Vanuatu Country Summary

FATF Status

Vanuatu was removed from the FATF List of Countries that have been identified as having strategic AML deficiencies on 29 June 2018.

Latest FATF Statement - 29 June 2018

The FATF welcomes Vanuatu's significant progress in improving its AML/CFT regime and notes that Vanuatu has established the legal and regulatory framework to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2016. Vanuatu is therefore no longer subject to the FATF’s monitoring process under its ongoing global AML/CFT compliance process. Vanuatu will work with APG to improve further its AML/CFT regime.

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Vanuatu was a follow-up Evaluation that took place in August 2018. According to that Evaluation, Vanuatu was deemed Compliant for 18 and Largely Compliant for 19 of the FATF 40 Recommendations. It was also deemed Highly Effective for 0 and Substantially Effective for 0 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.

Vanuatu is primarily a transit country for human trafficking, particularly for forced labor linked to its growing tourism sector, while also facing issues with illegal logging, fishing, and a small drug market. The country has seen a rise in cybercrime and is known as an offshore financial destination, attracting international fraudsters. Despite political volatility and corruption, recent anti-corruption efforts have improved governance, though challenges remain in law enforcement, victim support, and civil society engagement.

Vanuatu's economy is heavily dependent on subsistence agriculture and tourism, making it susceptible to external shocks like natural disasters and global economic changes. With a lower-middle income status, agriculture, particularly copra and kava, supports about 65% of the population, while the country faces challenges such as high public debt and inflation. Despite these issues, there are signs of economic recovery, with a projected real GDP growth rate of 2.21% in 2023.

Vanuatu's investment climate is appealing due to its status as a tax haven, which attracts foreign investors with no income tax and favorable regulations. However, concerns regarding political instability and governance issues create mixed perceptions about the safety of investments in the country. The government is working to enhance transparency and attract foreign investment, but challenges such as reliance on a limited range of exports and vulnerability to natural disasters persist.