IM Yearbook 2018/19

INVESTMENT MIGRATION YEARBOOK 2018/2019
IM
The exact due diligence procedures tend not to be publicly
disclosed. Some argue that this lack of knowledge has
contributed to the criticism that many programs face. Do
you agree with this criticism and do you believe the industry
needs to commit to a greater level of transparency?
Laura Austin: I think that there
is rightfully a high level of trust
that is placed in the work being
conducted by due diligence
providers, after all it is our
area of expertise. However, it is
crucial that transparency exists
between the due diligence
providers and the Citizenshipby-Investment
Units (CIU). It
is key that the right questions
are being asked of the due
diligence providers and,
likewise, that the due diligence
providers are forthcoming
with regards to their research
processes. Without this
transparency, there is a risk
of misguided faith in the
comprehensiveness and
quality of the due diligence
that is being conducted.
James Swenson: I have
long argued that citizenship
and residency programmes
should be transparent around
the level of due diligence. If
programmes are performing
a high-level of due diligence,
they should certainly be
more forthcoming about
the process. This would
give international and local
observers a greater degree of
comfort around the process.
However, due diligence is only
a portion of the on-boarding
process. Programmes should
also improve transparency
around their decisionmaking
process and what
risks constitute grounds for
rejecting an applicant.
What would you highlight as
the biggest challenges and
issues that the KYC industry
is currently facing?
Thomas Anthony: We have
seen greater transparency
from a number of programmes
recently, and our hope is
that this trend will continue.
An example of this effort
to increase transparency is
how the five Caribbean CbI
programmes have united as
an association, focused on
best practices and information
sharing. Another example
is the recent due diligencethemed
conference hosted by
Malta’s Individual Investor
Programme, bringing a
greater focus on the need
for transparency. We see
these examples not only
as positive steps but also
indicators of an industrywide
transformation. While
some programmes are not
as open about their internal
and third-party due diligence
practices, we have seen a
generally positive movement
towards transparency and
support this effort by providing
due diligence training
programmes to CBI and RBI
units. Increased openness and
insight surrounding the best
practices for due diligence will
benefit the industry as a whole.
Michael Cheng: We agree that
transparency will always be an
important part of any service
industry. Clients will always
have a right to understand
what they are purchasing,
and providing that level of
transparency is a matter of
best practice to us. We believe
it engenders trust not only
in our product, but also in
us as a company. We ensure
that our clients understand
our research methodology
and that all information is
fully and properly sourced in
our reports so that there are
no questions about how we
came about the information.
James Swenson: I would
mention increased complexity
and requirements, which
translate to increased costs for
most organisations. Regulators
continue to place pressure
on organisations to improve
due diligence processes. The
cost of compliance for many
organisations is therefore
increasing significantly, and
many banks are choosing
to exit entire industries or
geographies to avoid the costs.
Michael Cheng: We need
to make the most out of
technology. Among service
providers, technology is a
massive competitive advantage
and the most prominent
disrupter in the due diligence
and compliance industry.
Laura Austin: I’d like to point
to changing data privacy
regulations, namely the
General Data Protection
Regulation (GDPR) in the
European Union (EU), which
is at the forefront of our minds.
GDPR is being considered as
one of the most significant
reforms in data protection in
the past 20 to 30 years, and
with it have come changes in
the way that individuals and
businesses regard protection of
personal information. Not only
are these types of regulations
altering the processes of
due diligence, they are also
changing the landscape with
regards to information on
which due diligence relies. As
countries and regions enforce
stricter data privacy laws like
GDPR, the type of information
that is legally accessible
by third parties decreases.
Another significant challenge
relates to the accessibility of
information and reliability
of due diligence in war-torn
and sanctioned countries. As
countries, especially in the
Middle East and North Africa
(MENA) region, destabilise,
it is increasingly difficult to
access official records. Quite
often we must rely on local
source inquiries, which takes
additional time, cost and effort,
and often yields information
that is up to interpretation.
Thomas Anthony: New
regulatory hurdles such as the
European Union’s General
Data Protection Regulation
(GDPR) present an unknown
challenge and risk for KYC.
Compliance professionals
rely on the availability of
information. The solutions to
mitigate that risk are going to
come out of the effective use
of technology to ensure they
collect the information needed
to effectively evaluate and assess
risk, while adhering to required
laws. The CBI and RBI industry
faces a particular challenge with
regards to KYC, which is the
complexity of reviewing and
assessing global documentation
and records within the
context of a standardised due
diligence process. Third-party
due diligence providers with
comprehensive language
capabilities and understanding
of cultural nuances are key
to addressing this challenge.
As the global reach of these
programmes expands, engaging
providers with these skill sets
and experience will become
even more important.
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