In a bold move to protect the integrity of its Citizenship by Investment (CBI) Programme, Grenada is promising to take action. It will act against all agents found to be illegally discounting the investment amount. That applies under the approved project arm of its Programme.
Intentionally underselling the cost of real estate investments under Caribbean CBI Programmes is a reprehensible practice. If allowed to go unchecked, it could lead to disastrous consequences for the Caribbean. Such practices exhibit a blatant contempt for the law governing CBI programmes. They alienate many agents. Those agents adhere stringently to the terms of the programmes to which they are accredited. They also cheat Governments and their citizens. Valuable foreign direct investment is lost.
False advertisement has been known to take various forms. One form induces applicants to invest amounts below the minimum threshold. That happens by returning monies as substantial incentives or commissions. Another example is the promotion of share repurchasing arrangements. These take place before the end of applicable minimum hold periods. In all Caribbean CBI jurisdictions, real estate investments must be held for a minimum number of years before being re-sold.
Where an economic citizen sells real estate before the end of this statutory period, strict sanctions apply. In some cases, they include the revocation of citizenship. They can also include disqualification from further participation in the relevant programme. Rogue agents who participate in undercutting harm small countries seeking investment. They also harm unsuspecting investors. Those investors could face the loss of their citizenship.
This risk was highlighted by Sam Bayat. He is former president of the International Section of the Canadian Bar in Quebec. He is also CEO of citizenship consultancy and law firm, Bayat Group. While talking with WIC News, Bayat warned applicants. Those who obtain citizenship through illegally discounted real estate investments “could lose their investments or have their citizenships revoked.”
Recently, WIC News exposed the price undercutting scam by some agents and developers in the Caribbean. That raised the attention of the governments. Shameful attempts to misrepresent the costs of real estate are damaging. “CBI Projects are turned into cash cows in the Caribbean,” said Sam Bayat. The effects of adverse promotional practices on Caribbean CBI jurisdictions are felt in numerous ways.
Firstly, undercutting implies that the real estate in question is not worth the advertised cost. That disincentivises investments in real estate. Real estate markets then suffer from a lack of demand. Undercutting even devalues the benefits of applying under the fund options of Caribbean CBI Programmes. Many applicants choose the fund option. They do so despite not being able to obtain a return-on investment. They choose it because it is a one-time contribution. It costs less than the real estate option.
When real estate is promoted at a lower threshold than the fund option, the incentive to contribute to the fund is eradicated. Governments are denied the opportunity to invest in much-needed economic growth. Diversification suffers too.
Cognisant of the detriment undercutting can cause, Percival Clouden issued a cautionary circular. He is CEO of the Grenada Citizenship by Investment Committee. He issued it on behalf of the Committee to all industry stakeholders on 22 July 2020. Addressing all Marketing and Local Agents, the Committee issued a clear warning. Actions which discount the investment below the minimum amount prescribed by law “are illegal and in breach of the Grenada CBI Act and Regulations.” It further announced that an investigation is being conducted into the matter.
Transparency and integrity are at the heart of CBI in the Caribbean. It is shameful that a handful of agents are willing to tarnish the reputation of the CBI industry. They do this despite witnessing first-hand how vital CBI has been for certain Caribbean nations. As such, a zero-tolerance approach must be taken when it comes to undercutting. In addressing the illegality of underselling practices, Grenada is setting an excellent example. It is also attempting to foster adherence to the rule of law. Other Caribbean CBI countries should take heed.
Apart from this, reliable government sources in the Caribbean region revealed more. Several countries which offer a CBI Programme are taking the lead of Grenada’s action against offenders. On condition of anonymity, a senior government official of a Caribbean island spoke out. Most of the governments in the Caribbean are going to introduce such circulars. The goal is to halt abuse of the “Prestigious Programme.”
