Annexes to COM(2024)366 - - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2024)366 - . |
|---|---|
| document | COM(2024)366 |
| date | May 31, 2024 |
Since 25 May 2015, Vanuatu has been operating investor citizenship schemes allowing visa-required third-country nationals to easily obtain the Vanuatu citizenship and passport, thus enabling them to gain visa-free access to the EU, bypassing the Schengen visa procedure. The Commission started investigating Vanuatu’s citizenship schemes in 2017, as these raised serious concerns, including on account of failures in the security screening of applications.
Based on the assessment of the relevant data and information collected, the Commission concluded that Vanuatu’s investor schemes presented serious deficiencies and security failures that had the potential to create a risk to the internal security of the EU and its Member States, and activated the suspension mechanism set out in Article 8 of the Visa Regulation.
The suspension has been articulated in three phases, as detailed below. The present report to the European Parliament and the Council describes in detail the different phases of the suspension mechanism and the dialogue the Commission held with Vanuatu. The report is submitted in compliance with Article 8(7) of the Visa Regulation.
2. Phase 1 – activation of the suspension mechanism (Article 8(6)(a) of the Visa Regulation)
Between 2017 and 2021, the Commission had a number of meetings and written exchanges with the authorities of Vanuatu to collect information on Vanuatu’s investor citizenship schemes5. In that context, the Commission expressed serious concerns and warned the government of Vanuatu of the possibility of the visa requirement being reintroduced. These concerns were related in particular to:
- the high number of passports issued to nationals that would otherwise have to apply for a visa to travel to the EU (more than 10 000 between 2015 and 2021), with a very low rejection rate;
- the absence of any requirement for the applicants to have previously resided or even visited Vanuatu, as the application process is managed by specialised agencies located outside Vanuatu (e.g., in Dubai, Thailand, Malaysia, etc.) whereby the applicant does not need to have any direct contact with Vanuatu’s authorities;
- the absence of a requirement for a physical interview, reducing the opportunities for the authorities of Vanuatu to properly assess the applicant or to corroborate the information provided in the application, including its veracity and credibility;
- the fact that the schemes were commonly advertised as a way to by-pass the Schengen visa procedure and easily obtain visa-free access to the EU;
- the fact that the applications were processed within very short deadlines, not allowing for a proper security screening and exchange of information with the applicants’ country of origin or main past residence before the granting of the citizenship. Due to this, Vanuatu had granted citizenship to persons subject to a criminal investigation, including persons listed on Interpol’s databases6;
- the lax legislation on name changes, as successful citizenship-by-investment applicants can also apply for an identity change.
Furthermore, Vanuatu is also classified as potentially posing a high risk to the integrity of the Common Reporting Standard by OECD, raising suspicion of possible tax evasion and money laundering activities 7.
As the explanations provided by Vanuatu in the above-mentioned exchanges were not sufficient to mitigate those concerns, the Commission decided that the increased risk to the public policy and internal security linked to the nationals of Vanuatu having obtained the citizenship under the investor citizenship schemes could be mitigated only by means of a suspension of the visa exemption.
To this aim, the Commission adopted on 12 January 2022 a proposal for a Council decision8 to suspend partially the visa waiver agreement with Vanuatu. The decision was adopted by the Council9 on 3 March 2022.
In parallel, on 27 April 2022, the Commission adopted an implementing regulation10 having the effect of activating the suspension mechanism set out in Article 8 of the Visa Regulation, for a first period of nine months (4 May 2022 - 3 February 2023).
Following the activation of the suspension, and in accordance with Article 8(6), last sub-paragraph of the Visa Regulation, the Commission engaged in an enhanced dialogue with Vanuatu, with a view to identifying appropriate solutions which could remedy the circumstances having led to the temporary suspension of the visa exemption.
In the kick-off meeting of the dialogue, on 12 May 2022, the Commission expressed its willingness to find a solution and, to this end, proposed to hold monthly technical meetings. The parties agreed that the authorities of Vanuatu would appoint a contact point and communicate it to the Commission, in order to proceed with the subsequent technical meetings. Vanuatu informed the Commission of the decision of the Government of Vanuatu to set up a Task Force to review the investor citizenship schemes. It was agreed that the authorities of Vanuatu would transmit to the Commission a progress report prepared by the Task Force.
However, Vanuatu did not subsequently engage in a meaningful way. Vanuatu’s investor citizenship schemes remained in operation, and the Commission, during this first phase did not receive any information from the authorities of Vanuatu with regard to possible legislative and non-legislative actions aiming to remedy the circumstances having led to the temporary suspension.
