Over the last few years, we have heard the accusations in and out of our parliament that billions of dollars are unaccounted for under our Citizenship by Investment program (CBI) in the Consolidated Fund of Dominica. The argument is advanced, particularly by opposition parties, that all revenues generated from the sale of our citizenship must be accounted for in the Consolidated Fund.
The Leader of the Opposition, Mr. Lennox Linton and other members of the United Workers Party (UWP) have often sought clarification from the government of Dominica with respect to the alleged mismanagement of the proceeds of the sale of our citizenship under the CBI program. Mr. Linton has stressed that the public has a right to know the legal authority under which the monies raised or received by Dominica, through its CBI program, are kept out of the Consolidated Fund.
This concern has been significantly amplified over the years as the Skerrit-led DLP Administration has been accused of corruptly mismanaging the revenues from the CBI program. The UWP has highlighted that increasingly over the years there has been a major shift in revenue generation focus of Dominica from taxes, licenses, fees or loans and grants to the sale of Dominican citizenship without the corresponding investments in productive economic activities to secure sustainable jobs and national income.
To many citizens of Dominica, the CBI program that is operated by the Skerrit-led DLP Administration lacks integrity, transparency, and accountability. Dominicans have never been presented with a clear, full, and accurate accounting of the billions of dollars collected from the CBI program over the years. There has never been a full accounting of the expenditures from the special purpose escrow accounts that finance the free public houses, health and wellness centers, and hospital projects being undertaken around the Island by the government’s no-bid contractor of choice, Montreal Management Consultants Est (MMCE). The information made available to the public is very sketchy, manipulated, incomplete, inaccurate, and untrustworthy piecemeal reporting to parliament as part of the presentation of the annual budget.
Unlike the other OECS countries involved in the citizenship business, the Dominican government does not give a full accounting of the number of new economic citizens acquired per annum nor the total revenue and expenditure associated with the entire program. This has added to the growing distrust of the DLP government in managing the program in the best interest of the country. In fact, many are of the view that the CBI program is a cesspool of corruption and it must be purged if it were to remain as a viable and sustainable source of government revenue.
The DLP cheerleaders often boast that the Skerrit-led DLP Administration has been the only one to enact legislation to guide the CBI program in Dominica, albeit the program started under the Dominica Freedom Party (DFP) and continued under the UWP Administration. Inasmuch as this may be true, we all know that the DLP government is not always mindful of enacting laws for the good governance of the State-where its interest is not at the fore. The DLP enacts laws that enable it to govern in the dark with impunity. Therefore, it passed the Statutory Regulations and Orders (SR&O) No. 37 of 2014, pursuant to section 20 of Citizenship Act, of Dominica, Chapter 1:10 with a view to having tight control over all aspects of the CBI program. It cherry-picks who are agents, developers, what projects are approved for investment, where the monies generated are deposited, and how the monies are spent.
Per S.R&O No.37, an ‘approved project’ is a real estate development or ‘other development’ project that has been approved by Cabinet. Note the word “investment is used only under the Real Estate Option. It is not used with respect to the EDF Option. Instead, the word ‘contributions’ is used in the latter as the funds generated do not belong to the investors but to the government of Dominica.
Following the recent release of Aljazeer’s major investigative report that exposed the corrupt passport selling business in Malta, entitled, “The Cyprus Papers Undercover,” several high-ranking Cypriot officials, politicians, lawyers, and real estate developers were implicated in a corrupt Citizenship by Investment scheme that allowed criminals to acquire a European passport similar to the program in operation in Dominica. The investigation exposed how the highest ranks of the political elite were willing to aid and abet convicted international criminals to obtain Cypriot citizenship, granting them visa-free travel and access to the European Union’s internal markets. It was hoped that the Aljezeera’s investigations would have resulted in opening the transparency and accountability of the CBI program in Dominica, especially following the earlier expose from the same network on the sale of diplomatic passports by the government entitled, “Diplomats For Sale.”
Contrary to the evidence on the ground, the government of Dominica continues to advance the propaganda internationally that the CBI program is a legitimate revenue generating scheme that helps in creating a modern, diverse, and sustainable economy to meet the demands of a highly competitive global environment. On that basis, it continues to invite “investments” (actually the acquisition of citizenship) as the main revenue generator of the country. Notwithstanding the billions generated from the scheme, the evidence is clear that it has not fuelled consistent economic growth and prosperity through job creating and business opportunities for its citizens.
