Adella discusses how COVID-19 has led to the Caribbean region welcoming a new kind of visitor, as companies enacted necessary remote work policies from 2020 onwards.
Post-COVID World, The Financial Industry And Fault Tolerance
COVID-19 completely disrupted life as we knew it and most of us watched silently from our homes as governments imposed sweeping lockdowns on borders and placed strict sanctions on the movement of people and goods. The hindsight of a COVID-19 world is indeed a sobering view, especially in the Caribbean region where borders and businesses reopen, bringing a semblance of normalcy to severely ailing economies after a two year hiatus. That hindsight also brought clarity - that the region’s sole and myopic focus on tourism was and is a mistake; that a robust financial industry is more fault tolerant to the closure of borders and stay-at-home mandates than tourism.
The Caribbean region’s sunny isles have seen a record number of visitors since opening borders and relaxing entry requirements. It has also welcomed another kind of visitor, as companies, during lockdowns, through necessity enacted remote work policies. Enter the digital nomad.
The English speaking island of St. Lucia is nestled in the eastern Caribbean between Grenada and the French island of Martinique, and is home to about 165,000 people and an increasing number of digital nomads. Digital nomads are usually younger, semi-retired or entrepreneurial remote workers (usually in tech) who have opted for a nomadic life wholly dependent on technology, Wi-Fi and hotspots for productivity. Some hop serially from jurisdiction to jurisdiction where they will stay for a short time and some choose a place where they remain for longer periods. Research in 2020, claimed that as many as 10.9 million American workers considered themselves to be digital nomads.
Several islands in the Caribbean region, including St. Lucia, the Bahamas, Dominica, Antigua and Barbuda, the Cayman Islands and Anguilla pounced on the COVID-19 cabin fever by offering digital nomad visas which would enable the nomad, through special visa applications, the ability to legally reside on island consecutively for periods for 6-18 months at a time. Whilst a collective current census on digital nomads in the region has not yet been published, what has been observed is an increase in the demand for asset protection and financial services by that group. After all, it is one thing to read an article or receive a recommendation from a financial planner and another to experience the jurisdiction first-hand. St. Lucia is no longer primarily known for swoony honeymooners and those looking forward to posting Instagram office reels from the beach; there is also a subclass of nomads all too aware of the sweeping new trend of regulation by enforcement.
Asset Protection And Jurisdiction Shopping
On 8 April 2022, the EU adopted five packages of sanctions against Russia and Belarus, in response to the military attack against Ukraine. Moreover, the EU sanctions applied directly to every company and individual within the EU and extended even to EU citizens even if located in non-EU jurisdictions. Following suit, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned virtual currency mixer Tornado Cash, which allegedly was used to launder more than US$7 billion worth of virtual currency since its creation in 2019. Two days later, Alexey Pertsev was promptly arrested in Amsterdam on suspicion of involvement in the Tornado Cash protocol for “involvement in concealing criminal financial flows and facilitating money laundering”. As of writing, no formal charges have been read against Pertsev who has been ordered a stay in jail for the three month duration of an investigation.
Regulating with such wide strokes is wrought with unintended consequences and irregularities which may be quite impossible to consistently enforce. By way of a real world example, placing a blanket sanction on the Tornado Cash protocol is akin to closing down a highway between two cities because people use it to transport drugs from one state to another.
The Caribbean region is no stranger to the perpetual threat or reality of sanctions from abbreviated agencies that threaten to isolate or deplatform it from global financial markets. It is also well aware of the reputational risk that leads to those consequences - after all, an entity looking to incorporate, register or domicile in an offshore location must certainly be a criminal endeavour seeking to evade taxes and stash the proceeds of illicit activity and crime. However, the reality is often less salacious in nature; Often, the person or entity looking to offshore vehicles are more than likely looking to take advantage of attractive tax incentives that minimise tax burdens in their respective jurisdictions, or to create corporate structures that protect assets against unreasonable seizure and political uncertainty.
Second Citizenship And Property
An increasing number of countries in the Caribbean region, most popularly; St. Lucia, Dominica, St. Kitts and Nevis, Antigua and Barbuda and Grenada have in recent years offered a citizenship by investment option whereby an applicant, after a process of application and due diligence may participate in the programme by making a qualifying investment in real estate, treasury bonds or a qualifying government fund.
In St. Lucia, a nomad can gain citizenship via donation to the National Economic Fund, a real estate investment or the temporary St. Lucia COVID-19 relief bond. The minimum investment required for the National Economic Fund is US$100,000 for a single applicant, US$165,000 for a couple and US$190,000 for a family of four. The real estate option is executed via a sale on a government approved development for a minimum of US$300,000 and the St. Lucia COVID-19 Relief Bond requires a deposit of a minimum of US$250,000 into a refundable government bond, or US$300,000 for a family application. The bond has a minimum holding period of five years, after which the capital can be returned to the investor at 0 per cent interest. However, the COVID-19 Relief Bond is a temporary avenue, set to expire in December 2022. Applications can be conducted remotely and perks to the passport include VISA free entry to 157 countries including the Schengen Zone and the UK, Hong Kong, Singapore, etc. Moreover, St. Lucia poses no residency requirements on the applicant.
The growing global real estate market has become one of the largest asset classes in the world with a valuation of US$228 trillion dollars, surely with some help from the digital nomad. Not only is rental income passive income but it is a good way to diversify and protect one's portfolio and assets. There may also be favourable tax incentives for the buyer in their jurisdiction. Foreign properties are notoriously more difficult (and sometimes downright impossible) to attach than in a local jurisdiction. Moreover, the diversification angle cannot be understated. The prudent investor would never place all his assets into one asset class or vehicle and depending on where that property is purchased, it might even come with a second passport.
The decline of the COVID-19 era has seen the rise of the digital nomad, an often sophisticated professional looking to work remotely in pleasant climes. There is also a growing subgroup of the digital nomad; a nomad looking to take advantage of attractive tax incentives, financial services and protect their assets from geo-political instability, excessive unfavourable taxation and the unintended and dire consequences of extralegal regulation by enforcement regimes. The Caribbean region is politically stable and rife with opportunity and vehicles for asset protection and portfolio diversification.
Adella Toulon-Foerster LLB (hons), LLM, is an early adopter of cryptocurrencies and the founder of the St. Lucian based Nakamoto Group which works closely with regional Caribbean and North American law firms and advisory groups. The group focuses on multi-jurisdictional corporate governance, regulatory compliance and clarity for tech and cryptocurrency based projects and platforms. Ms Toulon-Foerster can be contacted at: adel.la