Financial Crime World

Vanuatu’s Gold Coast: The Intertwined Threats of Economic Crime and Corruption

In the Pacific archipelago of Vanuatu, the challenges of money laundering and corruption loom large. The country’s strategic location and economic reliance on international financial transactions have made it a potential hotspot for illicit activities.

Vanuatu’s Commitment to Combating Economic Crime and Corruption

  • Vanuatu has ratified various international anti-corruption and AML treaties, including the Teieniwa Vision 2021, UN Convention against Corruption (UNCAC), and the Pacific Agreement on Countering Serious Organized Crime (PACSOC).
  • The country is a member of regional organizations such as the Asia/Pacific Group on Money Laundering (APG) and the Egmont Group.
  • Vanuatu’s legal response to economic crime and corruption is underpinned by several laws, such as the Money Laundering and Countering Financing of Terrorism Act (AML/CFT) of 2014, Proceeds of Crime Act (POCA) of 2002, Customs Act of 2013, and Section 73 of the Penal Code.

Historical Context

  • Corruption has long been a problem in Vanuatu, fueled by political instability and a culture of factionalism.
  • British colonial authorities established Vanuatu as a tax haven, attracting foreign proceeds of crime.
  • After independence, Vanuatu continued this practice, eliminating income, capital gains, wealth, withholding, and inheritance taxes for individuals, trusts, or companies.

Economic Challenges

  • The sector that historically contributed significantly to Vanuatu’s economy, offshore financial services, is now in decline.
  • The country’s ‘Golden Passport’ scheme continues to offer opportunities for criminals, including corrupt persons, to launder their proceeds by purchasing passports.

Institutional Response

  • The Vanuatu Financial Intelligence Unit (VFIU) leads the investigation and prevention of money laundering.
  • Other key institutions include the Vanuatu Police Force (VPF), Office of the Public Prosecutor (OPP), Office of the Ombudsman, and Public Service Commission.

Challenges and Recommendations

  • Vanuatu is currently on the European Union’s list of non-cooperative tax jurisdictions and continues to face pressure from organizations such as the OECD and the Financial Action Task Force (FATF) to comply with international laws.
  • To address these challenges, the report recommends several steps, including:
    • Reviewing customer due diligence requirements to ensure alignment with FATF.
    • Enhancing due diligence requirements.
    • Strengthening the framework around confiscating criminal proceeds.
    • Ensuring the FIU is adequately staffed, resourced, and trained.
    • Promoting collaboration among stakeholders, including legislatures, supervisory bodies, law enforcement, and the private sector.

Conclusion

  • Vanuatu’s struggle against economic crime and corruption reflects the larger challenge faced by many developing countries in the Pacific and beyond.
  • While the country has made strides in establishing the necessary legal and institutional frameworks, continued cooperation from all stakeholders is essential to effectively addressing these complex issues.