The Consolidated Fund vs Escrow Accounts
Citizens of Dominica continue to ask whether all revenues from the CBI program should be deposited into, managed, accounted for, and reported through the Consolidated Fund, in light of the query of the UWP. To attempt an answer to the question, which may have been erroneously responded to in the affirmative by the UWP, it is necessary to explore the constitutional mandate and legislative framework of the Consolidated Fund.
Chapter V: Finance, Section 76 of the Constitution of Dominica states;
“All revenues or other moneys raised or received by Dominica (not being revenues or other moneys that are payable, by or under any law for the time being in force in Dominica, into some other fund established for a specific purpose) shall be paid into and from a Consolidated Fund.”
This constitutional provision is not unique to Dominica. It exists in the Constitution of most Islands in the Caribbean including Guyana, Jamaica, Barbados and Trinidad and all the Islands of the Organization of Eastern Caribbean States (OECS). The bracketed provision is a broad exception to the requirement that all government revenues are to be paid into the Consolidated Fund as per the Finance Administration Act. The provision allows government to hold funds separately in other funds for “specific purposes.”
The Consolidated Fund is regarded as the central government’s current account. It receives the proceeds of taxation and certain other government receipts, which consist of tax revenues and tax-type revenues such as tariffs, fines, penalties, proceeds from rent and/or sale of state assets and certain licenses, fees paid over by departments and known as Trust Statement income and including fees and all contributions from the CBI–EDF option in addition to the fees (not the investments) from the CBI-Real Estate option. Expenditure from the Consolidated Fund is classed as being of either a recurrent or capital nature. In general, recurrent expenditure relates to the normal operating costs of government departments and authorities, such as salaries and stores, while capital expenditure normally relates to major spending on construction works such as the building of a road, school, public housing, health centers, hospitals, and ports (sea/airports).
The Fund essentially aggregates all “public moneys” that are on deposit at the credit of the State. It does not include extra-budgetary funds established pursuant to an Act of parliament as indicated in Section 76 of the Constitution, which includes funds from the Lottery Act and the approved investment projects established under the S.R&O No.37 establishing the CBI program. Funds for these activities are for ‘specific purposes’ and funded by specific earmarked revenue that operates apart from the Consolidated Fund.
The former Financial Secretary, Ms. Rosamund Edwards advised the world in a presentation to Private Sector Forum in 2017 that the EDF (Cash) Option of the CBI program produces government revenues after the process for applying for citizenship. All “contributions’ (not investments) received under this option are paid directly into the accounts/Consolidated Fund of the government as public funds through the banking sector. Such funds are administered by the administrative staff of the Ministry of Finance, with the signatories being the Financial Secretary, the Budget Controller, the Accountant General, the government’s Senior Examiner, and the Corporate Services Officer of the Citizenship by Investment Unit (CBIU). All drawdowns from this fund must be done by at least two officers.
The funds received under the EDF (Cash Option) are considered as ‘public funds’, which are mainly used for financing capital projects (roads, health centers, hospitals and public houses) and for paying down on the national debts, which is consistent with professional advice given by all regional and international financial institutions and multilateral partners. All projects funded under this option are to be part of the national budget and revenues paid into the Consolidated Fund. Therefore, when the Minister of Finance presents his annual budget on or about June/July annually, all projects funded through the public funds of the CBI option must be clearly identified and reported thereon- which is not the same for the approved projects funded under the Real Estate Option.
With the Real Estate Option, the funds collected are not ‘public funds’ and therefore not part of the Consolidated Funds of the State. Projects are identified and specially approved by the cabinet related to the objective of generating Foreign Direct Investment (FDI), most of which initially went to hotel development but is now increasingly finding its way to financing public housing and the construction of health and wellness centers island-wide. Under the Real Estate Option, the government enters into a special agreement with the CBI developer. Terms and conditions are negotiated for the management of funds that are placed in a special escrow account. This money is not public funds. Not government funds. Therefore, any project constructed from these funding sources is not under the sole ownership and control of the government of Dominica. Hence the argument developed in Part IV of this series that the government cannot pass on any legal ownership title to any of the residents occupying the houses constructed by MMCE in the same way neither the government nor MMCE can confidently claim ownership of the mansion in which the Prime Minister resides –unless, the property was constructed from the profits of MMCE and therefore it has a legal interest in the property. Notwithstanding the suspicions abound, and the possibility of the Prime Minister’s equitable/beneficial interest in the property, he has no legally registered interest.
