In 2017, Antigua and Barbuda and Dominica have made changes to the operation of diplomatic passports while the St. Kitts government continues to debate proper regulation of Citizenship-by-Investment (CBI). As the popularity of CBI has continued, so has the criticism of the vetting, transparency, and governance issues arising out of the programs.

Diplomatic passports

Although the granting of diplomatic passports is a separate activity/product from CBI, in fact the two have linked because the problems associated with the operation of diplomatic passports coincide with the governments that have CBI.

Antigua and Barbuda

On March 1, 2017, Gaston Brown, the prime minister of Antigua and Barbuda, announced that his cabinet is implementing a new policy on diplomatic representation and accreditation.

The new policy is based on recommendations prepared by Sir Ronald Sanders, ambassador of Antigua and Barbuda to the U.S.

The new procedures provide enhanced integrity and standing of diplomatic and other passports by requiring more rigorous appointment procedures, including expanded due diligence and monitoring practices.

On February 7, 2017, the announcement by the Antigua and Barbuda cabinet stated that in March 2017, when new electronic passports, containing biometric data, would be ready for use, the government would recall all existing diplomatic and official passports, except those held by (i) the governor-general and spouse, (ii) the prime minister and spouse, (iii) ministers of the government and spouses, (iv) diplomats accredited by formal government to other states and international and regional organizations, and their spouses and dependent children.

Thereafter, the government will issue and monitor diplomatic and official passports in accordance with the following guidelines: categories of entitlement for diplomatic passports (e.g., governor general, prime minister, cabinet ministers, president of Senate, speaker of the House of Representatives, ambassadors, and ambassadors-at-large or special envoys); and categories of entitlement for official passports (e.g., members of the Senate and the House of Representatives, senior public servants, including permanent secretaries).

Appointment of non-national ambassadors-at-large, special envoys and honorary consuls. They will be granted on a limited basis to increase the global reach of the state. The cabinet must appoint non-national ambassadors-at-large, special envoys and honorary consuls only in circumstances where such appointments will further the goals of the state or bring added value to Antigua and Barbuda’s international or bilateral relationship with countries. To manage the risks associated with these appointments, the appointment will be for a maximum of two years, subject to renewal upon satisfactory performance.

Non-national persons considered for appoints as ambassadors-at-large, special envoys and honorary consuls must: (a) be of good reputation and proven competence; (b) not have any criminal record; (c) possess the skills necessary to function in the designated role; and (d) submit to rigorous and satisfactory due diligence checks.

Applicants for the above-three positions must submit all necessary information and documentation for enhanced due diligence process; provide an outline of planned activities for their task, emphasizing their capacity to bring benefits to Antigua and Barbuda; and deliver annual reports on the progress made including recommendations for improvements.

Applicants for these three positions must provide: police certificates from countries of residence and birth, and declarations on source of funds and disclosure of business activities.
The government will evaluate non-national ambassadors-at-large, special envoys and honorary consuls on a yearly basis to determine effectiveness of representation. If an appointee envoy does not fulfill the goals for which his/her appointment was made and is judged not to have brought any added value to the state, the government must terminate the appointment.

A review committee will be appointed to determine the performance, including any risks to the state’s reputation or otherwise, by non-nationals appointed as ambassadors-at-large, special envoys and honorary consuls. The committee must be non-political and will compromise five senior persons drawn from the existing public service (or retired persons with relevant experience), including law enforcement agencies, and will make recommendations to the cabinet on the continuance or termination of the appointments.

The appointments of all diplomats, including nationals, will be ended should they be found by a court to have committed a serious crime or should it be established that they have abused their diplomatic status to infringe the laws of Antigua and Barbuda or any state abroad.

With effect from the implementation of its new electronic passports, in March 2017, or at the effective date, the government will provide a list of all holders of Antigua and Barbuda diplomatic and official passports to those countries with which it has formal diplomatic relations.

On January 27, 2017, Xiao Jianhua, a 45-year old China-born billionaire who is a Canadian citizen and an Antiguan and Barbudan ambassador, was taken in a wheelchair from a luxury Hong Kong hotel with his head covered and eventually brought to China, apparently to cooperate in a corruption investigation.

