Vanuatu To Improve Due Diligence for CBI applicants

To say that the year 2020 has seen a tumultuous beginning in the Pacific island state of Vanuatu would be an understatement. While navigating the effects of the COVID-19 pandemic and with borders still closed under the country’s state of emergency, the tiny nation was devastated by category-five Cyclone Harold on 6 April. According to comments made by the newly appointed Chairman of Vanuatu’s Citizenship Commission, however, revenue derived from citizenship by investment (CBI) has been the country’s saving grace.

Talking to the Vanuatu Daily Post, Chairman Warsal indicated that in the first five months of the year, Vanuatu collected an estimated VT7,000,000,000 through CBI. In fact, thanks to CBI-generated funds, Vanuatu has been able to aid citizens affected by COVID-19 by allocating VT4,000,000,000 to support its businesses and employees.

Yet, despite the economic success of CBI in the country, Vanuatu’s dual-programme structure and the significant shortcomings with respect to the due diligence performed on prospective citizens, have been the source of much international criticism.

Vanuatu operates two concurrent CBI programmes, the Vanuatu Development Support Programme (VDSP) and the Vanuatu Contribution Programme (VCP). While the VDSP is marketed by local Ni-Vanuatu agents, the VCP has long been the sole purview of a Hong Kong-based authorised agent. Responding to the concerns of local agents and CBI industry stakeholders alike, in April 2019, new regulations harmonised the investment thresholds between the two programmes, making the VDSP just as financially attractive as the VCP.

Despite efforts to re-invigorate the VDSP however, concerns were expressed by members of the

European Parliament pertaining to the Government’s vetting procedure, or lack thereof. Concerns centred around the fact that all holders of ordinary passports issued by Vanuatu may enter the Schengen Area without a visa for travels of up to 90 days within any 180-day period. Citizens of Vanuatu can also travel to the United Kingdom and its Crown dependencies for six months visa-free, and to the Republic of Ireland.

Since succeeded by Marc Ati, then-Minister of Foreign Affairs, Ralph Regenvanu, acknowledged these concerns in 2019 in an interview with the Financial Times. “We are getting some negative implications as a result of the lack of due diligence on applicants to get citizenships, which is affecting our bilateral relations with other countries,” Regenvanu said. Promising to embark on a review of the programmes, Regenvanu expected changes to be implemented before March 2020, when the Government of Prime Minister Charlot Salwai was due to face elections.

Fast-forward to June 2020 and Vanuatu’s newly appointed Prime Minister, the Honourable Bob Loughman, has instructed Chairman Warsal to conduct an internal review of the programmes in a bid to improve transparency. In fact, reports indicate that the sole authorised agent for the VCP was last month issued with a three-month termination notice – implying that reforms to the country’s current dual-programme structure may be on the horizon.

Given increased scrutiny from entities such as the European Union, and the wider media’s generally misinformed take on CBI, it would be wise for Loughman’s Government to take a leaf out of the Caribbean’s book, where due diligence procedures are considered to be the most stringent in the industry. A good start would be to mandate external due diligence reviews of prospective citizens, using independent, internationally renowned firms that are respected across the European Union.

In the current climate, it is vital that Vanuatu is able to demonstrate the integrity of its processes by implementing a system of due diligence that stands up to scrutiny. Strong due diligence will not only raise the bar on industry standards worldwide but will ensure that CBI in Vanuatu continues to flourish.