As explained by PM Skerrit, the housing project for the replacement of the residents of Petite Savanne was funded by MMCE. He said that MMCE had fronted its own funds to construct the houses and the government undertook to pay the company upon construction. Therefore, as is typical under the Real Estate Option, a government-approved developer of a government-approved project is expected to submit a budget with established milestones for approval with the expectation that payment from an escrow account will be made based on the achievement of predetermined milestones.
The Agreement between the government and the developer provides for the appointment of an Assessor, who assesses the budget, establishes the reasonableness of the milestones and when a claim is presented for disbursement of funds from the escrow account, the said assessor verifies whether the work completed has been done as per the Agreement. It is only after the approval of the assessor i.e., the verification or verification of the work done under the Agreement that the government agrees to authorize payment of funds through a jointly signed instruction to the bank are funds paid out from the fund hold the moneys of the so-called investors. These financial guidelines need to protect the interest of the investors and the best interest of the State. Accordingly, all funds received under the CBI program are subject to all banking rules and therefore are expected to pass all money laundering and international transaction rules related to the financing of terrorism as is the case for any other financial transaction that goes through the banking system
Sections 13 of the Finance Administration Act of Dominica state, “All public money must be accounted for in the accounts of the Commonwealth of Dominica.” This provision must be read in conjunction with sections 76 and 83 of the Constitution. As per the Act, public monies include:
(a) all revenues or other monies raised or received for the purpose of the Government, and
(b) any monies or funds held, whether temporarily or otherwise, by any officer in his official capacity, either alone or jointly with any other person whether or not that person is an officer.”
Whereas the Section 76 of the Constitution of Dominica references all revenues or other moneys raised or received by Dominica, it is my assessment, contrary to the opinion of others in the opposition, that the revenues raised for under any law for which a special fund is established for a specific purpose are not considered to be public money and therefore does not have to be paid into and from part of a Consolidated Fund.
In that regard, the mandate under Section 83 of the Constitution establishing the Office of Director of Audit is limited to ‘public accounts.’ The Director of Audit is required to audit and report on the ‘public accounts’ of Dominica that includes:
i. the accounts of all officers and authorities ‘of the Government;’
ii. the accounts of all courts of law in Dominica (including any accounts of the Court of Appeal or the High Court maintained in Dominica);
iii. the accounts of every Commission established by this Constitution like the Electoral Commission and
iv. the accounts of the Clerk of the House.
The Director of Audit prepares and presents a certificate on the accounts of the Commonwealth of Dominica for every fiscal year and certifies that he/she has audited the Statement of Assets and Liabilities of the Commonwealth of Dominica i.e. the Consolidated Fund and other ‘related statements of accounts’ for each year, as presented by the Accountant General in accordance with Section 17 of the Financial (Administration) Act # 4 of 1994. The Auditor’s responsibility is to express an opinion on those financial statements based on my audit in accordance with the provisions of Section 83(2) of the Constitution of the Commonwealth of Dominica and the Audit Act # 5 of 1994.
The questions are whether the above list includes the CBI escrow accounts and whether the Director of Audit has a legal mandate to review and report on the funds held in the escrow accounts belonging to the CBI ‘investors’ and held in trust by the developers and the government? Based on the set up of the Real Estate Option, it does not appear that the Director of Audit has any such mandate to audit and report on these accounts and if he/she does, to date it is not being done. This may therefore be a major loophole of our legislative framework that promotes a lack of transparency and accountability of the management and reporting on the CBI scheme. These accounts are said to contain billions of dollars of the private investment funds from the sale of our citizenship held jointly with the government and the developers but are not subject to the jurisdiction of the Director of Audit. Therefore, a report on these accounts is not submitted to parliament by the Director of Audit and ultimately to the Public Account Committee (PAC) for review.
Indeed, the government of Dominica appears to have a prima facie legislative framework for the operations of the current CBI program. However, based on the manner in which the program is operated, there may be a need to request judicial review to challenge the secondary laws that established the CBI program as its provisions are contrary to the intent of section 41 of the Constitution, which provides a mandate for making laws for peace, order, and good government of Dominica.