Multiple Passports Aren’t Just for Criminals
In some parts of the financial industry, there is an unfounded fear that an individual with more than one passport is a suspicious character. There are more law abiding individuals with multiple passports than criminals and such individuals should be welcomed to your institution as clients.
Dual citizenship is the status of a person who is a legal citizen of two or more countries. 123 jurisdictions allow dual citizenship and another 13 allow dual citizenship for minors.
Some potential clients may even have three passports: parent from country 1 marries parent from country 2 and they have a child in the U.S. The child may end up with three passports.
U.S. citizens, including those with dual citizenship, must use a U.S. passport to enter and leave the United States. A dual citizen may also be required by the second country where she is a citizen to use its passport to enter and leave that country. Many Americans are dual Irish/U.S. citizens and Israeli/U.S. citizens.
If one of your grandparents is an Irish citizen who was born in Ireland, but neither of your parents was born in Ireland, you may still become an Irish citizen. The appeal to following this path to citizenship for some is pride in heritage and / or the opportunity to work in the European Union.
While only a fraction of those claiming Irish ancestry likely satisfy the law on citizenship by descent, there are a large number of individuals who claim Irish ancestry.
There are approximately 14.7 million Jewish individuals in the world. Of these, approximately 7.9 million live outside of Israel with 5.7 million residing in the U.S. Israel’s Law of Return grants every Jew the right to go to Israel as an Oleh. The rights of an Oleh extend to include a child, grandchild, spouse, the spouse of a child and the spouse of a grandchild (except someone who converts from Judaism to another religion).
Of concern to tax authorities is the “Golden Visa”. Some jurisdictions trade citizenship or residence rights for investment. Some associate Golden Visas with tax evasion and money laundering.
However, Golden Visas are available in jurisdictions not necessarily thought of as hot beds of money laundering including a large number of European Union countries and the U.S.
The U.S. EB-5 visa gives permanent U.S. residency to those investing into government-approved projects across the U.S. During the first four months of 2020, 80% of individuals receiving an EB-5 visa came from:
OECD Golden Visa / Passport Blacklist
The OECD has expressed its concern with Golden Visas seeing them as schemes open to abuse by criminals and those seeking to avoid economic sanctions.
[The information in the table reflects the OECD’s analysis of CBI/RBI schemes as of July 15, 2020.]
Regardless of whether a potential client has one or three passports or whether the client’s passport is from an OECD blacklist jurisdiction, the important thing is for the financial institution to complete its due diligence.
U.S. Bank Secrecy Act (BSA) / Customer Identification Program (CIP)
The CIP is intended to enable a financial institution to form a reasonable belief that it knows the true identity of each customer. A financial institution need not establish the accuracy of every element of identifying information obtained, but it must verify enough information to form a reasonable belief that it knows the true identity of the customer.
At a minimum, the financial institution must obtain the following identifying information from each customer before opening the account:
Date of birth, for individuals
An identification number for a non-U.S. person can be a passport number. The passport must provide evidence of a customer’s nationality or residence and bear a photograph or similar safeguard. Given the availability of counterfeit and fraudulently obtained documents, the U.S. encourages financial institutions to review more than a single document to ensure that it has a reasonable belief that it knows the customer’s true identity.
Not the End of the Due Diligence Story
CIP is one piece of a financial institution’s due diligence. Compliance staff conducting thorough due diligence need to be familiar with the requirements of a mouthful of alphabet soup: AML, KYC, PEP, EDD, SAR, SSIS, OFAC, SDN, FCPA, FBAR, FATCA, CRS.
Don’t fear the person with more than one passport. Just ensure you follow the due diligence process outlined in your organization’s policies and procedures. And if you do not have policies and procedures, you should fear the regulator’s next examination.