Dominica

On January 1, 2017, a CBS 60 Minutes program on “Citizenship by Investment” or CBI by several Caribbean islands, including Dominica, featured alleged abuses in issuing diplomatic passports, including the fact that several of Dominican diplomats have been arrested or are persons of ill repute. Critics called for the enactment of a Foreign Service Act in Parliament to govern the appointment of diplomats and others in Dominica’s diplomatic service and the appointment of a Commission of Inquiry, presided over by a distinguished Caribbean jurist to fully and comprehensively audit and investigate the CBI program and diplomatic appointments in controversy and report its findings to the Dominican public. One critic, Gabriel J. Christian, a Dominican and attorney in the Washington, D.C. area, observed that the Canadian government has imposed visa restrictions on Dominica after some 66 Chinese bearing Dominica passports were intercepted in Canada in 1999. He also alleged that news about one of Dominica’s diplomat appointees Macau based Lap Seng’s (Mr. Wu) involvement in illegal activity was aired on ABC News in 1997.

Another critic referred to the arrest and return to Iran on January 16, 2017 of Dominican diplomat, Alireza Zibahalat Monfared. Monfared has been accused of involvement in a sanctions-busting scheme (U.S. and U.S. sanctions against Iran oil industry) in which he worked closely with another Iranian who was sentenced to death last year for embezzling the Iranian government of some $2.8 billion. Monfared allegedly participated in a group helping Iran to evade UN and U.S. sanctions.

According to Christian, the Commission of Inquiry should report on: the numbers of passports issued under the program from inception; the names of all passport agents and full disclosure of their contracts of service; a complete audit of monies earned under the current administration from the passport/CBI program and the appointment of diplomats; the location of all monies earned and the manner of expenditure of such monies; an audit of all diplomatic positions granted, public disclosure of the names of all persons given diplomatic passports, and whether any monies were paid to the government or its agents/assigns for such diplomatic passports or positions; government officers, ministers and agents should give testimony under oath; the parliamentary opposition must have a member on the five person commission and the commission should include a member of the Dominican government, a local non-partisan professional and a qualified forensic audit from a Commonwealth country or the U.S.; and the Commission of Inquiry should be held in public, and in camera, in the Dominican parliament.

On February 27, 2017, Dominica’s Prime Minister Roosevelt Skerrit expressed his regret “at the unfortunate turn of events with respect to a few persons holding diplomatic passports becoming persons of interest to foreign countries and external security organizations” and acknowledged that such incidents have shown the need for improvement. Skerrit accused the opposition of conducting a “concerted and orchestrated campaign against the citizenship by investment program” which, he said, led to “incidents of looting, burning and other forms of vandalism, instigated by irresponsible politicians.”

Mr. Skerrit said the interim policy would be as follows:

  • All non-nationals under consideration for diplomatic and consular appointments will undergo the same due diligence requirements as persons applying for citizenship under the CBI program of Dominica.
  • A prospective appointee must meet and fulfill the requirements of the Dominican government and also must be approved by an internationally rated and recognized global security agency that would conduct the requisite due diligence exercise.
  • A prospective appointee must not have a criminal record, be of good reputation and proven competence, and possess the requisite skills required to operate in the designated role.
  • Where applicable, declarations must be made on sources of funds and disclosure of business activities of the proposed appointees.
  • All future consular and diplomatic appointments shall be for a period of no more than three years at any one appointment.
  • The Dominican government will undergo a more rigorous monitoring of all appointees to  ensure that these persons are doing an effective job for the country and that they continue to be held in high regard by their peers and in the country in which they are representing Dominica’s interests.

Skerrit’s announcement is in response to the cascading criticism and the call for a Commission of Inquiry. It remains to be seen whether his announcement will be sufficient to squelch the growing criticism.

Citizenship-by-Investment developments in St. Kitts concern vetting issues

On May 23, 2017, Labour parliamentarian Konris Maynard was ordered to leave parliament on the heels of a debate between the Speaker of the National Assembly Michael Perkins and opposition leader, former prime minister Denzil Douglas over comments Douglas made about a certain Chinese economic citizen of the federation. The speaker had told Maynard to sit down when he tried to make a point of order during a presentation by Prime Minister Timothy Harris.

