As the longest-standing and most credible citizenship by investment programmes are found in the Caribbean, we take a look at what these nations can teach us about this growing industry.

What is immigration and investment due diligence?

In a nutshell, due diligence usually refers to the research that is done on a person or entity before engaging in a financial transaction. When it comes to immigration and investing, it means that certain background and other checks are performed on the applicants that are hoping to immigrate or invest in in a particular country or region.

Each territory that an applicant seeks to invest in will have its own requirements. This also applies to citizenship by investment (CBI) programmes, the first of which was launched globally in 1984 by the twin-island nation of St Kitts and Nevis in the Caribbean.

Why is investment immigration due diligence important?

Different countries award citizenship in different ways. Some countries award citizenship by virtue of birth in that country, descent from a parent who is a citizen, or by naturalisation, for example through marriage to a citizen or through an extended period of residence in that country. Citizenship by investment programmes allow successful applicants to obtain citizenship by virtue of a significant investment in a country.

Many families and entrepreneurs turn to citizenship by investment programmes as an alternative form of asset diversification. Global uncertainty is driving the desire among wealthy individuals to incorporate second citizenship as part of their portfolios. However, countries offering CBI programmes still require that applicants be strictly vetted before being granted citizenship. This is to maintain certain standards of the CBI programme and to ensure that applicants comply with certain national and international standards to support safety and security, as criminal background checks are also included in the vetting process.

For more on the requirements for Caribbean CBI programmes, see here.

How is the Caribbean leading the way?

As the acceptance of funds from CBI programmes provide a high level of risk for most banks operating in the Caribbean, as there is usually only one US bank providing corresponding banking services in each of the CBI countries, banks in the Caribbean tend to exercise extreme caution when vetting new customers. Local Caribbean banks therefore exercise their own vetting processes on each CBI applicant before allowing funds from the applicant to enter the local banking sector. As this forms such an important part of the success of each application, this vetting process is usually done before the applicant's application is submitted to the recipient government's CBI unit for processing. This dual process of vetting by the bank as well as vetting by the government agency in charge of CBI adds a necessary and additional level of security to CBI programmes in the Caribbean.

For example, the Dominica CBI due diligence process covers four steps: know-your-customer checks performed by local authorized agents; internal checks including anti-money laundering and counter-terrorism financing vetting by the Citizenship by Investment Unit; mandated international due diligence firms perform online and on-the-ground checks; and regional and international crime prevention bodies check that you are not on any wanted or sanctions lists.

Caribbean governments have also been hard at work to continue making improvements to their CBI programmes and to ensure the quality of their programmes and of the applicants accepted through its programmes. St Kitts and Nevis has recently welcomed a new government administration into power and which has already announced changes to strengthen their CBI programme. In a recent move, a new head of its CBI unit has been appointed.

Caribbean countries have very open and strong relationships with international parties and are always on the lookout at what international law enforcement is saying. For example, security concerns coming out of international law enforcement always trump due diligence service providers. If a due diligence agent gives an applicant a clear review but that same applicant gets a red flag from international law enforcement groups, the country will deny granting citizenship by investment to that applicant.

Another reason why applicants can be refused second citizenship is if an applicant has been refused a visa from a country that the Caribbean countries have visa-free access to.

"When looking at countries which are top-rated, such as those in the Caribbean, we see that they are doing more in upscaling their programmes so that they are not just meeting minimum standards. Their CBI Units are always trying to achieve best practices by asking their due diligence agents on a regular basis how they can improve their risk-based approach, and how they can evaluate applicants better and they are actively involved in the due diligence process from beginning to end," said Karen Kelly, director of strategy and development at Exiger at a due diligence webinar hosted by Financial Times' publication, Professional Wealth Management (PWM) this year. "We find that countries who are already engaging top due diligence intelligence companies have consistent standards across their CBI programmes."

For more information on Caribbean CBI programmes, their offerings and benefits, visit www.csglobalpartners.com.