THE Citizenship By Investment Programme (CBI) of St Kitts and Nevis seems shrouded in a troubling combination of secrecy, and a lack of transparency and financial accountability.

The existing reporting by the Government itself indicates the Commonwealth nation relies on its CBI programme for a large portion of its total revenue. Based on the auditor general’s report of 2020, as much as 40 per cent of the country’s revenue is derived from the CBI programme.

While Attorney General Vincent Byron Jr and Les Khan, chief executive officer of the Citizenship by Investment Unit (CIU), insist strict reporting guidelines exist, they were unable to furnish facts and figures essential to understanding where funds are coming from and how they are being spent. Both said those were best handled by prime minister, who is also the minister of finance, Dr Timothy Harris. Up to the time of this report, the Prime Minister’s Office declined or ignored repeated requests for an interview to clarify outstanding questions about the St Kitts and Nevis Citizenship By Investment Programme.

Controversy over the lack of transparency and accountability triggered a very public conflict over CBI funds, which continues to unfold and is one of the issues that led to the parliament being dissolved, with a date for the general election to be announced. Head of the Concerned Citizens’ Movement — which was a member of the coalition government under the Team Unity Administration — and leader of Nevis, Premier Mark Brantley said he fielded a covert team to find actual figures for how much the CBI programme was bringing into the country by selling passports.

Brantley insists that Nevis (the smaller of the twin-island federation) is not getting its agreed share of revenue from the programme. The political crisis has somewhat revealed how much the CBI Programme earned between 2007 and 2021. However, the numbers remain unconfirmed by the prime minister.

Premier Mark Brantley, on record with CIJN correspondent Andre Huie, also makes a statement at a press conference

A review of budget and estimate proposals reflect some figures which are also unconfirmed. The 2016 auditor general’s report discovered a number of deposit accounts, two of which were directly related to the CIU in the amount of US$3,210,863.61 (XCD$8 669 331.75). The report noted such accounts were created for a specific purpose and should have been closed after that purpose had been served. It was noted that the existence of such accounts was a cause for concern as some of the accounts were being used to record transactions that should be classified as government revenues and expenditures. A recommendation was made to close all such existing accounts. It appears that the advice was taken to close the accounts as no mention was made in subsequent reports. However, there is no indication of where those funds were redirected or used.

Although our investigations indicated the CBI Programme contributes significantly to the economy of St. Kitts and Nevis, we were unable to find audited accounts of the programme outside of the Sugar Industry Diversification Fund (SIDF) beyond 2016, despite promises from the current Team Unity Administration to make the programme more transparent. Additionally, information regarding the number of passports issued and the country of origin of the applicants was unavailable.

A review of the legislation shows that there are loopholes which allow for abuse of the programme where only a few benefactors can profit handsomely. This happens mostly with the real estate option in which applicants receive their passports even before the real estate project they invested in is completely constructed. This has led to a number of unfinished CBI-approved buildings. Agents and applicants who act as real estate agents continue to benefit financially. Few benefit, but the country on a whole suffers. What is even more telling is that the authorities have either turned a blind eye or refused to get involved to rectify this ongoing saga.

Prime Minister Harris, who ideally holds all the answers, was unreachable up to publication time, despite numerous calls, messages and email to him and his office.

Recently, similar investment migration programmes have come under fire throughout the caribbean, with many social activists, Opposition members, and even those in the current Team Unity Government calling for more transparency in the programme.

Despite the numerous calls for the programme to be more transparent and for disclosure on the accounts of the CBI, Attorney General Vincent Byron remains confident that there is high accountability of CBI-generated financial inflows.

During a recent interview Attorney General Vincent Byron said there was a firm monitoring process over CBI funds, noting that the accountability of all funds was covered by more than a single piece of legislation, namely the St Christopher and Nevis Citizenship Act, St Kitts CBI Regulations, St Christopher Citizenship Investment Regulations, and the St Christopher Citizenship Investment (Amendment) (No2) Regulations, and was supervised and accounted for through the financial secretary and the Audit Department that reported to parliament through its annual publication.

“There is a very firm and strict vetting process of accountability and all other revenues that go into the Consolidated Fund. This one [CBI funds], in particular, has had the benefit of review and restructuring. And not just [by] our own Parliament and our own technical people looking at it very closely, but it has come under the scrutiny of agencies such as the International Monetary Fund, the World Bank, and other external partners who have looked at our system — and they have found out accountability of a high quality,” Byron pointed out.

