Playing by the rules
While Vanuatu is keen to offer an attractive business environment, it’s also responsible as a global player to do its part in the fight against financial crime. Our nation still does retain significant advantages for financial dealers over other jurisdictions, however in recent years we have strengthened our regulations to keep disreputable players off our shores and protect our stature on the world stage. Financial dealers must now comply with requirements covering a wide array of potential risks, from liability insurance, bond deposits and audited financial statements to maintaining a physical presence in our nation.
The new regulations, which have been designed for maximum effectiveness while maintaining ease of conducting business, bring our jurisdiction up to world standards, strengthening our ability to compete and signalling our commitment to be a responsible player on world financial markets. The new regulatory regimen is the foundation for a future of growth and increased prosperity for our financial community as members in good standing of the wider global financial market.
Our legal framework
All financial dealers who request a license from the Vanuatu Financial Services Commission ought to abide by the following laws:
Drafts June 2019 , December 2019, June 2020 and December 2020 – not passed yet: https://parliament.gov.vu/index.php/icons/bills
Our standards in practice
Our members strive to keep consumers safe and our industry healthy by adhering to the following rules and standards.
1. Physical presence in Vanuatu (coming 2021)
The director(s) or manager(s) of a licensed company must normally reside in Vanuatu for 6 months of each year. In the case where the company appoints several directors or managers, at least one of them is required to meet the residency requirement, whether by having Ni-Vanuatu citizenship or a valid residency visa.
The company must operate from physical premises located in Vanuatu and maintain systems for filing, management and accounting, business continuity, and digital communications there.
2. Expertise in financial services and digital transactions
Applicants for a Financial Dealer License must demonstrate their qualifications with at least 5 years of experience in fund management, securities and investment, confirmed by at least two independent references.
They are also expected to have prior Internet or e-commerce experience, and demonstrate their ability to operate their digital platforms without the need for a third party – which would pose a risk of fraud.
3. Clear, structured, ongoing operations
Applicants for a Financial Dealer License must provide an outline of their business plan, a prospectus, a client agreement, three-year financial projections, and a statement clearly detailing the activities to be carried out and the product(s) to be sold. They must also provide details of the company’s internal organization, controls and governance, including their practices for bookkeeping and receipts of investments.
Financial dealers must remain active in order to keep their license, starting within 6 months of being granted their license.
4. Financial soundness
In addition to annual license fees, financial dealers are required to maintain a bond of 5 million VT with the Vanuatu Financial Services Commission (VFSC).
Their amount of capital should be consistent with the level of business undertaken and should be based on the projections provided to the VFSC.
They must maintain professional indemnity insurance for their partners, employees and consultants, to serve as a protection for investors’ funds in the event of financial loss. The minimum insurance coverage for each licensee is 5 million VT for each claim, with an aggregate coverage of not less than 50 million VT and a maximum deductible amount of 500,000 VT.
When applying for a Financial Dealer License, each ultimate beneficial owner of the company must give proof of the source of their funds used to build its capital, with a recent account statement and a reference letter from their bank confirming their status and liquidity. The company must also provide a statement outlining its financial standing, current assets and contingent liabilities.
5. Integrity, honesty, reputation
Financial dealers must notify the Vanuatu Financial Services Commission (VFSC) of any matter that might reasonably cause the Commissioner to doubt that the company or its representative(s) have the competence, integrity or financial resources to undertake business in accordance with the law.
All key individuals in the company must complete and submit a “Fit and Proper” declaration along with a copy of their passport, a police clearance certificate, a proof of address, a curriculum vitae and copies of any diploma they hold. Upon review by the VFSC, they will be then given a confirmation letter attesting they are considered fit and proper to be granted a license.
6. Anti-Money Laundering and Combating the Financing of Terrorism (AML/CTF)
All financial dealers are registered with the Vanuatu Financial Intelligence Unit (VFIU), which requires them to appoint an AML/CTF compliance officer.
They must maintain compliance documents including an AML/CTF Manual, a staff procedure manual, and a risk assessment report made by an AML/CTF-qualified individual who is independent from the company.
Among other obligations, they must establish risk-based systems and controls, carry out customer due diligence, keep good records, conduct regular staff training on AML/CTF issues, establish adequate measures for correspondent banking, and submit reports of transactions using VFIU-prescribed forms.
7. Financial reports and audited statements
All financial dealers must submit quarterly reports to the Vanuatu Financial Services Commission (VFSC), including up-to-date information on their Vanuatu registered agent, their shareholder(s) and beneficial owner(s), their customers (i.e. retail investors), the funds invested by their customers in their products, the jurisdictions where their products are offered, their customer vetting process, the number of customers they’ve refused to serve and their reasons for doing so, and any complaint received from a customer.
An annual audited financial statement must be prepared by a VFSC-approved independent auditor and submitted three months after the expiry date of the Principal License, in accordance with the International Accounting Standard. This allows the VFSC to monitor the transaction volume and true value of funds traded under each license.
8. Automatic exchange of financial account information
As a signatory to international agreements to fight tax evasion, Vanuatu requires all its financial institutions to use the Common Reporting Standard (CRS) developed by the Organisation for Economic Co-operation and Development (OECD) for the automatic exchange of financial account information.
Under CRS rules, financial dealers must notify the Vanuatu Competent Authority of any account on their books held by an individual or entity that is a resident of a foreign jurisdiction, and keep relevant records for at least five years.