Vanuatu Country Summary

FATF Status

Vanuatu was removed from the FATF List of Countries that have been identified as having strategic AML deficiencies on 29 June 2018.

Latest 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.

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Vanuatu was a follow-up Evaluation that took place in August 2018. According to that Evaluation, Vanuatu was deemed Compliant for 18 and Largely Compliant for 19 of the FATF 40 Recommendations. It was also deemed Highly Effective for 0 and Substantially Effective for 0 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.

Vanuatu is primarily a transit country for human trafficking, particularly for labor and sexual exploitation, and is increasingly becoming a destination for forced labor due to its growing tourism sector. The country faces challenges with illegal logging and fishing, as well as a small but growing drug market, while foreign actors are the main criminal threats involved in these activities. Despite political volatility and corruption, recent anti-corruption efforts have improved governance, but the judiciary and law enforcement still face resource constraints, and civil society's role in combating organized crime remains limited.

Vanuatu's economy is heavily dependent on subsistence agriculture and tourism, which exposes it to vulnerabilities from external shocks like natural disasters and global economic changes. The country has a lower-middle income status, with agriculture, particularly copra and kava, supporting about 65% of the population, while inflation and public debt have posed challenges, although a recovery is anticipated with a projected GDP growth rate of 2.21% in 2023.

Vanuatu's investment climate is appealing due to its status as a tax haven, offering no income tax and favorable regulations for foreign investors. However, political instability and governance issues have raised concerns about the safety of investments, despite government efforts to improve transparency and attract foreign capital.