Financial Crime World

One Million or More Suspected of Money Laundering Must be Reported to FIU

The Financial Intelligence Unit (FIU) in Vanuatu has been working closely with financial institutions to identify and report suspicious transactions that may be connected to money laundering. According to the FIU, one million or more individuals are suspected of being connected to money laundering activities.

The Role of the FIU

The FIU provides training and guidelines to financial institutions to assist them in identifying such transactions, and performs an information gathering and compliance role under the financial institutional structure. If a suspicious transaction is reported by a financial institution, the FIU disseminates the report and conducts investigations to ensure compliance with the country’s financial regulations.

Challenges and Limitations

At present, there is only one full-time staff member and one part-time staff member at the FIU, with plans to employ two more full-time staff members. The FIU works closely with the Reserve Bank of Vanuatu and to some extent with the Vanuatu Financial Services Commission (VFSC). However, the determination of any possible money-laundering activities is carried out by the police and public prosecutor’s office. The FIU is not mandated to analyze suspicious transaction reports (STRs).

Vanuatu Investment Promotion Authority

The Vanuatu Investment Promotion Authority (VIPA) has been promoting foreign investment in Vanuatu, with the added responsibility of assisting investors facilitate implementation of their approved projects.

Regulatory Requirements

The office of the VIPA has not had to employ any extra staff to accommodate the new regulatory requirements, as the private sector is responsible for complying with the requirements by the time investment applications are filed. As such, the VIPA did not experience any extra costs as a result of the new regulatory requirements.

Emergence/Evolution of the Post-2000 Regulatory Regime for IFCs

Since 2000, multilateral organizations such as the OECD and the FATF have put considerable pressure on International Financial Centers (IFCs) to introduce new and stricter regulatory requirements. In June 2000, the FATF produced a blacklist of Non-Cooperative Countries and Territories (NCCT). Vanuatu was included on this OECD blacklist, and on the subsequent “unco-operative tax havens” list of April 2002.

Regulatory Reforms

The Financial Transactions Reporting Act was introduced in 2000, and additional laws may be passed to further strengthen regulatory requirements. The country has also been through several assessments in recent years, including this study.

Regulatory Reforms

In 2002, the IMF conducted a Module 2 Assessment of the Supervision and Regulation of the Financial Sector of Vanuatu. In response to one IMF recommendation, a cost-benefit analysis of the IFS sector in Vanuatu was conducted on behalf of the Vanuatuan government and the Pacific Islands Forum Secretariat.

Powers Awarded to VFSC

The powers awarded to the VFSC will be along the same lines as the Insurance Act of 2005. Insurance and trust regulation may be moved from the VFSC to the Reserve Bank of Vanuatu, however the private sector is totally against such a transfer of responsibility. The private sector claims that the RBV has no expertise in these areas.

Legislative Reforms

The main differences between the old Insurance Act (see list of legislation above) and the new one are that:

  • The licensing powers given to the VFSC previously rested with the Minister of Finance;
  • Previously, the VFSC had no powers to supervise, inspect or regulate insurers, but those powers now exist under the new Act;
  • The VFSC can also approve or remove principals of insurers and obtain and exchange information.
  • Under the new Act there is a set minimum capital requirement and the fees have increased.

Notes

  1. See s3 of the VFSC Act of 1993.
  2. Statistics given by senior staff of the VFSC on January 20, 2006; there is a plan to recruit a further two senior persons to supervisory roles.
  3. Information provided by the Commissioner of the VFSC, November 2005.
  4. Information provided by the Commissioner of the VFSC on February 20, 2006.
  5. IMF (2003b).
  6. FATF (2000, 2001, 2002).
  7. OECD (1998, 2000a).
  8. Comments from the Finance Department, February 27, 2006.
  9. Financial Stability Forum (FSF) (2000).