The Americas / Law, Policy, and a Risk-Strategy converge in Dominica’s Citizenship by Investment (CBI) Programme; Dominica promises the United States of America to implement Six CBI Principles by Asha P James

Introduction

No rational (and strategic) thinking person would oppose wider stakeholder engagement that achieves the objective of preserving Dominica’s reputation in the international arena. Therefore, I applaud Dominica’s (and the other four Caribbean CBI countries) 2023 commitment to the United States of America (USA) to change their Citizenship By Investment (CBI) Programmes in six areas (the ‘2023 Six CBI Principles’)[i].

The Caribbean CBI Countries, like several other countries, operate investment migration schemes whereby foreigners (and their qualifying family members) are granted second citizenship by making a financial investment in the target country. Since 1992, the USA has run its own investment migration scheme[ii]. However, there are major conceptual and practical differences between the US model and that of the CBI Caribbean. For example, under the US model, the successful foreign applicant is granted a right of residency; under the Caribbean CBI model all rights and privileges of citizenship are granted immediately upon investing. Also, in recent years, the USA has made significant regulatory, policy and operational enhancements to its own programme with its stated aim of improving integrity, transparency and security.[iii]

In this article, I focus on Dominica’s CBI Programme as it is one of the oldest among its Eastern Caribbean counterparts. Also, on July 18, 2023, the United Kingdom imposed a visa travel requirement for Dominica nationals, based on that government’s conclusion that Dominica’s CBI Programme was one that ‘has shown clear and evident abuse including the granting of citizenship to individuals known to pose a risk to the UK’’[iv].

Consequently, I review the context in which the 2023 Six CBI Principles were agreed and the substantive principles themselves, to reach three conclusions about Dominica’s CBI Programme. First, I say that the change in the CBI landscape in response to developed states’ requests was inevitable. History has proven that Dominica (and indeed the other Eastern Caribbean countries) usually comply with these types of requests. Secondly, the current laws of Dominica are adequate to support an immediate implementation of the 2023 Six CBI Principles. Thirdly, what is needed to implement the 2023 Six CBI Principles are changes to Dominica’s current policy and tweaks to the  processes of its CBI Programme.

However, this article does not comment on any regulatory, policy or operational changes that the Dominica authorities have made or will make to Dominica’s CBI Programme in response to the 2023 Six CBI Principles or for any other reason.

The inevitability of compliance

A change to Dominica’s CBI Programme, in response to developed states’ requests has always been inevitable. This is because of the significant value of the CBI Programme to Dominica. I expect that Dominica would wish to avoid de-risking and sanctions due to failure to implement the requested changes. Dominica has a history of compliance with the USA’s requests in other areas of global import.

Firstly given Dominica’s strategy, Dominica needs the funds from its CBI programme.

This is confirmed by the World Bank’s 2022 Debt Sustainability Analysis. This analysis highlights Dominica’s (1) historic reliance on CBI revenue to buffer fiscal deficits, (2) reliance on CBI inflows for sustainability of its debt recovery projections, and (3) reported reliance on CBI funds to fund its current ambitious infrastructural development projects including a new international airport and geothermal generation plant.[v]

It is also known that policymakers, to avoid de-risking, sanctions and just plain bad publicity move quickly to change local laws to implement developed states’ requests.

We remember Dominica’s experience with the Foreign Account Tax Compliance USA Act (FATCA) more than five years ago.  At that time, the USA requested that Dominica’s financial institutions comply with U.S. legislation to report U.S. citizens’ bank account information directly to the IRS in the USA. The U.S. request to Dominica was made with the stated aim to ‘improve the international tax regime’.

We also remember, the many legal opinions (mine included) that the FATCA U.S. legislation had no legal effect in Dominica. Moreover, we concluded that any compliance with this U.S. statute would conflict with Eastern Caribbean’s banking confidentiality laws. But in 2018, we watched as our Dominica legislators enacted local laws replicating much of the U.S. legislation [vi]Our Eastern Caribbean financial institutions scrambled to change their practices to comply with the new local tax reporting laws. And importantly, lawyers’ jurisdictional arguments that the FATCA USA laws had no effect in Dominica became moot.

Fast-forward in time and another industry later- what has always been inevitable is that our Dominican law, policy or strategy would change to comply with the CBI-related requests of the USA.  If Dominica’s CBI revenues are so invaluable; there is little choice but to ‘collaborate and cooperate’.

