The 2022 CBI Index: Due diligence and its vital role for the CBI Industry

Due diligence is a critical step in the citizenship by investment (CBI) programme process. Host countries need to fully understand who they are bestowing citizenship on. Caribbean nations that offer CBI, such as Dominica and St Kitts and Nevis, have developed an in-depth, six-step due diligence process to better understand the individual who is applying for alternative citizenship.  

Robust and multi-layered due diligence processes are essential to any successful CBI programme because it combines internal government checks with research by specialist third-party firms, and assessments by regional and international bodies.  

Properly executed due diligence protects not only the nation and its population, but also the reputations of the programme and its international partners. Stringent due diligence ensures that only reputable individuals are granted citizenship through this process. If governments fail to take the due diligence processes seriously, it could cause reputational damage to the host country, which could result in a premature end of its citizenship programme.  

The CBI Index invited three leading international due diligence investigative agencies to discuss the importance of due diligence in upholding the integrity and transparency of CBI programmes.  

Expert Panel 

Karen Kelly is from Toronto, Canada, and is the director of strategy and development at Exiger, a leading due diligence provider to the investment migration industry and CBI programmes since 2006. Karen is an expert in enhanced due diligence and anti-money laundering, and supports clients from around the world with comprehensive solutions to allow them to build and maintain world-class due diligence programmes.

Heyrick Bond Gunning is from London and is the CEO of S-RM, a global intelligence and cyber security consultancy. Heyrick’s focus is setting the strategic direction for the consultancy which provides intelligence that informs critical decision-making and strategies from investments and partnerships through to disputes, assisting organisations build resilience to cyber security threats, and by responding to cyber-attacks and organisational crises.

Eddy Leviten is from London and is the chief operating officer of FACT Worldwide. Eddy has spent over 10 years at FACT and now oversees all operations, including its successful due diligence business, as well as its investigations, digital forensics and intellectual property services. FACT’s staff include experts drawn from UK policing, intelligence gathering and legal backgrounds. 

What is due diligence and how does it work? 

Q: Why do jurisdictions need to conduct extensive due diligence of people looking to acquire citizenship? 

Karen Kelly: When a country is considering bestowing citizenship on an investor, it requires an in-depth look into who they are, what their background is and where their funds are coming from. An important element is the engagement of a third-party expert to undertake an in-depth investigation of these applicants.  

 In order to verify an applicant’s identity, we look at the documents they have supplied, such as marriage and birth certificates, degrees and business qualifications. Furthermore, applicants are checked for criminal convictions, litigations or judgements, and whether they are on any sanctions or watch lists. Finally, we look at their source of wealth and reputation in detail. 

Third-party experts not only research what is out there in open sources, but also collect on-the-ground intelligence, enquiring with people who know these individuals about the source of their wealth and their reputation.  

Q: How easy is it for powerful and resourceful individuals from nefarious backgrounds to either forge, buy or coerce people to supply the key supporting documentation necessary to back an application? 

Eddy Leviten: Typical prospective applicants for CBI programmes are hard-working entrepreneurs looking for a safe haven for their families. They are seeking safety and security, and are looking for opportunities to develop their business interests as well. 

We see very few instances of fraud or forgery of documents. If they are taking place, they are very clearly detected because of the systems in place that allow third-party agents to cross-reference multiple databases and physical records. As these due diligence agencies are checking records including births, marriages, deaths, educational qualifications and employment, a fraudster would very quickly get found out if they were trying to falsify their background or documents. 

If an applicant were a master criminal looking to avoid prosecution in a country, this isn’t the easiest route. There would be better ways for fraudsters to hide their assets and move around the world. 

Q: Where a family applies, you have a lead applicant and some family members that come in on the application. Is more stringent deeper due diligence conducted on the lead applicant, with other family being included in the application without that level of scrutiny? 

Heyrick Bond Gunning: We apply scrutiny to all the dependants on an application and close family members. We consider issues like political affiliations, political exposure, negative media and whether there have been criminal convictions against those family members. Those checks are carried out on all the applicants and their relationships as well. We look at relationship charts between applicants and dependants, and the associates within their families. 

Q: How vital are these checks to ensuring the brand and reputation of these programmes are upheld? 

Eddy Leviten: It is vital. The main jurisdictions that offer CBI programmes have high levels of due diligence. Certainly, all the jurisdictions we work with offer very high levels of due diligence. Some countries may even use two due diligence companies to cross-reference the work that is being done in order to ensure they are picking up on everything.  

The potential for risk to the integrity of their programmes causing reputational damage to a country means that anyone who is involved recognises that due diligence needs to be at the highest possible standard.  

