DID "CITIZEN BY INVESTMENT" (CBI) CONSULTANCY ADMIT THAT ITS DUE DILIGENCE AND KNOW YOUR CUSTOMER PROCEDURES ARE DEFICIENT ?

DID "CITIZEN BY INVESTMENT" (CBI) CONSULTANCY ADMIT THAT ITS DUE DILIGENCE AND KNOW YOUR CUSTOMER PROCEDURES ARE DEFICIENT ?

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If you have been following the recent spate of articles critical of international immigration consulting firms that process clients for Citizenship by Investment (CBI/CIP) passports, you have probably read the extensive article published recently in The Guardian. In response, Henley and Partners released a Statement, which the newspaper published in its entirety, on its website.

We direct your attention to this specific quote from the Statement, " Our corporate governance, due diligence and 'know your client' procedures match or exceed those of adjacent professional services such as law firms or banks."Henley and Partners Statement from Guardian website.

When the Statement refers to  "adjacent" (meaning the Caribbean) law firms and banks for their benchmark for due diligence and 'know your client' it betrays a reliance upon entities that historically conduct substandard compliance policies and procedures that do not measure up to " Banking Best Practices" which are the rule in North America and the European Union.

The reason that major onshore financial institutions are engaged in De-Risking" of correspondent accounts of Caribbean banks is in large part due to inadequate due diligence and KYC. Candidly, US, Canadian and European banks have little faith in the compliance work product of Caribbean banks, and they have good reason to take that position. When foreign tax cheats, narcotics kingpins, fugitive fraudsters, international sanctions evaders, and other career criminals are freely accepted as clients by offshore bankers who see only dollar signs, and who are guilty of Willful Blindness when it comes to affluent clients.

As the local law firms, with the rare exception of some of the foreign firms, Caribbean lawyers are not very discerning when a dodgy, but rich, new client arrives from a foreign country. I know that from thirty years of personal experience, and I defy any lawyer from a tax haven jurisdiction to say otherwise.

Given the added complication of the OECD Blacklist on all five of the East Caribbean CBI states, which will further stigmatize those jurisdictions, as the FATF Non-Cooperative Countries and Territories List did in the past, Caribbean compliance policies will be held in even less esteem by international banks, and their compliance staff.

To sum up, CBI consultancies admittedly have set a very low bar for themselves, when it comes to effective due diligence and "Know Your Customer" programs; govern yourselves accordingly.  

Chronicles of Monte Friesner - Financial Crime Analyst  

Contributed by Kenneth Rijock - Financial Crime Consultant