CITIZENSHIP BY INVESTMENT PASSPORTS POSE UNIQUE CHALLENGES FOR COMPLIANCE OFFICERS

 

You are a new accounts executive, specializing in onboarding high net-worth customers, locted in an international bank somewhere in the European Union. How would you explain either of these new clients to your compliance department ?

(1) Your new client, who owns a computer manufacturing factory in Malta, presents a Maltese passport, showing him as a native Maltese, plus a drivers' license, and two bank references from leading financial institutions in his country, showing impressive balances, and existing account relationships. His company exports to customers around the world, and he needs an international bank with a global reach through correspondent relationships. The only problem is, you have spent a considerable amount of your holidays in his country, and are familiar with English when spoken by one who first language is Maltese, and your new client has a Slavic accent.

(2) Your new client, a partner in a Caribbean hotel, shows his Antigua passport as identification, supposed by all the appropriate financial documents and references your bank requires, which you have confirmed. His passport lists his native-born status, but his conventional vocabulary, and lack of Caribbean lilt indicate otherwise. Also, his passport was issued only last year, and doesn't have a lot of entry or departure stamps on it. He wants to move funds to Europe, in preparation for a new business venture he is purchasing this year.

Both of these gentlemen have proffered Citizenship by Investment (CBI) passports, indicating citizenship and nationality from a low-risk jurisdiction. All their documents and supporting information, including glowing bank references, are legitimate and acceptable. So what's the problem?

Both men are Russian nationals; one is linked to Russian Oligarchs under EU and American sanctions. One is moving dollars for Iran, in violations of international sanctions; the other is cleaning narcotics profits. Your compliance officer would not have caught wither of them had you not taken holidays in both countries, and sensed that something was amiss.

Compliance officers face headaches every day, when dealing with individuals hiding under CBI passports, who otherwise would not survive the initial compliance checks at your bank. If the frontline new accounts staff at your financial institution have the benefit of a broad educational background, an inquiring mind, and ready access to information, they may be able to catch some of the posers, but in the end it is the compliance department that must analyze the information, and separate the wheat from the chaff. Remember to give them the tools to do so effectively.