Grenada

When the Grenada Citizenship by Investment (CBI) programme was launched in August 2013, it was believed by many to be the only way to save the island from an economic downfall. 

Grenada’s Prime Minister Dr Keith Mitchell pushed the passport scheme in 2013 as his government battled economic struggles whipped up by the global financial downturn.

Government declared that the programme would become a main source of revenue to help develop the island and pay outstanding debt to international creditors and lending agencies. 

The programme offers individuals the ability to buy its passport in as few as 60 days at a minimum cost of  USD $150,000 USD in addition to USD $8,000 processing fees.

In 2018, five years after the programme started, the International Monetary Fund (IMF) warned of an overreliance on CBI inflows, noting that the programme accounted for 4.5 per cent of GDP in 2017:

“Further improve mechanisms for monitoring the proceeds of CBI inflows and recording all flows through the consolidated fund on budget to improve fiscal management and reporting,” was a major red flag from the IMF, which also asserted that “strict enforcement of the due diligence process of the CBI program are critical for Grenada’s continued stable access to cross-border bank payments”.

(https://www.elibrary.imf.org/view/journals/002/2018/236/002.2018.issue-236-en.xml)

The CBI program based on projections in the budget estimate is expected to remain a vital earner for Grenada’s economy.

Red Flags

By law, the identity of beneficiaries under the programme is a tightly kept secret – just one of the restrictions that raises a transparency red flag for a programme that plays a major role in raising cash and investments to boost economic growth. 

Grenada is just one of five countries in the English-speaking Caribbean to offer the programme. Through these schemes, non-nationals can purchase citizen status after making financial commitments to invest in real estate or special funds set up by the governments. 

But there have been longstanding concerns by citizens, local anti-corruption lobbyists and powerful development partners in Europe and North America that the passport schemes could be abused to shield bad actors like money launderers and terrorism financiers. It’s a concern echoed wherever CBI programmes exist.

Cases of questionable investments and weak policing systems have emerged to support some of the claims that not enough due diligence is being conducted before applications are approved. There is also a view that the processes are lax because governments want to maximise on investments given the role of the programmes in the economies. 

But the small mainly tourism-dependent economies of the Caribbean operating such programmes have pounced on the arguments, pointing to their open economies and the right to use legitimate means to fund massive infrastructural development and provide jobs for their citizens. 

Since the CBI law was approved in Grenada in 2013, there have been approximately eight amendments to it, one of which removed the requirement for the publishing of names, addresses and nationalities of those who received passports under the programme.

According to Senator Christopher De Allie, a former chairman of the CBI Board, such legislative amendments were crucial when dealing with ‘high-level’ people who require confidentiality.  There is an apparent acceptance of this argument in order to make the programme attractive, especially in light of the competition offered by neighbouring Caribbean countries offering the same level of protection for applicants.

In an interview with CIJN, De Allie stated, “I don’t see it as an issue… There is a rigorous reporting to Parliament that has to be done by the (CBI) Unit. So I don’t see it as an issue of transparency or hiding because we have to be upfront in what we do to Parliament, which is a highest body that we have to report to.”

This was also the position of former Foreign Affairs and International Business Minister Nickolas Steele who said the amendment was “necessary”. 

What about dual citizenship? A local agent, who preferred to remain anonymous, said that dual citizenship is not an acceptable practice among several of the territories from where applicants originate.

This, the source contended, was an additional factor which led to Government’s decision on non-disclosure of names of applicants. The agent explained that there was lobbying by international CBI agents for this amendment in countries such as China, India and the United Arab Emirates.

Currently, due diligence processes for applications are mandated by law but the specific steps are not outlined. The law however factors in a checklist including subjects such as criminal conviction and the provision of false information which can disqualify persons from being granted citizenship.

Every six months, the Minister of Finance is required to publish a report which includes the applications approved or denied, the amounts invested, approved projects, the funds in the NTF, the names of approved projects, and a listing of the local agents and marketing agents. 

However, the annual reports mandated by law are not being tabled in Parliament in accordance with the required timelines and this brings to bear the question of parliamentary accountability.

Is There Undue Political Influence?

