Vanuatu: Schengen-Access Suspension Saw CBI as Share of Govt Cut in Half

Vanuatu saw the share of government revenue that came from citizenship by investment fall to just under 20% by the final quarter of 2022, down from a peak of 43% two years earlier. The decline is owed to Vanuatu’s loss of visa-free travel to Schengen in March last year. Last month, Vanuatu’s new government formed an independent commission, giving it “wide-ranging powers” to find out what went wrong and who is to blame.

Background

On January 12th, the European Commission proposes a partial suspension of Vanuatu’s visa-free travel agreement with the EU, citing security “risks posed by Vanuatu’s investor citizenship schemes.”

The decision followed Vanuatu’s announcement in the preceding month that it would open a third CBI program, the “Real Estate Option program”, which was set to have a single master agent.

On March 4th, the European Council adopts the Commission’s proposed partial suspension, affecting ni-Vanuatu citizens whose passports were issued after May 25th, 2015 (when the country’s large-scale CBI operations began in earnest).

On March 31st, Vanuatu establishes a National Task Force to “assess and mitigate” the EU’s concerns about ni-Vanuatu CBI, as well as to “engage in meaningful dialogue” with the EU.

On May 4th, the partial suspension takes effect. The following week, representatives of Vanuatu meet with the Commission, which makes clear that Vanuatu will have until February 3rd, 2023 to reform its programs or see the visa-waiver suspension extended by another 18 months.

In early June, Switzerland follows the European Council in partially suspending visa-free travel to ni-Vanuatu passport holders. By the end of the first half of 2022, figures from Vanuatu’s Department of Treasury and Finance show that government revenue has been hard-hit by the suspension.

In November 2022, the European Council, after decrying “a lack of progress” in reforming the program, extended the visa-waiver suspension to cover all ni-Vanutu passport holders, even those whose citizenships were issued prior to 2015. The move was widely considered punitive, as it could not be justified on the basis of “security concerns” since CBI citizens were already covered by the suspension.

In February 2023, the European Council agreed to give Vanuatu 18 more months to “fix” its CBI programs before making the suspension permanent.

Despite not losing visa-free access to Schengen until well into the second quarter of the year, Vanuatu’s CBI income was down by 35% in 2022, falling sharply from Q2 onwards.

As a share of government revenue, CBI receipts accounted for only 20% in the final quarter of last year, down from 45% in the same quarter in 2020.

Vanuatu's new government, which took office in November last year, indicated it did not place much faith in their predecessors' "National Task Force" - in which the previous administration had intended to investigate itself - by setting up an investigative commission of its own.

Glen Craig, who chairs the inquiry commission, spoke to ABC last month about the background for and scope of the investigation:

"The government put a commission of inquiry together to look at what went wrong, who was responsible, and how you can improve it," explains Craig. Questioned as to whether he thinks he'll be able to get to the bottom of whether passports have indeed been issued to individuals who should not have received citizenship or whether any government officials have acted inappropriately or even corruptly, Craig responded that his commission had been given "wide-ranging powers" to tackle such thorny questions.

"They've asked us specifically to look at the Department of Finance, the Financial Intelligence Unit, the Citizenship Commission itself, and also the Department of Immigration, which issues passports."

Subpoenas and witness lists being prepared

One of the powers vested in the Commission is the authority to issue subpoenas, which Craig says "will be issued."

The Commission, he said, would gather and analyse the required information and submit requests for missing data to the corresponding departments and ministries.

"Then," added Craig, "we'll develop witness lists and call people before the commission and, at that point, we'll have documents, we'll have witness testimony, and then we can start going through to see if it all matches up."

Pointing out that heading the commission would be a rather thankless task and that "you don't make a lot of friends doing that," he was not taking on the role just to sugar coat things:

"The results will be the results. I'm doing it as a job, and I am looking forward to getting in there to see how we can improve it, because it's a significant revenue earner and we want to make sure that the countries that we align with are happy with the program, as much as they can be." Otherwise, he remarked, the country's economy would suffer tremendously.

When the report on the findings is ready, he pointed out, it will be a public document. He expected, he said, to complete the work by early September.

While the final report will be published, Craig said Vanuatu officials had instructed the commission to conduct hearings confidentially to protect the privacy rights of individuals who have obtained Ni-Vanuatu citizenship.