Financial Crime World

Financial Crime and Corruption in Vanuatu: A Major Threat to the Pacific Archipelago’s Economy

Vanuatu, a strategically located country in the Pacific, has become a hotbed for financial crime and corruption. The country’s reliance on international financial transactions and its porous borders have made it an attractive destination for money launderers and corrupt officials.

A History of Corruption

Corruption has a long history in Vanuatu, fueled by political instability and a culture of factionalism. The country’s colonial past as a tax haven, established by British authorities, has contributed to its current economic challenges. After independence, Vanuatu continued this practice, eliminating income, capital gains, wealth, withholding, and inheritance taxes for individuals, trusts, or companies.

Current Challenges

Despite ratifying several anti-corruption and anti-money laundering treaties, including the UN Convention against Corruption (UNCAC) and the Pacific Agreement on Countering Serious Organized Crime (PACSOC), Vanuatu continues to face significant challenges in combating economic crime. The country’s legal framework is underpinned by laws such as:

  • Money Laundering and Countering Financing of Terrorism Act (AML/CFT) of 2014
  • Proceeds of Crime Act (POCA) of 2002
  • Customs Act of 2013
  • Section 73 of the Penal Code

The Impact of Corruption

Corruption has a significant impact on Vanuatu’s economy, hindering economic growth and development. The sector that once drove Vanuatu’s economy, offshore financial services, is now in decline. However, the country’s ‘Golden Passport’ scheme continues to attract criminals, including corrupt officials, who use it to launder their proceeds by purchasing passports.

Efforts to Combat Economic Crime

The Vanuatu Financial Intelligence Unit (VFIU) leads the investigation and prevention of money laundering, while other key institutions such as:

  • Vanuatu Police Force (VPF)
  • Office of the Public Prosecutor (OPP)
  • Office of the Ombudsman
  • Public Service Commission play crucial roles in combating economic crime.

Recommendations

Experts recommend reviewing customer due diligence requirements, enhancing due diligence requirements, strengthening the framework around confiscating criminal proceeds, ensuring the FIU is adequately staffed, resourced, and trained, and promoting collaboration among stakeholders to effectively address these complex issues.

Conclusion

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