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St Kitts-Nevis passports used to facilitate financial crime
Published on May 22, 2014 Email To Friend    Print Version

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By Caribbean News Now contributor

WASHINGTON, USA -- According to an advisory issued on Tuesday by the US Treasury’s Financial Crimes Enforcement Network (FinCEN), foreign individuals are abusing the citizenship-by-investment program sponsored by St Kitts and Nevis (SKN) to obtain SKN passports for the purpose of engaging in illicit financial activity.

The SKN citizenship-by-investment program offers citizenship to a non-citizen who either invests in designated real estate with a value of at least US$400,000 or contributes US$250,000 to the St Kitts and Nevis Sugar Industry Diversification Foundation.

According to Prime Minister Denzil Douglas, the SKN program rakes in more than $100 million annually.

Such citizenship-by-investment programs are actively promoted by at least three other Caribbean countries – Antigua and Barbuda, Dominica and Grenada. Saint Lucia and The Bahamas are also considering implementing similar programs.

In Grenada, where the previous iteration of its citizenship-by-investment program was abandoned amid high profile frauds by Grenadian economic citizens and allegations of government corruption, the program was reinstated last year but has since run into renewed controversy over conflicts of interest and a lack of transparency.

It has been known for some time that such programs are also coming under increasing scrutiny in Washington and recently a well-placed US intelligence source, who spoke on condition of anonymity, warned that the United States will come down on these citizenship programmes with a very heavy hand – something that now seems to be taking place.

Specifically, FinCEN believes that illicit actors are abusing the SKN program to acquire citizenship in order to mask their identity and geographic background for the purpose of evading US or international sanctions or engaging in other financial crime.

For example, FinCEN said that several Iranian nationals designated by the Office of Foreign Assets Control (OFAC) have obtained passports issued through the SKN citizenship-by-investment program.

“While many countries offer programs similar to the SKN citizenship-by-investment program, the SKN program is attractive to illicit actors because the program, as administered, maintains lax controls as to who may be granted citizenship,” the FinCEN advisory read.

While the SKN government has publicly pledged to improve these controls, FinCEN believes that they remain ineffective. For example, in 2013 the SKN government announced that all Iranian nationals were suspended from participating in the SKN citizenship-by-investment program. Despite this public assurance, FinCEN believes that Iranian nationals continue to obtain passports issued through the program. As a result of these lax controls, illicit actors, including individuals intending to use the secondary citizenship to evade sanctions, can obtain an SKN passport with relative ease.

FinCEN said that financial institutions can mitigate exposure to such risk through customer due diligence, including risk-based identity verification consistent with existing customer identification program requirements.

In particular, financial institutions should conduct risk-based customer due diligence to mitigate the risk that a customer is disguising his or her identity with an SKN passport in order to evade sanctions or engage in other financial crime. This due diligence may include verifying the customer's identity using a form of government-issued identification other than, or in addition to, the SKN passport, or using non-documentary methods that enable the financial institution to form a reasonable belief that it knows the true identity of the customer, including the customer's country of origin.

If a financial institution knows, suspects, or has reason to suspect that a transaction conducted or attempted by, at, or through the financial institution involves funds derived from illegal activity, is an attempt to disguise funds derived from illegal activity, is designed to evade regulations promulgated under the Bank Secrecy Act, or lacks a business or apparent lawful purpose, the financial institution may be required to file a suspicious activity report.

A Dubai-based company Range Developments has been actively promoting developments in the Caribbean financed through citizenship-by-investment programs, notably, the Park Hyatt St Kitts at Christophe Harbour in SKN and a proposed Kempinsky-branded hotel in Dominica.

The main contractor for another Range project – the Al Rawdatain Residences in Karbala, Iraq – is the Tadbir Construction Development (TCD) Group, which is a company or group of companies blacklisted by the US Department of the Treasury as fronts controlled by the Iranian leadership.

However, according to a recent statement by the Range group, “There is absolutely no financial or commercial connection whatsoever between Range Hospitality's project in Iraq and Range Development's project in St Kitts.”

The St Kitts project has an escrow account administered by Standard Chartered Bank and Range Developments is audited by Grant Thornton.

According to the Range group statement, as soon Range Hospitality became aware the TCD Group was named as a Specially Designated National by the United States Office of Foreign Assets Control in June 2013, the contract with TCD was terminated by Range Hospitality. A leading law firm has been instructed to commence arbitration against TCD.

“Range Developments has not accepted any investors in its project in St Kitts from the project's inception from any individual from Iran,” Range said in its statement.

Meanwhile, a new inter-agency task force has reportedly been set up between authorities in the US and Britain to investigate allegations of sanctions-busting.

In a statement on Wednesday, Dr Timothy Harris, leader of the opposition coalition Team Unity in SKN, said that the country’s citizenship-by-investment program needs an urgent overhaul by independent professionals if it is to regain its integrity.

“We believe that the Douglas regime has singlehandedly undermined the citizenship-by-investment program and dirtied our country's good name and international reputation. The US government clearly has no trust in the illegitimate regime and has moved from quiet diplomacy pursued with the Iranian diplomatic passport scandal last year to open censure of the government via public advisory,” he said.
 
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