Attorney General Vincent Byron speaks on CBI legislation

Although it is the world’s oldest CBI programme, started in 1984, it has come under increased scrutiny like its Caribbean neighbours. According to information on the European Parliament, regarding EU Parliament calls for a ban on CBI golden passports, the MEPs (Members of the European Parliament) were concerned that these programmes, if not adequately managed with strict due diligence procedures, could contribute to money laundering, security threats, tax avoidance, pressure on the real estate sector, and an erosion of the integrity of the internal market.

Les Khan dispelled growing concerns and emphatically stated the CBI programmes were not dead as there was a process that needed to be followed, further explaining that the EU Parliament had not passed any law that said they were going to stop CBI programmes.

The current Russia/Ukraine war exposed the threat to the programmes in the Caribbean. Several wealthy Russian oligarchs were sanctioned as part of punitive measures exerted by Western nations in response to Russian aggression towards Ukraine. In a somewhat knee-jerk reaction, all the CBI countries in the Caribbean imposed a ban on CBI applications from Russia and Belarus in direct response to the sanctions. Additionally, the conflict makes it difficult for background checks to be done. Despite this action, however, it is uncertain how many economic citizens from these countries are actually Russians and Belarusians and, even more telling, it is not public knowledge if any of these candidates were sanctioned.

“All they’ve asked is that the European Commission should review the process, and asked the commission that they get the ball rolling on drafting potential new laws. It is not a law. The problem is that the European Parliament, and the European Commission, and the 27 EU member states’ governments are different in their opinions. The commission and the member states are nowhere near as enthusiastic about introducing a new EU tax or in closing off the schemes because of what it means for those countries,” Khan detailed.

Khan remained confident that the programme would not be shut down but expressed some uncertainty as to the impact it would have on agents and lawyers who act as agents for the CBI programme.

“There are 27 countries in the EU that, if it came to a worst-case scenario and we lost it, we have 161 visa-free countries. So, 27 countries, while it is a major implication, I am not sure what the implication would be. I think one should notice that even with what happened in Vanuatu, my sources are telling me that the volume of applicants into Vanuatu has not stopped. There could be other drivers for citizenship, and I think we will see that,” he asserted.

On April 4, St Kitts and Nevis signed a full visa waiver with the South Pacific nation of Tuvalu. The agreement was signed by St Kitts and Nevis High Commissioner Dr Kevin Isaac and Tuvalu’s Minister of Foreign Affairs Simon Kofe in London, United Kingdom.

Following the signing, Premier Brantley, who is also minister of foreign affairs, lauded the move and noted that the country continues to increase its diplomatic presence across the globe. He also stated since Team Unity took over the Government in 2015, St Kitts and Nevis had signed 33 new visa waiver agreements.

Shrouded Transparency

The St Christopher (Kitts) and Nevis Citizenship Act stipulates, in sub-regulation (2), any person who contravenes the provisions of sub-regulation (1) shall, (a) on summary conviction, be liable to a fine not exceeding ten thousand dollars; (b) where he or she has proposed a project that has already been approved, be liable to have the status of that approved project suspended or revoked by the minister; (c) in the case of any overseas agent, be listed on the Citizenship by Investment website as a person who is not authorised to submit to the unit an application for Citizenship by Investment on his or her own behalf of any other person.

The St Christopher (Kitts) and Nevis Citizenship Act, which governs how the CBI programme works, does not contain provisions for the authorities to disclose who the applicants are, their nationality, how much money the programme makes, how many applications are made to the programme, or even how many passports are granted.

This and other pertinent information in relation to the CBI remain a mystery. The law that governs the programme does not obligate the authorities to report on its progress, despite promises by the current Administration to make the programme more transparent and accountable.

Furthermore, Attorney General Byron recalled that after Team Unity took office in 2015, they undertook a complete revamping of the programme — strengthening CBI and supporting legislation, procedures and policies, after the international community had lost confidence in the programme, essentially seeing it as a threat. He noted much care had been taken to avoid “unwanted elements” from accessing the CBI programme.

Social commentators and activists in the country have publicly stated otherwise and have heavily criticised the apparent lack of transparency of the programme; the most notable being Dwyer Astaphan, a former Government minister. “If you have a transparent system, a transparent programme, you are going to find sufficient decent people in the world to want to do business with you. It’s not just opaque programmes that attract people; clean programmes have their people as well,” he said.