The Face of Compliance with the 2023 CBI Principles

Unlike Dominica’s FATCA experience, I am of the view that new local legislation is not required to implement the 2023 Six CBI Principles. Dominica’s current CBI legislation[i] is already adequate to support the implementation of the 2023 Six CBI Principles. However, what is necessary to apply the 2023 CBI Principles is a change in procedures within Dominica’s programme itself.

The 2023 Six CBI Principles that Dominica (and the other Caribbean CBI Countries) reportedly committed to implement are[viii]-:

Principle 1: Collective agreement on the treatment of denials.

Dominica promised the USA that it would reject applications from individuals who been previously denied in other CBI jurisdictions by proactively sharing information on denials.

Dominica’s Principal Regulations provide several grounds upon which an applicant can be denied, including its umbrella ground that the applicant can be denied if he ‘is or has been involved in any activity likely to bring disrepute to Dominica’ [ix]  Surely, an applicant’s previous CBI rejection in another jurisdiction can warrant a denial of their citizenship application under this ground.

Therefore, what is required for Dominica to implement this ‘promise’ is merely a policy directive to its CBI Unit [x]  to use its powers of denials for this reason.  An inter-country MOU of CBI Units should support an immediate sharing of information. Thereafter, a joint data collection institution would support a more efficient framework for information collection, searching and retrieval.

Principle 2: Interviews

Dominica promised to conduct interviews with applicants, whether in person or virtually. However, Dominica’s Principal Regulations already give its CBI Unit broad discretion to  require that an applicant undertake an interview, either virtually or in person.[xi] The Principal Regulations also provide the Minister with the power to appoint a panel to interview an applicant; this panel is to consist of senior diplomatic, consular and government officers.[xii] Furthermore, a recent 2023 amendment to the Principal Regulations[xiii]provides for enhanced due diligence and mandatory interviews for applicants and dependents, who are citizens from countries specified in a Notice of the Minister published in the Dominican Gazette.

Consequently, Dominica’s current CBI laws allow it to satisfy its promise to the USA to conduct interviews. All that is required to comply is a tweak to its policy and internal practices.  First, to consider a risk-based two-tiered interview approach. This framework should utilise the CBI Committee for its basic interviews and the more senior Ministerial appointed interview panel for applicants subject to enhanced due diligence. Secondly, it is necessary to identify the mischief that these mandatory interviews seek to cure. Also, to understand why the current paper application does not cure this mischief. Thereafter, to target the interview process to address it. This may be necessary to prevent a mandatory interview requirement from becoming a mere tick-box exercise of diplomatic shenanigans.

Principle 3: Additional checks

Dominica promised to ‘run checks’ on each application with its Financial Intelligence Unit (FIU).

The FIU is responsible for investigating and reporting for possible prosecution of suspected money laundering and terrorist financing activity in Dominica. The FIU’s enabling legislation allows it to ‘consult with any person, institution or organisation within or outside Dominica for the purposes of the exercise of its powers and duties under this Act’’.[xiv]  Separately, Dominica’s CBI Regulations compel the CBI Unit to commission ‘background due diligence checks’ on applicants from ‘one or more independent professional firms’[xv].

Indeed, information about a CBI applicant who is suspected of being involved in money laundering or terrorist financing is pertinent to both statutory agencies. For the FIU- this information is relevant to further its aim to investigate to deter with prosecution; for the CBI Unit- that information is relevant to its duty to deny applications of persons who are involved in activities ‘likely to bring disrepute to Dominica’.

It is likely that information sharing between the CBI Unit and the FIU is permissible under their respective statutes to further their separate aims. Consequently, the parameters of such information sharing can be easily settled by an inter-agency MOU. Notwithstanding, each agency would need to be mindful of its related obligations during this information sharing exercise. For example, the AML rule against tipping off [xvi]would likely apply to the CBI Unit when it satisfies its statutory obligation to notify an applicant of a denial or delay, whilst there is an ongoing money laundering or terrorist financing investigation related to the applicant.

Principle 4: Audits

Dominica promised to audit its Programme annually or at least every two years in accordance with internationally accepted standards.

I posit that such audit can be conducted through a simple policy directive to undertake it, without any need to change Dominica’s CBI laws. However, the actual value of an audit is not so much in performing it. Real value is achieved by agreeing to the standards against which one is to be tested, establishing meaningful audit objectives and agreeing to implement audit recommendations within set timelines.  Further, wholesale adoption of the US standards and processes may be inappropriate, given the differences between the US and the Caribbean investment migration schemes.

