[dropcap]T[/dropcap]he Caribbean finance sector remains a local lifeblood, but one that is totally global in reach. The region is recognised as an epicentre of offshore banking, for all the challenges (and virtues in other instances) that can come with that. Yet though the offshore banking industry has long been a global concern, the growing pressure from the EU on Citizenship by Investment Programmes (CIPs) means there are signs the ‘party is coming to an end’ across the European continent. This has implications not just for Europe, but for the Caribbean, as high net worth individuals AKA ‘citizens of the world’ may look anew to this region for buyable passports and offshore financial structures.
THE RELATIONSHIP OF CIPS AND OFFSHORE BANKING
Offshore banking and CIPs are separate but related issues within the Caribbean and beyond. While the industries can exist without one another, just as the local region’s two biggest industries of tourism and finance find many common ties, so too do offshore banking and CIPs.
That’s why the news out of the European Union on Tuesday of increasing pressure on the so called ‘Golden Passports’ issued by EU nations is notable not only for European nations, but all around the world. Vera Jourova, the EU justice commissioner, described existing CIPs in Europe as “problematic” and “unfair”, also citing the security risks they pose as anyone who acquires citizenship from one nation in the Schengen Area can thereafter travel throughout the EU.
This was also accompanied by the publication of the OECD’s analysis of 100+ territories that offer CIPs (and/or residence by investment) to foreign residents. The report held that a number of nations in Europe and the Caribbean, including Antigua and Barbuda, Barbados, Dominica, Grenada, Saint Kitts and Nevis, and Saint Lucia, potentially pose a high risk to the integrity of the OECD/G20 Common Reporting Standard (CRS).
The CRS, established in 2014, looks to foster the automatic exchange of financial information between different jurisdictions, and see this done annually. In tandem with the publication of this list, the OECD has also published new guidelines offering directions to financial institutions, enabling them to better identify and prevent clients who seek to avoid the CRS.
WHY THE LATEST EU AND OECD NEWS MATTERS FOR THE CARIBBEAN
Though each nation pursues its own CIP independently, there are always considerations beyond one state’s borders alone. For example, citizens of CARICOM nations can travel between local nations via a CARICOM passport, and citizenship — whether obtained by birth, a long naturalisation process, or a quicker CIP route — once granted, cannot (except in extreme cases) be revoked.
The same dynamic applies to the EU. News of increasing pressure on its CIPs may cheer some locals in the Caribbean who savour the prospect of an increase in business for the local CIP industry. But it could also mean that those who EU intelligence agencies have deemed a security risk, could look anew at a Caribbean CIP in the event that one from an EU nation proves too hard or too laborious to obtain.
LOCAL AND GLOBAL
The story of the Panama Papers and Paradise Papers and their fallout is ultimately one that is a global issue; just like the Trump phenomenon in Washington, Brexit and the growing tensions within the South China Sea due to Beijing’s building of artificial islands are global in impact.
Any expectation within the region that it, and it alone, can administer this debate or resolve these issues locally and totally by itself would be wrong. Not only is the debate global in nature, but ultimately there remain many jurisdictions around the world that have seen controversies arise surrounding their banking and finance industries.
That’s why anyone in Europe who does wish to see the odorous elements of offshore banking stamped out, needs to think carefully about how reform occurs; so that, in a global economy, global results are seen and not merely the ‘shutting up shop’ in one region that may see a spread of the issues to another region.
Just the same, if it’s accepted that people and nations further afield have a right to call for change within the region via international channels, so too do Caribbean nations have a right to respond, seeking to ensure the conversation truly is global; one that sees that any reforms and change locally are mirrored elsewhere, whether the impetus for them is driven from locals or from petitions abroad.
Indeed, if it is expected that the Caribbean delivers landmark change where no other nations do, it reinforces perceptions held by some locals that this present debate is not just about global finance, but also about old world nations seeking to stamp their authority once more on new world states; new world nations who, in so many instances, retain painful memories of colonisation and foreign domination, and have no wish to revisit them.
THE WINDS OF CHANGE GROWING
Recent weeks and months have shown a new momentum building to address existing issues surrounding offshore banking and illegal tax practices (clear evasion against law over minimisation alone), and also to combat criminal activity that is taking advantage of opaque banking and buyable passports. No fair citizen of a Caribbean nation or beyond could decry progress in these areas that are possible, practical and set to deliver enduring results.
It’s just also true that there remains within this debate a number of regular citizens and local jobs that depend on the existing finance industry. Just the same as their nations depend on their own to voice outcry when it’s perceived they are not being treated fairly but are being pushed by larger entities.
Among these members of the Caribbean family many different views can be found on the existing regional finance industry, and how it operates from nation to nation, and as a whole. But all could agree on the shared desire to see a global push for change accompanied by global reforms.
That’s why the recent news out of the EU will be watched with interest, not only for what it may mean for the Caribbean, but also because it may lead to global dialogue that could see a truly international campaign for reform find greater momentum than all that has occurred so far.
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