“Freedom of information…is a constitutional right. The only thing in Government that you don’t have a right to as a citizen or resident of St Kitts and Nevis is information that is sensitive in the area of national security and safety. Everything else in the Government is your business,” Astaphan added.

Ira McMahon, another commentator and local social activist, has been quite vocal in the public domain on this issue as well. “We don’t know how many passports are being sold; we don’t know what is the biggest source market. Those kinds of details we do not know,” McMahon said.

When contacted, Khan was unable to provide pertinent information such as the number of applicants to the programme and the number of passports issued. “There is a lot of information I cannot give you, a lot of information I do not have. A lot of what you are asking for can only be provided by the Prime Minister’s Office or from the Ministry of Finance,” Khan told our reporter via a telephone interview.

However, Khan noted: “Over the last couple of years . . . let’s say about 60 per cent of our applications are coming from the Middle East, and it’s across the various countries in the Middle East and mainly China. China would have been a big set of applications coming into St Kitts and Nevis. There are a few coming out of Europe, and even a few coming out of Russia, but as you know we’ve stopped taking any Russian applications”.

An email sent to director of audit at the National Audit Office, Carla Pike, did not shed any light on the situation. She advised that she was not the person to bring clarity on the information being sought on the programme or its further plans, and redirected CIJN to Khan.

Ironically, even members of the executive branch of the St Kitts and Nevis Government are seemingly ignorant of how much the programme actually earns. A spat among party leaders in the tri-party coalition Government of St Kitts and Nevis led to the stunning revelation by Deputy Prime Minister Shawn Richards, on March 23, 2022, that he does not know how much the CBI earns as the information is closely guarded by Prime Minister Harris, who is also the minister of finance. “There has thus far been no public statement by the honorable prime minister as to the actual revenue from CBI over the (past seven years),” Richards said.

Brief statement by St Kitts and Nevis Deputy Prime Minister Shawn Richards, 23rd March 2022

Ira McMahon said there was still a lot of information that the Government was not forthcoming to citizens about. “Basically, there are a lot of things about the CBI that we do not know. I am not sure of the excuses they use for not giving out more details. The CIU was set up as a semi-autonomous government agency which funded a number of public and private sector projects. It also made direct contributions to the Consolidated Fund,” he explained.

“It was not run transparently back then either, although they would publish their accounts, [but] not in a timely manner I would say. It became a campaign issue when the Opposition was saying the Government of the day was using it as a slush fund, and called for greater transparency and promised that proceeds would go into the Consolidated Fund.”

Despite promises of greater transparency once successful, McMahon said very little changed in that regard when Team Unity took office in 2015, and information continued to be difficult to source.

How much does the CBI actually earn?

The most information revealed about CBI revenues over the past few years sprung from a dispute between Premier Brantley and the prime minister. The premier has for years been clamouring for Nevis to get a fair share of CBI revenues, as was reportedly agreed upon by the coalition partners before they won the election of 2015. According to Premier Brantley, the Federal Government has not been living up to that promised agreement.

On Thursday March 31, 2022 Premier Brantley revealed figures said to be earnings from the CBI dating back to 2007, and how much of that Nevis would have received from those earnings. He said he was able to obtain those figures by having a research team “ferret out” the information, which he stands by as verified and authenticated. However, it is unclear if these figures are net values or after expenses of the programme.

According to Premier Brantley, from 2007 to 2021 the CBI programme netted approximately US$1.9 billion (XCD$5.15 billion) for St Kitts and Nevis. It is not certain how much of that went into expenses.

Premier Brantley has also been very vocal on his Facebook page, taking Dr Harris to task and calling on him to give an account of the funds generated under the CBI programme, which has also attracted a number of comments for and against the charge.

Premier Brantley, and Deputy Prime Minister Richards who is also leader of the People’s Action Movement, and who all make up the coalition Team Unity Government, had given Prime Minister Dr Harris an ultimatum and insisted he responded to their claims by April 20. According to reports, Dr Harris responded after the deadline, in the wee hours of April 21. Since then, Deputy Prime Minister Richards and Premier Brantley have filed a motion of no confidence in Dr Harris. However, they noted they had left the “door ajar, but only for a short while” for some reconciliation to end the rift that has split the six-year-old Government.

Reports on CBI earnings are generally made in the auditor general’s report, with mentions, in passing during the finance minister’s address. According to the report of 2020, 40 per cent of Government’s revenues in 2020 were from the CBI programme. “This collection amounted to US$100 million (XCD$270 million) in 2020. The total revenue collected represented a decrease of US$64 million (XCD$173 million) over the previous financial year. The collection of revenue by the CIU was approximately US$9 million (XCD$24 million) lower than its 2020 revenue projection,” the report said.