Principle 5: Retrieval of passports

Dominica promised to request law enforcement assistance to retrieve revoked/recalled passports.

Dominica appears not to have made any promises to change the grounds or process for deprivation of citizenship to ‘CBI citizens’ or cancellation of passports.  What Dominica promised to do appears to be that- after Dominica completes its process for citizenship deprivation and passport cancellation for a target ‘CBI citizen’, it will then ask for assistance from law enforcement to retrieve the revoked/recalled passports.

The laws setting out the grounds and process of depriving a ‘CBI citizen’ of citizenship,[xvii] and after that, cancelling a passport appears to be relatively involved in Dominica. For deprivation of citizenship, the Minister must notify the person and constitute a committee of inquiry if the person objects, before he can issue an Order of Deprivation[xviii]. For cancellation of passports, the person must have been convicted of a specified offence before the Minister’s Cancellation Order.[xix]

But, with the Six 2023 CBI Principles, Dominica did not commit to change its process for citizenship deprivation and passport cancellation or to set completion timelines. Consequently, the process of retrieving a cancelled passport (which remains the property of Dominica[xx]) can be achieved through directives to local enforcement and regionally through the CARICOM Implementing Agency for Crime and Security (IMPACS).[xxi]

Principle 6: Treatment of Russians and Belarusians

Dominica promised to suspend processing applications from Russians and Belarusians.

However, since March 2022 Dominica’s CBI Unit has published Dominica’s policy decision (and the Unit’s intention to act thereupon immediately) to refuse new applicants from Russians and Belarusians.[xxii] Therefore, in my view, there is nothing more required from Dominica to implement this promise.

Conclusion

In conclusion, a change to Caribbean CBI Programmes in response to developed states’ requests was inevitable. In this article, in respect of Dominica’s implementation of the 2023 Six CBI Principles from the USA, I have outlined what these changes should look like- a series of policy directives giving rise to operational and process changes, within Dominica’s existing legal framework.

Notwithstanding, I expect that as more geopolitical ground shifts, the Dominican (and Caribbean) CBI landscape will undergo further change. For example, it is not far-fetched to expect the US to give the Caribbean CBI Countries more ‘guidance’ thereby augmenting the initial ‘2023 Six CBI Principles’. Also, it is possible that the UK will extend its visa-regime to other CBI Caribbean Countries or set conditions for its return of visa-free travel access. Such conditions will likely affect our CBI Programmes. It is foreseeable too, that the European Union will eventually devise its own version of the ‘CBI Principles’ requesting (demanding?) changes to the Caribbean CBI programmes. In any event, law, policy and risk-strategy will continue to converge in Dominica’s CBI Programme, as well as in the other Caribbean CBI Countries.

The information contained in this article is not intended to provide, and should not be relied on as legal or other advice. Any opinions expressed are solely the personal views and observations of the author and do not represent the views of any other person including her affiliates. 

Author: Asha Pearl James
Designation: Attorney-at-Law
Organisation: Courts and Tribunals Service
Country: Saint Lucia and Dominica

Email: clarionlaw@clarionlawcaribbean.com

Web:  www.clarionlawsaintlucia.com

Biography

Asha Pearl James is an Attorney-at-Law practising in Saint Lucia and the Commonwealth of Dominica.

Asha received her LLB and LLM (Corporate/Commercial Law) from University College London (UCL), United Kingdom. She received her BPTC from BPP Law School, London. She was called to the Bar by the Honourable Society of Lincoln’s Inn in the United Kingdom. She also holds a Legal Education Certificate from Hugh Wooding Law School in Trinidad and Tobago.

She has a combination of 15 years’ legal experience in banking/finance, construction, capital/infrastructural projects, corporate governance, management and investment migration.

Asha Pearl has a passion for simplifying and resolving legal issues by using plain English, candor, practicality and risk management strategies. She enjoys engaging in areas of her legal practice and interests.

