Vanuatu and the EU list of high-risk third countries
The Asia/Pacific Group on Money Laundering (APG), of which Vanuatu is a founding member, submits a “Mutual Evaluation Report,” noting the country shows some weaknesses when it comes to anti-money laundering and combatting the financing of terrorism (AML-CFT). Although no incidents have been reported, several deficiencies are of concern to the APG.
In Port Vila, the National AML-CFT Coordinating Committee (NCC) is established to implement the recommendations of the APG report. Dr. Gregoire Nimbtik, Director of the Prime Minister’s Office, chairs the Committee.
There are major upgrades to the legislative and regulatory framework, including control mechanisms and sanctions. The APG provides technical assistance to Vanuatu.
The Financial Action Task Force (FATF), the organization that sets international AML-CFT standards – and of which the APG is a member – notes Vanuatu’s high-level of political commitment to addressing its deficiencies. Until this is done, the FATF places the country on its grey list of jurisdictions with strategic AML-CFT deficiencies.
The European Union launches its own AML-CFT list, the “list of high-risk third countries.” The first version is modelled on the FATF black and grey lists.
Two working groups are established in Port Vila: the first, the Supervisory Working Group (SWG), is made up of representatives from the Reserve Bank of Vanuatu (RVB), the Financial Services Commission (VFSC), the Financial Investigation Unit (VFIU), the Casino Regulator and the Cooperative Registry. The second, the Law Enforcement Working Group (LEA WG), is made up of representatives from police, immigration, customs, the VFIU, the Attorney General and biosecurity. Both groups report to the NCC.
During the year, the NCC and its working groups sign a series of Memoranda of Understanding. It submits 30 AML-CFTrelated bills to legislators and the first amendments are implemented.
The FATF International Co-operation Review Group recognizes that Vanuatu has completed its action plan and schedules a field visit for May 2018. The visit includes representatives from Australia, New Zealand, Papua New Guinea, and the APG and FATF Secretariats.
The FATF removes Vanuatu from its AML-CFT grey list, noting the country’s “significant progress” in implementing the 2015 recommendations. It is agreed that the APG will continue to monitor Vanuatu’s AML-CFT regime on an ongoing basis.
The EU announces the fourth iteration of its AML-CFT list, using its own methodology for the first time. Whereas the first, second and third iterations had been modeled on the FATF lists, the list now diverges from these, and includes Vanuatu.
APG releases a new “Mutual Evaluation Report” confirming Vanuatu’s comprehensive compliance with the FATF AML-CFT recommendations. The report is based on the APG’s own analysis with its resources on the ground.
The European Commission proposes a draft for the fifth iteration of its AMLCFT list. Following the conclusions of the APG and the FATF, Vanuatu is not on the proposed list. (The Commission’s analysis concluded that, at this stage, Bosnia-Herzegovina, Guyana and Vanuatu do not have strategic deficiencies in their AML/ CFT regime considering the available information. Those countries have
recently taken a number of measures in order to reinforce their AML/CFT regimes and the Commission will further monitor effective implementation of such measures.) The draft list consists of 23 names,
including several U.S. territories and Saudi Arabia, which are critical of the list. The Council of the European Union rejects the draft list the next month, citing a lack of transparency in the Commission’s selection process. Vanuatu remains on the AML-CFT list, but its officials are told that this is due to an administrative delay and that the European Commission intends to remove Vanuatu from the list.
Vanuatu is placed on yet another, separate EU watchlist related to fiscal policy: the “list of non cooperative jurisdictions for tax purposes.” It is still on that list today, along with Fiji, Guam, the U.S. Virgin Islands, Panama, Palau, Samoa and American Samoa, and Trinidad and Tobago.
The Organization for Economic Cooperation and Development (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes rates Vanuatu as “Partially Compliant” with its requirements in a detailed report that states, among other things, that requirements for “beneficial ownership requirements are broadly in line with the standard, although the identification of beneficial owners for trusts and foundations needs improvement.” In other words, Vanuatu gets a passing grade.