Christopher De Allie resigned in May 2021 over what he said were his views that the CBI programme should be privatised. Strong disagreement of his colleague board members over this resulted in his departure. “We need to move it forward and to get a grip … and make (it) more independent,” he said

When asked about any “undue influence” over the CBI operations from the Prime Minister, De Allie responded, “He (Mitchell) would intervene and come and discuss with the board certain things that he would like to see move. I don’t think that was undue influence, I think that was part of his remit being minister in charge,” he added.

De Allie admitted that under his tenure the CBI board pushed back on “certain things” proposed by the Prime Minister. When questioned about what these were, he said he could not remember.

Where do the CBI Funds Go?

The Grenada CBI system makes provision for persons to become citizens through approved payments to the National Transformation Fund as an investment in a sanctioned project or into real estate. 

The programme is run by a CBI office that reports to a committee established by law. The rest of the architecture includes a local agent who acts on behalf of applicants, as well as marketing agents who promote the programme.

Applications can only be considered after all relevant fees have been placed in an irrevocable escrow account controlled and managed by the local agent, who has been selected by a marketing agent.

In March 2019, the Government of Grenada said it was taking steps to make its CBI programme more attractive to investors by offering a greater range of benefits including widening the pool of eligible persons and removing permanent residency as a pre-requisite for citizenship. 

Speaking at the time in Parliament, Prime Minister Keith Mitchell, who also holds the portfolio of Minister of Finance, said while the CBI is important, Grenada would not compromise on security. 

“Grenada is not dependent on CBI, therefore we do not have to compromise on security to maintain our programme. It is important that we stay competitive but at the same time, we must maintain the integrity of the programme. Any action by one country that compromises security can have serious consequences for the entire region, therefore we must all be mindful of that,” he said. 

However, details on CBI inflows suggest that the programme generates significant revenue and also plays an important role in maintaining levels of capital expenditure on social infrastructure and other labour-intensive projects. 

The latest reports indicate that as much as forty-nine percent of government’s revenue is derived from CBI initiatives.

In its 2020 annual report, Grenada’s Fiscal Responsibility Oversight Committee (FROC) urged the government to reduce its reliance on monies from the CBI programme and focus on diversifying the economy. 

 The report identified a key are of concern: “One weakness is in the structure of public finances whereby domestic revenues used to finance the capital program are dominated by CBI receipts. Volatility in these receipts will impact the predictability of resources to spending programs in the longer term.” 

Former Grenada Ambassador to the United States and Chairman of FROC, Dr. Angus Friday spoke on Grenada’s dependence on CBI revenue: “What we are saying is that it will become very important for the Government to find a whole range of alternatives. 

“For example, one of the risks with CBI, let’s just put on the table, from time to time the OECD will make pronouncements, they added countries to the risk list, they take the country of the risk list …they do take a view on CBI type programs around the world, we could not want to be wrong-footed.” 

The Government has received millions in revenue through the CBI over the years. In 2019 more than EC$80 million (USD $ 29 million) was received, according to Government documents. Most of these revenues were funnelled through the National Transformation Fund (NTF).  The report recaps the year 2020 and concludes that the Government could face significant challenges in the medium term even if economic growth returns in 2021.  The NTF is set to provide 49.2% of funds for Government capital projects for 2022. 

Since the start of the Citizenship by Investment Programme in Grenada the country not only earns millions in investment on construction projects, but hundreds of citizens have gained part-time and full-time employment through the various approved projects mainly linked to tourism initiatives.

CBI Revenue has contributed to these Real Estate projects:

Grenada has, however. had to battle a series of cases that have raised questions about due diligence processes. This is despite the assertion of Foreign Minister Peter David that Grenada has “one of the most rigorous due diligence programmes” and that electronic and in-person checks are done to verify information. 

After an application is accepted by the CBI Committee – due diligence is executed by the Financial Intelligence Unit; US Homeland Security, and the Joint Regional Communications Centre (JRCC) which is based in Barbados. 

In October 2020 U.S. Ambassador to the OECS Linda Taglialatela commented on the CBI programme: “Grenada is doing a good job, Grenada is using it more than some of the other islands. 