It was even more pronounced in 2019 before the COVID-19 pandemic hit. In the auditor general’s 2019 report, the Inland Revenue Department and the CIU collected 91 per cent of Government’s revenue of which 45 per cent was collected through the CBI.

In 2018 the CBI Programme accounted for US$154.8 million (XCD$418 million) in non-tax revenue. No report was found for 2017 while in 2016, revenues through the CBI Programme were relatively low at US$64.8 million (XCD$175 million), which formed part of the 89 per cent recurrent revenue for that year. A decline in CBI fees was cited as the reason for the US$34.4-million (XCD$93 million) decrease in non-tax revenue.

[INSERT SKN CBI EARNINGS GRAPH HERE]

These reports indicate that the Government depends heavily on CBI revenues for the survival of the country, particularly with regards to the consequences of the pandemic. The lack of accountability is glaring, based on the budget presentations of the minister of finance where there is no clear indication of how these funds are allocated, except for specific projects.

How the public benefits

After the hurricanes of 2017 the Government embarked on an islandwide roof repair programme through which persons who suffered roof damage, due to the hurricanes, would have those repaired. However, this was questionable as some persons had houses completely refurbished or rebuilt from the programme.

St Kitts resident of Edinborough thanks the Government for the roof repair programme. CBI funds were used for this initative. Courtesy: Ministry of Sustainable Development, 2018

It is believed that most government projects are funded by the CBI. In 2021 the prime minister made what many considered a shock announcement in paying double salary to civil servants. This has become a tradition since 2013, after first being introduced in 2009, but was paused in 2020 due to the financial impact of the pandemic. This announcement prompted commentators to suggest that this was funded solely by the CBI programme.

During his contribution to the 2021/2022 Budget Debate in December 2021, Opposition parliamentarian Dr Geoffrey Hanley highlighted the Government’s dependence on the CBI. “It appears that we are prepared to continue to seek increased revenues in the CBI programme, which outperforms the needed sector for local growth and leaves us vulnerable to external shocks.” He made this point after pointing out that the CIU budget was increased by some US$14 million (XCD$38 million) from the previous year, far more than some other critical ministries of government.

Another programme funded by CBI funds is the People’s Employment Programme (PEP), which has been renamed STEP (Skills Training Empowerment Programme). Some 2800 persons are employed under this programme which involves persons paid by the Government to work in private sector entities as apprentices/trainee workers. It was approved in 2012 by the then SIDF, which was set up to help diversify the economy after the sugar industry closed in 2005. The SIDF, before it was discontinued by the Government in 2016, funded several programmes in agriculture, construction, arts and culture, entrepreneurship, resort development, training and tourism, among other areas. However, the expenses of the programme outweighed the benefits of the country and its people, which led to the SIDFs discontinuation.

According to the International Monetary Fund (IMF) Article IV Consultation 72-page report of October 2021, nearly a decade of saving a significant part of the CBI revenues, and use of those funds to significantly reduce public debt to below the regional target debt of 60 per cent GDP, allowed the country to respond to the impacts of the COVID-19 pandemic and to pursue assistance and recovery programmes, and give allowances and subsidies.

However, the IMF has advised: “Once the recovery is firmly established, the Government should resume saving part of the CBI revenues to rebuild fiscal buffers. As a small, natural disaster-susceptible country dependent on tourism and historically volatile CBI revenues, St Kitts and Nevis needs significant buffers. Higher buffers will also provide more fiscal space to mitigate contingent and long-term fiscal pressures.”

Successes and Failures

Despite the lack of transparency of the programme there have been some tangible benefits from the CBI. A number of hotel projects were built through funds raised from the CBI, which has contributed to the tourism development of the country.

According to Khan, the option of investing via real estate remains the most popular choice for those seeking a passport through the CBI programme, and he stated there were at least six projects which “continue to move”, with some projects that were CBI-funded or CBI-approved projects.

Khan said under the previous Administration, there were a lot of real estate projects approved prior to 2014, adding at that time St Kitts and Nevis was the only CBI programme available. He added it was only after 2014 that Antigua, Dominica, Malta, Cyprus and others came online, which represented the challenges from competition that St Kitts and Nevis experienced.

Khan added the five or six projects they had currently being sold were ones under construction, that there was a track record of completion and that these would be completed within the next year, despite the slowdown by COVID-19.

