Originally Published May 21, 2014
Yesterday, the Financial Crimes Enforcement Network (“FinCEN”) issued an Advisory “to alert financial institutions that certain foreign individuals are abusing the Citizenship-by-Investment program sponsored by the Federation of St. Kitts and Nevis (“SKN”) to obtain SKN passports for the purpose of engaging in illicit financial activity.” The advisory seems primarily concerned with Iranian sanctions evaders.
Specifically at issue are revelations that several Iranian nationals designated by the Office of Foreign Assets Control (“OFAC”) have obtained alternative passports through the SKN Citizenship-by-Investment program. Those Iranian nationals then engage in deceptive activities to circumvent U.S. economic sanctions. Most recently, OFAC added the names of 4 Iranian individuals and 9 entities to its Foreign Sanctions Evaders List (“FSE List”). This article, published a month after OFAC’s action, identifies that those 4 individuals had specifically acquired SKN passports. This follows the more high profile case of Alireza Moghaddam, an Iranian national who had been issued a diplomatic SKN passport and was attempting to enter Canada.
The FSE List was issued pursuant to Executive Order 13608 and imposes both sanctions and immigration restrictions on those deemed to have undermined or evaded U.S. economic sanctions targeting Iran or Syria. U.S. persons are generally prohibited from all transactions or dealings, whether direct or indirect, involving persons identified on the FSE List in or related to any goods, services, or technology.
Although it seems as if SKN has halted the practice of issuing economic citizenship to Iranian and Afghan nationals, FinCEN warns that “the program, as administered, maintains lax control as to who may be granted citizenship. Furthermore, SKN is hardly the only nation in the world offering economic citizenship. A quick search on the internet reveals that Bulgaria, Latvia, Antigua and Barbuda, and the Commonwealth of Dominica all have similar investment-for-citizenship programs.
Financial institutions with a presence in the United States and U.S. businesses should remain cognizant of the regulatory risks posed by foreign sanctions evaders when transacting with persons using passports from any country offering economic citizenship, not just SKN. As advised by FinCEN, financial institutions and U.S. businesses should “conduct risk-based due diligence to mitigate the risk that a customer is disguising his or her identity.”
Disclaimer: Blog posts should not be relied upon as legal advice and are only provided for informational purposes. Information contained in blog posts may also become outdated with the passage of time as laws change and U.S. foreign policy and national security objectives evolve.