She explained that the U.S., through its embassy in Barbados, has working arrangements with the islands offering CBI programmes as an avenue for raising revenue and there is the opportunity for the JRCC in Barbados to be its hub for due diligence probing.

“We have working arrangements with the five islands in the eastern Caribbean which have an arrangement for due diligence through the JRCC,” said the Ambassador. She also proposed that all applications in each of the island should be vetted by the JRCC.

Countering CBI Controversy

Some key CBI-financed projects have also come in for major scrutiny over the delays in their completion or adverse traces later found out about the approved investors. Questions have been raised by members of the public about whether the projects were properly assessed to be worthy of investments.

In February 2017, a CBI registered company called Grenada Sustainable Aquaculture launched the Zero-Water Exchange Sustainable Organic Shrimp Farm. The project was expected to specialise in the production of shrimp in a socially and environmentally friendly manner, free of antibiotics, chemical additives and enzymes.

In an October 2018 report, the CBI unit advised that it had suspended the acceptance of applications in respect of the project. It was later revealed that the project had lost millions. 

That project was suspended via public notice on Grenada’s CBI website: 

The project never materialised because of the alleged fraudulent action of the investors. Under Prime Minister Dr Keith Mitchell, the Government took immediate action to institute new regulations by establishing the requirement that CBI funds received must go into an escrow account. 

A media report quoted Prime Minister Mitchell as saying: “They have not done the investment and because of that we have made some changes to the conditions of people receiving money from the CBI programme, we are making sure it goes into escrow accounts and they have to account for it on a regular basis with the government having oversight. Some of them don’t like it but we have to protect the name of the country.”

Another project currently embroiled in controversy is the Kimpton Kawana Bay development under the direction of the locally registered company True Blue Developments and its principal, Warren Newfield, a former Ambassador-At-Large and Grenadian General Consul in Florida.

The company has taken the Government of Grenada to the World Bank’s International Centre for Settlement of Investment Disputes for alleged arbitrary and unlawful conduct which it contends prevented the successful completion of the Kimpton Kawana Bay resort approved in 2017.  

It was a CBI project which made it possible for the investors to receive citizenship on the basis of this investment. True Blue Development’s website contains details and what may be considered by some as circumstantial evidence. However, the final ruling is yet to come.

“As heartbreaking and perplexing as I find the government’s turnabout on Kimpton Kawana Bay, we have worked diligently to meet all our obligations, while the Government of Grenada has been deceitful,” said Newfield.

Newfield was assigned as an Ambassador at Large and Consul General for Grenada but resigned from those posts in May 2021 claiming the Government has adopted “an anti-business regime” that disregards investors’ rights and breaches agreements.

Prime Minister Mitchell later explained to parliament that Newfield violated Section 7 of the CBI legislation requiring all CBI project developers to place at least 20% of any investment in an escrow account. “He put down the 20% but then decided that he had to recoup it…this is what brought on the hostility,” the Prime Minister told the Parliament.

What will happen to the Kawana Bay project is anyone’s guess.

Pressure From the EU

The European Union (EU) has been pushing for member states to end their so-called ‘golden passport’ CBI-like schemes. The EU and the Organisation for Economic Cooperation and Development (OECD), a club of the world wealthiest states, have argued that CBI-like programmes are susceptible to abuse and give certain rights to persons who should not benefit. 

Grenada is listed among the countries the OECD says have CBI schemes “that potentially pose a high-risk” to the integrity of common reporting standard, on the basis that the programmes can be misused by individuals to misrepresent their jurisdiction for tax purposes. It is noteworthy that Grenada was removed from the EU’s grey list of tax havens in March 2019.

De Allie says the stance of the EU and the other key influential partners to pressure Caribbean states with CBI “is an excuse to limit us and try and colonise us again”. 

On March 10^th, 2022, following Russia’s invasion of Ukranie, Grenada temporarily suspended the acceptance of new CBI applications from citizens of Russia and Belarus. Government said it is closely monitoring the current situation in Ukraine and will advise of any further changes to its current policy on this matter.

But the survival of Grenada’s Citizenship by Investment programme which once saved it from economic and social fracture, is also uncertain.