The concept of obtaining a second citizenship in exchange for a significant investment has been around for decades. However, one of the most prevalent misconceptions in our industry pertains to the acronym CBI (Citizenship by Investment). It's time to set the record straight and propose a more accurate name. The better reflects the industry today and the marketplace in which we operate.
The primary issue with the term CBI is that it implies that citizenship is automatically conferred upon investors, which is not the case. In reality every applicant, specifically those originating from Caribbean jurisdictions, undergo a rigorous multi-step due diligence process. This process encompasses pre-submission checks by recipient banks and post-submission reviews by local authorities such as the JRCC (Joint Regional Control Center) who then have access to international government and border security agencies. Additionally, private due diligence checks are conducted by individual units based on the information provided by applicants.
Only after these comprehensive checks and an in-person interview can the applicant be granted, or denied, their citizenship request. Furthermore,, the acronym suggests an investment component. According to Merriam Webster, investment is “the action or process of investing money for material result or profit.” While many marketing agents and developers attempt to persuade investors that this is the case, in reality, it is not, as the construction schedules, cash flows and business models simply do not allow it over the short term.
The majority of hospitality developments in the Caribbean, which serve as the primary investment vehicle, have construction schedules spanning a minimum of three years, contingent upon their size. It takes at least two years for a hotel to attain a stable profit and loss, necessitating an investment period of approximately six to seven years before a hotel can even hope to recoup its investment for investors. Even then, the return on investment will be modest.
The primary issue lies in the erroneous marketing of “Investment with Citizenship,” where agents and practitioners completely disregard the inherent value of the citizenship itself. It is almost as if the citizenship is perceived as a supplementary benefit to the investment, rather than the converse. This misrepresentation leads applicants to believe that their investment will yield substantial returns, which is very rarely the case for the vast majority.
It is imperative, that we redirect and realign our industry’s focus to the paramount significance, sovereignty and substantial weight that comes with the bestowal of Citizenship. This has to be effectively communicated to investors by all parties involved, from Government down to the authorized government entities and most definitely by the approved practitioners and developers who create and market these perceived ‘investment vehicles’.
In case we have all forgotten, the citizenship is the investment and there are intrinsic transformative opportunities that Citizenship bestows upon successful applicants, such as the freedom to travel globally, explore and exploit new business avenues in new territories whilst elevating personal quality of life. Furthermore, Citizenship grants children greater autonomy than their parents, opening up new possibilities for entire generations to commence anew in politically stable, economically viable, and conflict-free countries, like those of the Caribbean.
These are the reasons why clients should be drawn to our programs, not the superficial promises of return on investment or exit strategies or investment schemes, and profits that rarely materialize within the statutory holding period, for the vast majority of investments.
Sure there can be an upside and there are many bona fide reputable developers offering opportunities that could result in some level of returns, or buyback but we cannot continue to oversell the investment while underselling the real reason that clients seek out second citizenships My strategy, right or wrong has always been to advise any client that they have to consider the citizenship as the investment, an investment in their family’s present and future and therefore anything else above this should be classed as a bonus, whether that be an annual vacation entitlement, a reasonable and attainable dividend or return, or the knowledge that through their citizenship application, they have assisted and aided a country in its efforts to create a better and more sustainable future for its population – a population of which the investor is now included.
In conclusion, while CBI programs can offer significant benefits, the term itself as a misnomer that perpetuates unrealistic expectations. By adopting a more accurate name we can promote greater transparency and understanding with the industry and provide a more realistic framework for individuals considering a second citizenship. It's time to retire the term Citizenship by Investment’ and adopt more accurate and descriptive name, one that more accurately describes the transaction between applicant and host country.
It is in essence an ‘Application by Contribution’, whether that contribution be as a donation or to a development, it allows the client the ability to apply for citizenship.
So lets keep it simple and lets get back to our ABCs.
author: Richard Hallam CBI Director – Ora Caribbean