Thierry Mariani, Member of European Parliament, asks the European Commission why Vanuatu is still on the EU’s AML-CFT list despite nearly two years of compliance with the FATF. Two months later, the Executive Vice-President of the Commission, Valdis Dombrovskis, replies that the European list also considers the requirements of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes and that the Commission is working on a new methodology. This reply seems to indicate that Mr. Dombrovski has confused the AML-CFT list and the other, tax-related EU watchlist (see March 2019).
The EU announces the fifth iteration of its AML-CFT list, using a “revised methodology.” Vanuatu is still on the list as well as in the following iteration in December 2020 – the one currently in effect.
For the first time ever, after repeated calls, the DG FISMA, the Directorate responsible for the file at the European Commission, issues a 20-page document, the “draft benchmark,” detailing why Vanuatu is still on its AMLCFT list.
Dr. Gregoire Nimbtik writes a brief letter to the DG FISMA to express Vanuatu’s disappointment that the FATF’s conclusions have been ignored and incredulity of the criticism of its AML-CFT regime. A few weeks later, the DG FISMA’s two-page reply considers Vanuatu to be uncooperative and threatens to make its draft benchmark conclusive if a discussion does not take place “as soon as possible.”
After analysis, Dr. Gregoire Nimbtik sends a 15-page reply detailing Vanuatu’s desire to meet the EU’s AMLCFT expectations and highlights many factual errors in the draft benchmark. Indeed, the draft benchmark points to deficiencies that have already been addressed with the proper measures. Dr. Nimbtik concludes that the EU’s assessment of Vanuatu’s AML-CFT regime is inadequate.
The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes issues
a peer review of Vanuatu’s legislative
framework for the automatic exchange of financial account information. The framework is deemed to be “in place and consistent with requirements.”
A virtual “technical” meeting finally takes place between DG FISMA (EU) and the NCC (Vanuatu). The Europeans are satisfied with the clarification detailed in the 15-page December letter and promise to promptly send a new benchmark reflecting these developments. The NCC team gets the impression that Vanuatu will be removed from the AML-CFT list since it has successfully substantiated its arguments and dispelled any doubts about its AML-CFT regime.
Clare Daly, Member of European Parliament, asks the European Commission why Vanuatu is on the list of “uncooperative countries for tax purposes” (the other, tax-related watchlist) even though neither the OECD nor the independent Tax Justice Network find its tax regime inappropriate or include it as a tax haven. Daly highlights the discriminatory, damaging nature of the two lists on which the EU persists in placing Vanuatu. Two months later, a letter from Commissioner Mairead McGuinness fails to address specific details, but explains that the Commission placed Vanuatu on its list in 2016 in the wake of the FATF grey list and continues to monitor developments according to its own methodology.
After the DG FISMA postpones several times, the new benchmark is finally sent to Vanuatu, this time to the Vanuatu Minister of Finance. Contrary to expectations, if does not mention removing Vanuatu from the AML-CFT list. Instead, the country is asked for yet more proof of its AML-CFT compliance. It does not require the exhaustive details as the 20-page draft benchmark of 2020 (which has not been finalized). This time, a two-page letter, signed by John Berrigan from DG FISMA, advises Vanuatu, in three brief paragraphs, to make beneficial ownership information more available and to apply adequate AML-CFT controls to foreign investment programs. The recommendations are entirely general and lack specific criteria, objectives, or action items. Nevertheless, Mr. Berrigan gives Vanuatu 12 months to implement them, after which time a full review will take place.
This explains the current stalemate/status quo between Vanuatu and the European Commission concerning the EU AML-CFT list, or “list of high-risk third countries.” It is noteworthy that several actors have made public statements about the issue, fuelling a growing sense of the EU’s injustice, both among the people and the elites of Vanuatu.
By Martin St-Hilaire