Financial Crime World

Vanuatu’s Compliance with Anti-Money Laundering and Counter-Terrorism Financing Recommendations

Vanuatu, a small island nation in the Pacific, has been making efforts to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) recommendations set forth by the Financial Action Task Force (FATF). However, its compliance ratings have been criticized for being inadequate.

Challenges in Compliance

According to the FATF, Vanuatu’s AML/CTF regime is characterized by:

  • Limited understanding and awareness among law enforcement agencies: Law enforcement agencies lack sufficient training and resources to effectively investigate and prosecute AML/CTF offenses.
  • Fragmented legislation and lack of coordination between agencies: The country has multiple laws and regulations in place that may overlap or conflict with each other, leading to inefficiencies and inconsistencies.

Current State of Compliance

The Vanuatu Police Department and the Financial Intelligence Unit (VFIU) are responsible for investigating and enforcing AML/CTF offenses. However:

  • Limited resources and capacity: The VFIU has limited resources and lacks a system to track cross-border currency movement.
  • No comprehensive system to report suspicious transactions or cash transactions: Vanuatu does not have a centralized system to report suspicious transactions or cash transactions.

Supervision of Financial Services Sector

The financial services sector in Vanuatu is supervised by three main agencies:

  • Reserve Bank of Vanuatu (RBV): Regulates domestic and offshore banks.
  • Vanuatu Financial Services Commission (VFSC): Regulates insurance providers, credit unions, charities, and trust and company service providers. However, the VFSC lacks the authority to issue comprehensive guidelines or regulate the financial sectors under its responsibility.
  • Customs and Revenue Branch: Supervises money exchange and remittance services, but this role is limited to issuing operating licenses.

Areas of Concern

Vanuatu’s AML/CTF regime has been rated as partially compliant by the FATF. The main areas of concern include:

  • Limited understanding and awareness among law enforcement agencies
  • Fragmented legislation and lack of coordination between agencies
  • Limited resources and capacity to investigate and prosecute AML/CTF offenses
  • Lack of a comprehensive system to report suspicious transactions or cash transactions
  • Insufficient supervision and regulation of the financial services sector

Improvements Needed

To improve its compliance ratings, Vanuatu needs to:

  • Strengthen legislative framework: Enhance coordination between agencies and provide clear guidelines for AML/CTF regulations.
  • Enhance resources and awareness among law enforcement officials: Provide sufficient training and resources to investigate and prosecute AML/CTF offenses effectively.
  • Implement a comprehensive system to report suspicious transactions or cash transactions: Establish a centralized system to track cross-border currency movement and report suspicious transactions.

By addressing these concerns, Vanuatu can improve its compliance ratings and effectively prevent money laundering and terrorist financing.