Those projects included the Ramada Hotel, which was set to open within the next couple of months; the Park Hyatt, where sales were still ongoing as there were still a number of shares left; a few boutique hotels including Hamilton Beach Resort and Belmont Gardens, which were said to have ongoing construction and were almost complete and would be sold; Royal St Kitts Hotel and Villas that continued to be developed on a continuous basis where villas and rooms were always being added; the Four Seasons and Four Seasons Villas; Seaview Gardens which was beginning to sell; and the Sealoft project which was being built by some Chinese and was about 70 per cent completed, but had taken a hit from COVID-19. However, he said he had spoken with the developers recently and they remained focused, but no timeline had been given on completion.

The Park Hyatt Resort is the only five-star resort on St Kitts and is a shining example of one of the projects which contributed to the well-being of the people of St Kitts. The resort, which opened in November 2017, has provided employment to several local people while also boosting the island’s room stock with 78 rooms and 48 suites. Range Developments, developers of luxury hotel resorts in the Caribbean, led the project which was partially financed through the country’s CBI programme. However, it is unclear how much funds the CBI programme provided for completion of the project.

Another success story is the Koi Resort, which incidentally opened just as the pandemic struck St Kitts and Nevis. It boasts 102 rooms, again increasing the island’s room stock which is critical for the destination to attract more airlift from the major tourism markets.

The cost of this project is also unknown.

Kittitian Hill is another resort that was developed through CBI funds. It is a complex that comprises luxury villas, boutique hotels, a golf course and spa. Despite some earlier challenges and the slow rollout of that project, it was designed to merge the natural environment with tourism to benefit the people of the nearby communities while boosting the rural and national economy. Employees are generally from the neighbouring rural communities, with local farmers and fishers called upon to supply the resort with food to feed its guests. Farms on the property are designed to supply some of the food demands as well, in a bid to create a sustainable tourism model for the brainchild of Trinidadian businessman Val Kempadoo. Kittitian Hill formed part of the Government’s plan to bring development to the rural areas of St Kitts, while improving infrastructure outside the nation’s capital Basseterre.

At the same time, there are a lot of false dawns with many CBI projects. In 2019 Prime Minister Harris announced several projects on both St Kitts and Nevis which have not materialised:

Era Development

Pundits argue that a lot of the stalled projects are as a result of an abuse of the real estate option of the CBI. Under this option, applicants must make a minimum investment of $US400,000 in an approved real estate development either yet to be constructed, under construction, or already completed. The Government receives the necessary fees for the application while the investment is placed in escrow, pending the completion of the application process.

The applicants, Astaphan explained, usually receive their passports once they are approved, but oftentimes the real estate projects are never completed. “Most of the real estate applications involve payments of money that don’t come anywhere close to the legally prescribed minimum investments,” Astaphan disclosed. “The attitude of the authorities…they are not getting involved in that. That’s a private matter.”

The Future of the Programme

The abuse of the Real Estate Option, in Astaphan’s view, is robbing the country of much-needed revenue. A drive around St Kitts, especially in sections of the resort town of Frigate Bay, are decorated with not-hard-to-spot eyesores of unfinished, CBI-approved edifices with no clear evidence of construction.

“You have very little money left to build bricks and mortar; to hire local people to do the construction, and then to open the facility and hire local people to work at the facility and in their businesses to provide goods and services. This is one of the reasons you see so many unfinished projects in St Kitts,” Astaphan lamented.

Astaphan also believes the Government should put a cap on the number of passports it will sell under the programme. He believes the country could face socio-cultural challenges if the programme is left to run without end. “While they may bring their resources, unless this thing is carefully managed and administered, you could have a problem in terms of continuing…the marginalisation of local people in terms of economic and social growth opportunities,” Astaphan explained.

With the level of scrutiny internationally, and the concerns raised by pundits and insiders of the programme, the future of CBIs may indeed be under threat despite the narrative being pushed by those in Government and Khan.

As to whether transparency of the programme and the country’s finances will ever come about, that is left to be seen after Prime Minister Harris fired six Cabinet ministers, including Deputy Prime Minister Richards and Premier Brantley, and advised Governor General Sir Tapley Seaton to dissolve Parliament immediately, with a date for the next general election to be announced.

The announcement came on May 10, following months of political turmoil which led to six members of Team Unity filing a no-confidence motion against Prime Minister Harris on April 25.

With so many unanswered questions and the urgent necessity for transparency and accountability in the face of a daunting future, it is time for answers.