Following a statement by China suggesting that CBI recipient, Chinese national Ren Biao, had become a citizen of St. Kitts by using illicitly obtained funds, P.M. Harris said that the government is hoping it will be able to strengthen other components of the economy significantly enough over a period of time so that it can phase out the country’s CBI. He made the observation while explaining his government’s efforts to ensure that the CBI program does not attract tainted funds.

On May 9, 2017, Harris, who is accused of harboring fugitive Ren, said he inherited a bad situation from the prior Douglas administration. Harris said the Douglas administration granted Ren citizenship even though Interpol informed the prior administration of Ren’s pending arrival in St. Kitts and Nevis in July 2014. Harris observed that the passports in question did not have the country of origin field, despite earlier warnings from the U.S. government.

In March, Harris stated records provided by the Canadian bank Note Company showed that some 15,197 regular passports, 91 diplomatic and 39 official passports were issued without the country of birth field by the Douglas administration. Harris said his administration has decided to deactivate all passports issued by the former government without the country.

In 2014, Canada revoked the visa waiver that holders of St Kitts and Nevis passports, citing concerns about the issue of passports and identity management practices with the CBI program.

Analysis

The Xiao disappearance also calls attention to the issue of extradition and alternatives and their interaction with international human rights as well as the need for better regulation of both CBI and diplomatic passports. In this regard on September 6, 2016, at the G20 summit in Hangzhou a resolution provides for the Chinese to start an institute about anti-corruption and the need for other countries to cooperate in returning persons suspected of corruption and deny their entry into their countries. The G20 has committed to continue the G20 Denial of Entry Experts Network. In this regard, consistent with national legal systems, the G20 will work on cross-border cooperation and information sharing between law enforcement and anti-corruption agencies and judicial authorities. Increasingly, the G20 and international organizations are likely to increase their demands for better regulation of CBI programs.

Assuming CARICOM members want to preserve as much of their sovereignty as possible, and considering the implications for CARICOM in the context of the single market, CARICOM itself should act to require better regulation of both diplomatic passports and CBI. Failure of the countries with CBI programs and CARICOM to regulate is likely to result in increased pressure from the G7, G20, OECD, and countries, such as China, to act or face potential countermeasures.

SHARE
Previous articleThe deteriorating investment climate in South Africa
Next articleEntrepreneurial transfer pricing – embracing the arm’s length principle
Bruce Zagaris

Bruce concentrates his practice in tax controversy and international criminal law. His tax controversy work has included representing individuals on voluntary disclosures, audits, and litigation as well as consulting and serving as an expert witness in criminal trials for defendants and the U.S. Government. Since 1981, he has also represented foreign governments in international tax and financial services, including advising and helping negotiate income tax and tax information exchange agreements. He has also written a number of books and articles, and is an adjunct professor. Bruce is founder and editor of the International Enforcement Law Reporter.
 

Bruce Zagaris
Partner
Berliner Corcoran & Rowe LLP
Washington, D.C.
United States

T: +1 (202) 293-2371            
E: bzagaris@bcr-dc.com            
W: www.bcr.us www.ielr.com  

 

Berliner Corcoran Rowe

We serve a local, national, and international clientele, including large corporations, foreign governments, small-to-medium sized domestic and foreign businesses, and individuals.

The lawyers at our law firm embrace a philosophy of managing client projects with a commitment to excellence and quality, timely legal work, attention to detail, and careful and thoughtful analysis, while being mindful of the client's sensitivity to legal fees and expenses. Berliner, Corcoran & Rowe, LLP clients enjoy personalized partner-level attention in a broad range of legal services along with excellent staff support and resources.

At Berliner, Corcoran & Rowe, LLP, clients work with experienced attorneys dedicated to personal attention to client needs. The law firm provides a full range of services to business and individual clients. The firm's attorneys are admitted in jurisdictions beyond the capital region of Washington, DC and the United States and are qualified or fluent in other languages, including German, Greek, French, Portuguese, Arabic and Spanish.

Many attorneys at the law firm have gained extensive experience in working abroad and in advising international clients from all continents and are familiar with their unique needs in the American legal environment.

Berliner Corcoran & Rowe LLP
Suite 1100
1101 Seventeenth Street, NW
Washington, DC 20036
United States


T
: +1 (202) 293-2371            
E: bzagaris@bcr-dc.com            
W: www.bcr.us www.ielr.com