Vanuatu is on the FATF List of Countries that have been identified as having strategic AML deficiencies
FATF Statement - 29 June 2018
The FATF welcomes Vanuatu's significant progress in improving its AML/CFT regime and notes that Vanuatu has established the legal and regulatory framework to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2016. Vanuatu is therefore no longer subject to the FATF’s monitoring process under its ongoing global AML/CFT compliance process. Vanuatu will work with APG to improve further its AML/CFT regime
APG issues public statement on Vanuatu – September 2015
The APG remains concerned about the serious deficiencies in Vanuatu’s anti‐money laundering and combating the financing of terrorism (AML/CFT) system.
Vanuatu’s latest mutual evaluation report, adopted by the APG membership in July 2015, indicates that many of the deficiencies first identified by the APG in 2006 have not yet been adequately addressed. The report also finds that its system demonstrates low levels of effectiveness in implementing all of the FATF’s global AML/CFT standards.
The most important technical compliance deficiencies include:
Inadequate criminalization of money laundering and terrorist financing;
Inadequate measures to implement United Nations resolutions for targeted financial sanctions against terrorists;
Inadequate customer due diligence (CDD); and
Inadequate supervisory frameworks for financial institutions and designated non‐financial businesses and professions.
The APG calls on Vanuatu to expeditiously address the remaining deficiencies and to enhance the effectiveness of its system to combat money laundering and terrorist financing.
This statement, which was first issued in October 2014, will remain in place until the most important deficiencies are adequately addressed, as determined by the APG membership, informed by its peer monitoring and follow-up process.
In June 2014, Vanuatu enacted and brought into effect the Anti‐Money Laundering and Counter‐Terrorism Financing (AML/CTF) Act and the AML/CTF regulations. The AML/CFT Act and regulations addressed some but not all of the deficiencies relating to CDD.
In January 2015, Vanuatu brought into force amendments to the Proceeds of Crime Act and the Counter Terrorism and Transnational and Organized Crime Act. These amendments did not, however, adequately address the deficiencies relating to the criminalization of money laundering and terrorist financing.
In July 2015, the APG adopted Vanuatu’s third mutual evaluation report. The evaluation was conducted under the FATF’s 2013 assessment methodology which focuses on effectiveness. The report reflects low levels of effectiveness across all of the FATF’s 11 Immediate Outcomes. In light of these serious deficiencies and the length of time that they have been outstanding, the APG membership recently referred Vanuatu to the FATF’s International Cooperation Review Group for further action and scrutiny.
Compliance with FATF Recommendations
The last follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Vanuatu was undertaken in 2018. According to that Evaluation, Vanuatu was deemed Compliant for 18 and Largely Compliant for 19 of the FATF 40 Recommendations.
US Department of State Money Laundering assessment (INCSR)
Vanuatu was deemed a Jurisdiction of Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Vanuatu has an agricultural and tourism-based economy; it is closely tied to the economies of Australia and New Zealand. Vanuatu is an offshore financial sector with a relatively small number of licensed banks, totaling five domestic and eight international banks. Vanuatu is known for strict secrecy provisions that have prevented law enforcement agencies and regulators from obtaining the beneficial owner information of entities registered in the offshore sector, except under a court order. As a result, legal entities (companies) and arrangements formed in Vanuatu face criminal misuse and are vulnerable to money laundering.
Vanuatu’s money laundering threats are primarily from foreign predicate offenses (including foreign tax crimes), illicit cross-border currency movements, domestic bribery and corruption, fraud (particularly value added tax (VAT) evasion), and drug offenses. High-risk sectors include remittances and currency exchange businesses, trust and company service providers, casinos, and interactive gaming businesses. Of less, but still significant risk are lawyers and accountants, real estate and high-value asset dealers. Political instability, with frequent government leadership changes, has an impact on high level political commitment to establish and maintain an efficient and effective AML/CFT system.
EU Commission Tax Blacklist
On March 12, 2019, the EU Commission confirmed that Vanuatu had not delivered on their commitments since the first blacklist adopted in 2017 and, therefore, it will be placed on the EU Tax Blacklist.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 46
World Governance Indicator – Control of Corruption 50
This South Pacific island economy is based primarily on small-scale agriculture, which provides a living for about two-thirds of the population. Fishing, offshore financial services, and tourism, with nearly 197,000 visitors in 2008, are other mainstays of the economy. Australia and New Zealand are the main source of tourists and foreign aid. A small light industry sector caters to the local market. Tax revenues come mainly from import duties. Mineral deposits are negligible; the country has no known petroleum deposits.
Economic development is hindered by dependence on relatively few commodity exports, vulnerability to natural disasters, and long distances from main markets and between constituent islands. In response to foreign concerns, the government has promised to tighten regulation of its offshore financial centre.
Since 2002, the government has stepped up efforts to boost tourism through improved air connections, resort development, and cruise ship facilities. Agriculture, especially livestock farming, is a second target for growth.
Agriculture - products:
copra, coconuts, cocoa, coffee, taro, yams, fruits, vegetables; beef; fish
food and fish freezing, wood processing, meat canning
Exports - commodities:
copra, beef, cocoa, timber, kava, coffee
Exports - partners:
Japan 35.1%, Turkey 10.5%, Thailand 8.7%, China 8.2%, Venezuela 5.9%, UK 5.6% (2015)
Imports - commodities:
machinery and equipment, foodstuffs, fuels
Imports - partners:
China 16.7%, Australia 14.6%, Japan 13.9%, Singapore 10%, Fiji 9.3%, NZ 8.3%, New Caledonia 5.2% (2015)
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