Antigua and Barbuda: Snow Washing Conduit

For decades shell companies and bank accounts in poorly regulated jurisdictions offered sufficiently strong solutions for the majority of international money launderers and tax evaders.

However, a relatively new weapon of choice has emerged – the second passport issued by countries such as Malta, Cyprus and several Caribbean states, including Antigua & Barbuda St Lucia and Grenada.

In fact, Malta and former British colonies in the Caribbean like Antigua & Barbuda have rapidly become the hot favourites because of their Commonwealth links worldwide, which permit visa-free travel to more than 168 and 134 countries respectively, including the Schengen region of Europe.

This aspect of indiscriminately provided dual citizenship added to the recent trend of "snow washing" has sent alarm bells ringing around the world.

Few, outside the opaque world of the tax avoidance industry, law enforcement and regulators, will be aware of the rapid growth of so-called "snow washing," which exploits company structure weaknesses in the systems of "white listed" countries like Canada and Scotland.

There is continued growing concern in Europe and the United States over the use of Citizen by Investment Programmes, especially those without any residency requirement. These are being used to defeat the privilege of visa-free travel agreements between specific nation states, which have genuine arrangements, by other countries that have subordinate agreements with the same individual country. 

For example, as a former British colony and a member of the Commonwealth, Antigua & Barbuda has arrangements for its citizens to travel freely to the UK.

As the UK still remains a member of the EU, onward travel to any EU member country is permitted.

Most of the Citizen by Investment Programmes clearly state that visa-free travel is the main key benefit.

Malta has issued over 700 passports to non-EU nationals in exchange for at least €200 million since its CIP started in 2014.

Antigua and Barbuda has almost tripled this number to 1923 passports sold during the same period.

Ana Gomes, who sits on the Justice and Home Affairs Committee said, "Such schemes put at risk the integrity of the Schengen system and should be looked at closer." She has demanded an investigation by the EU Commission into all member state investor schemes, not just Malta's.

Meanwhile, Frank Engel, a centre-right MEP, representing Luxembourg, referring to CIPs remarked, "These are the practices of a banana republic."

Another politician, Latvian MEP Robert Zīle, stated that "Citizenship is something that has to be earned, not simply handed out to people with deep pockets. He further expressed concern that Malta may also be helping to defy the sanctions imposed on Russia by Europe."

Maltese officials defended the Programme claiming that applicants were thoroughly scrutinised.

"The people going through the program have to go through a very strong and thorough due diligence process," Kurt Farrugia, the Prime Minister of Malta's spokesman, noting that 25 percent of applicants are rejected, said "We've always looked to get the quality persons. Applicants must have no criminal record as well as undergo checks against records at the International Criminal Court and Interpol."

Gaston Browne, Prime Minister of Antigua and Barbuda, offers a similar defence of his country's  passport programme, fiercely rebuffing the latest US State Department INCSR report released in March 2017, which describes Antigua's Citizenship by Investment Programme as "among the most lax in the world."

In a European Parliament press release dated 16 January 2014 about a recent resolution on citizenship rights, which was passed by 560 votes to 22, with 44 abstentions. "These are invaluable and cannot have a price tag attached to them. Outright sale of EU citizenship undermines the mutual trust upon which the Union is built.

Parliament also stresses that the rights conferred by EU citizenship, such as the right to move and reside freely within the EU, should not be treated as a "tradable commodity". EU citizenship implies having a stake in the EU and depends on a person's ties with the EU and its member states or on personal ties with EU citizens.

Furthermore, citizenship-for-investment schemes "only allow the richest third-country nationals to obtain EU citizenship, without any other criteria being considered," which implies discrimination."

Meanwhile, approved representatives of spurious citizenship programmes have sprung up in many legitimate countries, many of which do not fall with the remit of local financial conduct regulators.

The Mossack Fonseca law firm behind the Panama Papers scandal has exposed many jurisdictions, persons and companies. 

Many observers were surprised that Canada has emerged a tax haven and money laundering centre.

"Snow washing" has been created by the widespread international tax avoidance industry, using Canada's "white listed" tax destination reputation and sound economy to make suspect transactions appear genuine.

The Canadian Authorities, by their tax agreements with 115 countries, have increased the opportunities for criminals and tax avoiders to transfer funds through its financial system.

Gaps filled by prudent jurisdictions, such as the use of foreign-controlled shell companies, whereby owners remain anonymous because of the use of nominees, have not been closed.

The issuance of new bearer shares has recently been banned but this does not apply to those already issued, giving them a premium value.

Canadian limited partnerships are the corporate vehicle of choice.  This is because there are no filing requirements for non-residents.

Meanwhile, Scotland has also emerged as a hot bed of tax evasion and money laundering because it has a similar limited liability partnership structures to Canada and, like its maple tree cousin, it enjoys the façade of being a white listed jurisdiction.

Growth of this "industry" has trebled since 2011 and shell companies are being marketed around the European Union as Scottish zero tax offshore companies. 

Indeed, whilst the architects of the CIP Schemes, Henley  & Partners claim the benefits of dual citizenship are primarily for the purpose of releasing holders from time-consuming visa applications, free movement and second homes, the better informed remain convinced that the underlying purpose is a fresh, separate identity linked directly to another country, different from the bearer's normal residency.

And so, facilitated by a flaky Maltese or Antigua & Barbuda second passport, masked behind the veil of a Scottish or Canadian limited or limited liability partnership, bank accounts in Cyprus and Latvia can flourish with funds gained from tax evasion, money laundering and other crimes with the bearer safely detached from the original source and the reach of local tax authorities and law enforcement agencies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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