Caribbean Citizenship by Investment: Bank or Seller Financing?

Citizenship by investment brings freedom and security to many new families every day. With the situation in Afghanistan in the news, we once again see an example of how life can take an unexpected turn, and those who have two or three passports are always in a privileged position. A second citizenship is an asset with a unique value. 

The Caribbean, and in particular five island nations here, are the undisputed global leaders in the second passport area. The Federation of St Kitts and Nevis pioneered the economic citizenship or CBI concept as far back as 1984.

Caribbean Citizenship

More and more these days, our clients are using third party financing deals to cover their Citizenship by Investment need – meaning they don’t have to tie up their own cashflow. In this article we look at how this works – using bank or developer financing to qualify for Citizenship by Investment.

Is it legal to seek external financing sources (borrow money) for citizenship by investment in the Caribbean? The normal caveat applies that this article is general in nature and does not constitute individual legal advice. But we believe yes it is legal. We will explain more later in this article about the legality of borrowing money to finance citizenship by investment in the Caribbean.

We consulted several different legal sources including local agents and immigration lawyers specially for this article, and they confirmed that borrowed funds are regarded as a legitimate source of funds for citizenship by investment purposes in the Caribbean. If you would like to hear it directly from them, we can arrange introductions and easily set up a Zoom meeting.

If you borrow money for citizenship by investment from a family member, that person is likely to be regarded as a sponsor…. and will therefore be subject to background checks. If you borrow funds in a normal arms length commercial transaction, however, there is no sponsor involved. All the government is concerned about is that you have the funds at your disposal, and that they can be verified as coming from a legitimate source, and that you are making a qualifying investment. A loan generally qualifies as a legitimate source of funds.

Looking Back in History: How HSBC started RCBI Financing in Canada

Financing citizenship and residence by investment programs is nothing new. This is how HSBC made a lot of money in Canada in the 1990s. They helped thousands of Chinese clients with investment immigration. 

How did it work? Let’s say the investor, to qualify for residence in Canada, had to hold a million dollars worth of Canadian government bonds. Those bonds would be recovered after a holding period of 5-7 years. HSBC instead would charge investors a one-time, non-refundable upfront interest payment to cover borrowing 1 million dollars for 5 years. HSBC would then buy bonds in the name of the investor, but keep hold of them using an offshore trust agreement or an insurance wrapper, so the Canadian government’s requirements were fulfilled. The government got the investment, the investor got their residence and citizenship without having to put up the capital, and the bank earned money on the deal – so it was beneficial all round.

Variations on this financing theme are what are now becoming popular in the Caribbean citizenship by investment market.

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Real Estate vs Donation

Let’s be clear on one thing: most of these financing deals revolve around the real estate option rather than the government donation option. If you don’t know the difference, read about it here

No commercial lender is likely to lend you funds, without security, to donate funds to a government or NGO for citizenship by investment purposes. Of course if you have security to pledge (such as shareholdings in a family business, or a stock portfolio in a bank) that changes the game. You should be able to borrow against that and use the funds for CBI. That would be a typical offshore private banking transaction. Swiss banks in particular have plenty of experience of this.

With the real estate options for Caribbean citizenship, however, things look different. There is nothing to stop a commercial bank from deciding to lend against real estate, irrespective of the citizenship by investment element. That said, local banks in the Caribbean, being dominated by ultra-conservative Canadian banks, traditionally avoided financing real estate for non-residents – even if they are local citizens and passport holders. 

Realistically, you will find CBI financing deals generally happen with offshore banks that are working hand-in-glove with the developers. They likely already have some skin in the game, probably having loaned money to the developers.

Another way of acquiring financing for citizenship by investment purposes is with traditional seller financing. Some new developers offer this, but you might equally be able to find a CBI option on the resale market, especially in more developed CBI real estate markets like St Kitts and Nevis, Antigua and Grenada. Typically these investors who already acquired their citizenship 5-10 years ago have problems competing with new developments. They may be happy to carry a seller note, simply to get a quick sale.

Next Steps to Finance Your Citizenship by Investment

Obtaining financing for your dream of a second citizenship could be easier than you might expect. But still, it requires a little effort on your part.

Thankfully, Offshore Pro has many years experience of setting up such deals. We add value to the transaction by serving as a “one stop shop” – coordinating for you with all the stakeholders. In a Caribbean real estate citizenship by investment financing transaction you typically need to involve a number of parties, such as:

  • Developer or seller
  • Local agent
  • International marketing agent
  • Escrow agent
  • Bank
  • Local attorneys

In some cases, one company or firm can fill one or more of these roles – but still, it’dss much easier to have one point of contact to coordinate everything for you. Sometimes, clients worry that as agents we will increase the costs. In fact, by serving as the “honest broker”  we do make money, but we also typically save the clients money because we know who to talk to in each case to make everything run smoothly. If you doubt this, you are welcome to ask for a quotation and put us to the test!

We have processed hundreds of Caribbean citizenship by investments over the years. These days, more and more of them include a financing element. Don’t hesitate to make  contact and we will set up a Zoom meeting with our expert Citizenship by Investment lawyers and bank financing affiliates! We look forward to talking to you.

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