic.
Khan outlined St. Kitts and Nevis’s “rigorous” vetting process in particular, which involves consulting international law enforcement agencies including Interpol, terrorist watchlists, anti-money-laundering databases, as well as American, British, and Canadian databases. Davis cited his experience in St. Kitts and Nevis: “Six months is usually the current processing time. Assuming you pass that, then you’re in.”
Background checks are vital in maintaining both the integrity of a country’s CBI program and the visa-free access the passport provides. In the months following the 9/11 attacks, for instance, Canada began requiring travel visas from citizens of Grenada, citing security concerns over the island’s lack of sufficient vetting of its CBI applicants. Over 18 years later, Grenadian citizens still require a visa to visit Canada.
Davis explained: “They want to keep it clean. They want to make sure [applicants have] legitimate purposes. Most of the people by far are people like us, from Russia and the Middle East and certain other countries, [from] where it’s otherwise just impossible to travel.”
While Henley & Partners points to Malta as an exemplar for a thriving cash-based CBI program, a report that landed on the desk of Dr. Simon Busuttil, the then-leader of Malta’s Nationalist Party, in 2017 tells a different story—one in which three foreign applicants to the program and eventual Maltese citizens transferred €166,831.90 to a suspicious British Virgin Islands (BVI) account connected to a licensed CBI agency. Much of the money was reported to be subsequently transferred to an account held by the Prime Minister’s chief of staff, Keith Schembri.
Busuttil held a press conference to make what he described as an “explosive announcement” to the public, at one point calling for the Prime Minister’s resignation. “The police had never done anything about the matter,” Busuttil shared with The Politic. Both the Prime Minister and Schembri strongly denied Busuttil’s accusations of corruption.
Regardless of whether Schembri was at fault, the issue highlights corruption as a key threat to the credibility of residency and citizenship by investment programs that try to stimulate economic development, a threat that compounds with generally nameless investments.
Busuttil describes the commercialization of citizenship as “selling one’s identity and selling one’s soul,” corrupting what he describes as an intangible belonging to a community.
The Migration Observatory at the University of Oxford engages in extensive research on international migration public policy. Madeleine Sumption, the Observatory’s director, sees the arguments on both sides. “The very act of buying and selling something degrades it, if it is not something that is an appropriate subject of a market transaction.” On the other hand, Sumption argues that citizenship is not sacred, but rather simply and arbitrarily assigned at birth.
Beyond the concept’s questionable ethics, many critics claim that governments often overstate CBI’s impacts on economic development. Malta’s National Development and Social Fund (NDSF), a separate entity to which over 70 percent of IIP funds are allocated, “must have well over half a billion euros sitting in it,” Busuttil argues. “In terms of using it, frankly we haven’t seen many concrete projects. ”
A video for potential investors on the IIP website, however, publicize many “deliverables” including millions of euros toward upgrades in local health centers, social housing, and sporting facilities and recruitment, as well as to the Puttinu Cares Foundation to assist cancer patients in the UK, a donation from which Maltese citizens do not benefit economically.
For these governments with large immigrant investor programs, national support of their initiatives is key in the programs’ success. Khan said of St. Kitts and Nevis, “We have to continually show how many jobs are created in the hotels and how many jobs are created as a result of construction.” Both Khan and the country’s Prime Minister, Timothy Harris, have taken part in multiple domestic interviews to garner public support, something Khan believes has grown immensely in the last three to four years.
Immigrant investor programs exist much closer to home than many Americans realize. The EB-5 visa in the U.S. grants Green Cards (permanent residency) to foreigners if they invest $500,000 in a “targeted employment area” (often a rural and high-unemployment area) by creating or maintaining ten full-time American jobs, and $1 million if directed toward another sector.
The program has attracted harsh bipartisan criticism. Senator Chuck Grassley (R-Iowa) called the program “a source of cheap foreign capital for big city, big moneyed interests,” and Senator Dianne Feinstein (D-California) said the program sends “a terrible message for the 4.4 million people waiting in line for visas.” These stances, Grassley explained, are countered by “powerful special interest groups and big moneyed interests.”
By the end of 2019, the U.S. Department of Homeland Security intends to raise the standard minimum investment to $900,000 in targeted areas or $1.8 million in other sectors to account for inflation.
Still, the overall proportion of U.S. admits under the EB-5 program is modest: the 10,009 EB-5 visas in 2017 accounted for just 0.88 percent of all permanent residencies awarded. Sumption is unsure whether EB-5 has been generally beneficial for the U.S. as “there’s relatively little data and the program is not very well evaluated.” Given the legal impracticalities of making residency contingent on maintaining investments, in this case in the private sector and especially due to the unpredictable nature of economic cycles, the government cannot prevent investors from withdrawing their investments immediately upon entering the U.S.
Despite its being effectively a backdoor to the U.S. for the wealthy, the EB-5 visa evades the national spotlight. Sumption explained that there is little public concern and economic threat associated with the immigration of wealthy investors compared to that of “lower-skilled workers.”
As CBI programs continue to work for who they are supposed to work for, the market for citizenship is becoming increasingly competitive. Khan believes that his biggest challenge as CEO will be to “continually ensure that we remain competitive and that people know [about] our program.” He then explained that St. Kitts and Nevis is unique in offering a new “fast-track capability,” allowing applicants to receive citizenship on an accelerated timeline without a compromise in due diligence.
Like all new programs, this one has attracted ire: Busuttil calls CBI “a sale scheme, where you pay money…and you do not even need to set foot on the island,” before receiving a passport. Government officials like Khan are now faced with the challenge of molding CBI initiatives—or altogether re-shaping them—to honor the moral value of citizenship. Davis argued that “Nearly all applicants are doing it for valid reasons.”
Once on the idyllic island of St. Kitts, the controversy around the program fades into the background. The small country of just over 50,000 permanent residents moves slowly, and there are always familiar faces. “I know people from my daughter’s class– that’s how you know people,” Davis shared. On the street, “half will know you by name.” To him, it was never just about the passport. It’s not the same, he explained, “If you’re the type that comes here a few times a year to hang by the beach.”