Vanuatu’s Anti-Money Laundering and Counter-Terrorist Financing Measures Fall Short

A new report has highlighted significant shortcomings in Vanuatu’s efforts to combat money laundering and terrorist financing. The country’s financial institutions, international banks, and designated non-financial businesses or professions (DNFBPs) have failed to adequately implement risk-based procedures, with some even lacking basic understanding of anti-money laundering and counter-terrorist financing (AML/CFT) measures.

Compliance Deficiencies

• AML/CFT compliance procedures, internal audit, and training are not well-embedded in most reporting entities, except for commercial banks.
• The Reserve Bank of Vanuatu (RBV) has issued comprehensive guidance for banks, but none have been provided for other sectors.
• The Financial Intelligence Unit (VFIU) has failed to effectively supervise DNFBPs due to a lack of resources and direction.

Suspicious Transaction Reporting

• Inadequate level of suspicious transaction reporting from entities outside commercial banks and Money or Value Transfer Service(s) (MVTS).
• RBV and VFIU have sufficient legislative powers, but a lack of resources hinders their ability to adequately supervise the number of entities involved in AML/CFT activities.

Identifying and Assessing Risks

• No formal process for identifying and assessing money laundering/terrorist financing risks among financial institutions and reporting entities.
• Lack of supervision has resulted in a real risk that criminals can misuse legal persons and arrangements for money laundering in Vanuatu, particularly through international companies.

International Companies Act

• The International Companies Act (ICA) prohibits the disclosure of information about shareholding, beneficial ownership, management, business, affairs, financial affairs or transactions of companies.
• This has made Vanuatu’s international companies particularly attractive to criminals for money laundering.

Money Laundering Threats

• Primary drivers of money laundering threats are foreign predicate offences, illicit cross-border currency transactions, domestic bribery and corruption, fraud, drug offences, and other criminal activities.
• High-risk sectors identified in the report include:
  • International banks and companies
  • Remittance sector
  • Trust and company service providers
  • Currency exchange businesses
  • Casinos
  • Interactive gaming businesses

Lack of Political Commitment

• Political instability has hindered efforts to establish an efficient and effective AML/CFT system.
• Frequent government leadership changes have impacted high-level political commitment to allocate adequate financial and human resources, supporting the development of technical expertise and capacity building in law enforcement and regulatory/supervisory authorities.

Conclusion

Vanuatu’s AML/CFT measures are falling short, with significant deficiencies in compliance and effectiveness. The country needs to address these shortcomings to prevent money laundering and terrorist financing activities. The report highlights the need for: + A comprehensive national AML/CFT strategy + Dedicated risk-based policies + Coordination mechanisms + Reliable statistical information + Interagency processes to promote cooperation between operational agencies