Footnotes:

[i] The five Caribbean countries are Dominica which started its CBI programme in 1993, Antigua and Barbuda reportedly began in 2013, Grenada in 2013, Saint Lucia in 2015 and St. Kitts and Nevis in 1984/ Press-Release-OECS-Prime-Ministers-Negotiate-CBI-Agreement-with-US-TA.pdf (investmentmigration.org)

[ii] US- EB -5 Immigrant Investor Programme: https://www.uscis.gov/working-in-the-united-states/permanent-workers/eb-5-immigrant-investor-program

[iii] https://www.uscis.gov/working-in-the-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/eb-5-whats-new

[iv] The UK Government also expressly stated that its decision to impose the visa requirements was taken for ‘migration and border security reasons and is not a sign of poor relations with these countries’. See further: https://questions-statements.parliament.uk/written-statements/detail/2023-07-19/hcws979

[v]Dominica – Joint World Bank-IMF Debt Sustainability Analysis (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/440801653321436579/Dominica-Joint-World-Bank-IMF-Debt-Sustainability-Analysis

[vi] Agreement of USA and Dominica governments to Improve International Tax Compliance and Implement FATCA, 2018. https://home.treasury.gov/system/files/131/FATCA-Agreement-Dominica-6-15-2018.pdf;  Foreign Account Tax Compliance (United States of America) Act No. 14 of 2018  of the Laws of Dominica : https://dominica.gov.dm/laws/2018/Foreign%20Account%20Tax%20Compliance%20(%20United%20States%20of%20America)%20Act%202018.pdf;  FATCA Commencement Order, SRO 17 of 2021, of the Laws of Dominica: https://dominica.gov.dm/laws/2021/Foreign_Account_Tax_Compliance_USA_Commencement_Order_2021_Sro_17_of_2021.pdf; Dominica implementation: http://www.news.gov.dm/press-releases/1438-registration-of-licensed-non-bank-financial-institutions-in-compliance-with-fatca

[vii] Dominica’s CIP Programme is governed by the Commonwealth of Dominica Citizenship Act Chap 1:10 and the Commonwealth of Dominica Investment Regulations of the 2017 Revised Edition of the Laws of Dominica. The Principal Regulations have been amended by Amendment Regulations, 2017, 2018, 2019, 2020, 2022.

[viii] Reported on  https://www.bloomberg.com/press-releases/2023-07-14/the-commonwealth-of-dominica-adds-vital-layer-to-its-cbi-processing-requires-all-applicants-to-conduct-interviews

[ix] Regulation 5 of the Principal Regulations

[x] Under Regulation 3 of the Principal Regulations the CBI Unit is the body responsible for ‘administering the Citizenship by Investment Programme and for processing all applications for Citizenship by Investment’.

[xi] Regulation 4(10) ‘…if the Unit considers it necessary, an applicant may be required to attend an interview. The interview will normally be conducted in Dominica, however at the request of the applicant and where considered by the Unit to be appropriate, provision may be made for the interview to be conducted elsewhere at the expense of the applicant’.

[xii] Regulation 9, (1): ‘The minister may appoint a committee to review an application and interview the applicant’. (2) Where the Minister appoints a review panel, the panel may request the applicant appear in person before it to be interviewed (3) The interview will normally be conducted in Dominica, however, at the request of the applicant and where it is considered by the Unit to be appropriate, provision may be made for the interview to be conducted elsewhere at the expense of the applicant’ . Also Sub Regulations (4)- (7)

[xiii] Amendment Regulations: SRO 8 of 2023 made on June 16, 2023. https://dominica.gov.dm/laws/2023/commonwealth_of_dominica_citizenship_2023_rso_8_of_2023.pdf

[xiv] Section 4(1)(k) of the Financial Intelligence Unit Act Chapter 63:04 of the 2017 Revised Edition of the Laws of Dominica

[xv] Sub Regulation 4(12) of the Principal Regulations

[xvi] Money Laundering (Prevention) Act Chap 73:03 of the 2017 Revised Edition of the Laws of Dominica, section 5(1) provides ‘A person who has reasonable grounds to believe that an investigation into a money laundering offence has been, is being or is about to be made shall not prejudice the investigation by divulging the fact to another person’.

[xvii] Any doubt that this deprivation of citizenship process applies to persons obtaining citizenship under the CBI Programme is dispelled by the express language of section 4(10)(b) of the Regulations- ‘If an applicant is subsequently found to have provided false or incorrect information, or concealed any material fact, the applicant may be deprived of Citizenship of Dominica pursuant to Part III, section 10(2) of the Act’.

[xviii] Commonwealth of Dominica Citizenship Act Chap 1:10 section 10.

[xix] Sections 28B and 28C of the Immigration and Passport Act Chap 18:01 of the 2017 Revised Ed of the Laws of Dominica.

[xx] The Immigration and Passport Act, section 28D provides ‘All passports issued by or on behalf of the Government of Dominica are the property of Government of Dominica’.

[xxi] https://caricom.org/institutions/caricom-implementing-agency-for-crime-and-security-impacs/

[xxii] Banned Nationalities for Citizenship by Investment | Dominica CBIU