Vanuatu’s Crypto City Project Raises Concerns of Scam

PORT VILA, Vanuatu - The small Pacific island nation of Vanuatu has become a hotbed for illicit activities, with the government warning that a privately owned island aiming to become a crypto city may be a scam.

Financial Concerns

The Vanuatu Financial Services Commission (VFSC) has raised concerns about the project, which promises to establish a hub for cryptocurrency and blockchain technology. However, experts believe that the project may be a way for fraudsters to launder money and evade taxes. The country’s lax financial regulations and extensive waters have made it an attractive destination for foreign actors involved in drug trafficking and illegal fishing.

Criminal Networks

Foreign criminal networks pose the main threat to Vanuatu, with drug trafficking and illegal fishing being the primary concerns. While there are no indications of mafia-style groups in Vanuatu, criminal networks engage in opportunistic crimes such as burglary and theft, targeting expatriate residences.

Leadership and Governance

Vanuatu’s political volatility since gaining independence in 1980 has created an environment prone to bribery, nepotism, and misappropriation of funds. While independent institutions such as the judiciary and prosecutors have been effective in combating political corruption, there is a general distrust in institutions among the population.

Criminal Justice and Security

Vanuatu’s judiciary system operates independently, but resource constraints have hindered the hiring of qualified judges and prosecutors. The country’s borders are also vulnerable to illegal activities, with serious threats expected to persist and increase in the coming years.

Economic and Financial Environment

Vanuatu is considered a high-risk jurisdiction for money laundering and terrorist financing due to its rudimentary financial sector and lack of anti-money laundering measures.
The country’s strict secrecy provisions prevent law enforcement agencies and regulators from obtaining beneficial owner information, leaving legal entities vulnerable to criminal misuse and money laundering.
The golden passport scheme has made Vanuatu one of the most vulnerable jurisdictions to financial crime, offering multiple channels for criminals to purchase citizenship.

Victim support provided by government agencies and civil society is limited in Vanuatu.
Systematic anti-trafficking awareness campaigns are not conducted, and the government lacks an adequate system to research and assess the extent of its trafficking problem.
The country’s labor department licenses and monitors agencies that recruit workers for overseas work, but does not prohibit recruitment fees for seasonal work out of the country.

Conclusion

Vanuatu’s crypto city project has raised concerns about the potential for money laundering and tax evasion. The government needs to take a proactive approach to address these concerns, including implementing robust anti-money laundering measures and increasing transparency in its financial sector. Civil society also needs to play a more active role in combating organized crime and supporting victims of fraud and trafficking.

Recommendations

Strengthen anti-money laundering measures and implement stricter regulations on the financial sector.
Increase transparency in the government’s financial dealings and provide public access to beneficial owner information.
Implement robust border control measures to prevent illegal activities.
Conduct systematic anti-trafficking awareness campaigns and establish a adequate system to research and assess trafficking problems.
Support victims of fraud and trafficking through government agencies and civil society organizations.