Q: What are some red flags that commonly come to light during the due diligence process? 

Heyrick Bond Gunning: It does vary from jurisdiction to jurisdiction, but 4-5 per cent of the applications have something wrong with them. It might be false documentation from an identity perspective, concerns because of their business associates, or an applicant doesn’t work in the sector they claim to be working in where they derive their source of wealth. 

There are a variety of issues that we see crop up and those will be the concerns we flag to the clients. What is really important is the ongoing monitoring of an applicant after the report has been written, because people’s circumstances do change. What third-party experts do is provide evidence of a snapshot in time, but circumstances change. Live monitoring is something that many CBI units are now doing, as it is becoming increasingly important to ensure that they stay on top of any potential challenges and issues that arise. 

How do the Due Diligence standards of different CBI jurisdictions compare? 

Q: Are the standards of due diligence programmes fairly consistent across all CBI programmes, or are there some that are more rigorous, potentially making their citizenships more valuable and better respected internationally? 

Karen Kelly: The programmes Exiger works with directly are already proactively applying best standards in terms of engaging the top companies, such as ours on this panel, to conduct external open source and on-the-ground checks. Conversely, there are several programmes that undertake far less stringent checks.  

The programmes we work with are striving to enhance their already high standards, not just meet minimum requirements. They consult with us for advice on how they can make further improvements to their programmes to minimise risk and discuss best practices for evaluating applicants from countries perceived to be of higher risk. This is very encouraging as the programmes I am most concerned about are those that do not discuss their due diligence processes. By not talking about it, I fear they are doing very little.  

Heyrick Bond Gunning: The Caribbean CBI programmes are transparent about maintaining due diligence practices of the highest standard. In addition to their internal checks by their respective CBI units, they all engage third-party companies to conduct due diligence. They also engage with regional and international law enforcement and intelligence, and have partners and information sharing agreements to gather information. They are also increasingly mandating agents and promoters to carry out preliminary know-your-customer checks on prospective applicants before submitting their applications.  

Q: Some countries offer fast-track accelerated programmes for a fee. Are the due diligence checks for these programmes just as stringent as those of an applicant going through the standard processing time?  

Eddy Leviten: There is only so much that can be done to speed up the due diligence process, but the checks for all applicants should be the same. Such checks include going in-country to verify the documents and to cross-reference a range of sources. The types of reports produced by a third-party due diligence provider are like reading a life story of a person. There is a biography which includes everything from when they were born, who they associate with, what their business interests are, and who their family members are. 

To produce that takes time. We can expedite reports, but we can only squeeze the time so much or else the quality suffers. 

What are the future challenges for the CBI industry and standards of Due Diligence?  

Q: Often applicants are successful, politically connected individuals who are trying to distance themselves from a restrictive regime in their country of origin. What safeguards are in place to ensure there is adequate due diligence of these applicants with a higher risk level?  

Karen Kelly: Whether we are talking about political exposure or jurisdictional risk, any risk or red flag must be viewed in context. Many individuals looking for citizenship opportunities are from high-risk jurisdictions. Whenever you are looking at those high-risk factors or red flags, they must be viewed in the context of the CBI programme’s risk appetite or threshold.  

Due diligence providers are  there to provide facts and intelligence, to corroborate information and to empower the programme with the resources to determine whether a person is above or below that risk threshold. The programme will also consider the information they receive from other sources, such as intelligence and law enforcement agencies. They will then review the applicant considering their own risk appetite. 

Q: Is it necessary to conduct deeper, enhanced due diligence checks for certain applicants? 

Eddy Leviten: It is critical to undertake the same levels of investigation and checks on all applicants and their dependants based on the documentation provided by the CBI Unit. When we receive an application, we are not aware of their risk profile. We apply the same verification process to all applicants. 

We provide a risk profile to the CBI Unit to enable them to make an informed decision. In some instances, however, we are instructed by the CBI Unit to conduct additional in-depth checks, based on the applicant’s risk profile.  

Q: There have been game-changing global events in the past three years. How have these events affected the CBI industry and the ability to conduct due diligence checks?  

Heyrick Bond Gunning: These events have affected many countries and their gross domestic product. The pandemic specifically had a significant adverse effect on international tourism, which many of countries (not just those with CBI programmes) heavily rely upon as a source of revenue. The pandemic put pressure on CBI units to adapt their processes to become as efficient as possible to ensure that they continue to attract applicants. However, this has not come at the expense of compromising their due diligence standards. All the most successful CBI programmes understand how important a role due diligence plays in maintaining the reputation and popularity of their programmes.