3. Phase 2 – extension of the suspension (Article 8(6)(b) of the Visa Regulation)
As the circumstances that led to the suspension persisted, the Commission adopted a delegated Regulation extending the suspension for a period of 18 months, until 3 August 202411. At the same time, the Council adopted a Decision on the full suspension12 of the Agreement.
During this second suspension phase, the Commission continued the dialogue with Vanuatu, with four meetings held between February 2023 and April 2024, and numerous information exchanges in writing.
The first of these meetings took place on 15 February 2023, where Vanuatu’s designated contact point for the enhanced dialogue, the National Security Advisor to the Prime Minister’s Office, informed the Commission of the policy and legislative measures put in place by Vanuatu to address the concerns of the Commission: new standards of procedures to manage the schemes, including the appointment of a new Head of the Citizenship Office; the reduction and better scrutiny of private agents handling citizenship applications that would lead to the direct termination of their professional license in case of malpractice; and draft amendments to the Citizenship Act that would introduce a new stringent screening process. The Commission on this occasion asked to be provided with detailed explanations of these measures and how they would address the circumstances that led to the suspension.
On 4 April 2023, Vanuatu submitted to the Commission the Citizenship Amendment Act, adopted on 21 March 2023. The main novelty introduced by this new legislation is the replacement of the institutions and procedures for the screening and due diligence checks of the applications. In particular, the previous Internal Screening Committee appointed by the Prime Minister has been replaced by three institutions: the Vanuatu Police Force, the Financial Intelligence Unit and the Vanuatu Immigration Services. Those institutions carry out the checks, including on Interpol databases, and report to the Secretary General of the Citizenship Commission. This new process includes the automatic banning of applicants whose names correspond to a hit in the Interpol database, the exclusion of applications submitted by citizens from countries placed on the UN sanctions list, and the extension of the vetting process for a period of 14 to a maximum of 30 days. However, Vanuatu did not submit any accompanying document to explain the legislative changes and how they would address the circumstances that led to the suspension.
On 13 July 2023, the second meeting of this phase took place, during which the Commission expressed to Vanuatu’s representatives the need to receive a detailed explanation of the above-mentioned Citizenship Amendment Act. In that context, the Commission expressed its concerns about the legislative changes, especially in relation to the methodology used for processing the applications that did not sufficiently address the issues identified as risks for the internal security of Member States, such as the lack of exchange of information with the applicants’ countries of origin about criminal records and the origin of the funds.
On 5 December 2023, the third meeting took place. Vanuatu was represented by a newly designated Contact point, the Secretary-General of Vanuatu Citizenship Commission. In that context, the Commission regretted that the long reaction time of the Vanuatu authorities to the Commission’s requests for information was slowing down the dialogue, and recalled the approaching legal deadline set out by the suspension procedure of 3 August 2024. Hence, Vanuatu was invited to use the following weeks to provide the missing information and explanation of the policy and legislative changes, for the Commission to conclude its assessment.
Following the meeting, a list of follow-up questions were sent to Vanuatu on 15 December 2023 with a one-month deadline, to which Vanuatu responded only on 22 March 2024, with replies that failed to convincingly address the concerns of the Commission.
The Commission also informed Vanuatu on the newly adopted proposal on the revision of the suspension mechanism13, which introduces the operation of investor citizenship schemes as a new autonomous suspension ground, and on the ongoing legislative process.
The fourth and last meeting of this phase took place on 5 April 2024 between the Commission and the Secretary General of the Vanuatu Citizenship Commission. The Commission invited Vanuatu to clarify and elaborate on the replies submitted on 22 March 2024 regarding the screening and vetting procedure, the independence of the institutions involved in the schemes, and the impact of the suspension on citizenship applications in 2022 and 2023. The existing concerns were not addressed adequately and several factual and statistical inconsistencies in the data previously provided to the Commission remained unanswered (see point ii under ‘Phase 3’ below). At that point, the Commission was informed by Vanuatu’s representatives that possibilities for exchanges at technical level had been exhausted and that Vanuatu would consider outreach to the Commission at the political level.
4. Phase 3 – Commission’s final assessment and proposal to terminate the visa exemption (Article 8(7) of the Visa Regulation)
As set out in Article 8(7) of the Visa Regulation, before the end of the period of validity of the delegated act, the Commission has to submit a report to the European Parliament and to the Council with its final assessment, which may be accompanied by a legislative proposal to amend the Regulation in order to transfer the reference to the third country concerned from the list of visa-free countries to the list of visa-required countries.
The present report is submitted in compliance with this requirement, with the Commission’s final assessment presented in detail below.
i. Economic reliance on the schemes
Before the suspension, Vanuatu’s economy heavily relied on the revenues generated from the investor citizenship schemes (i.e., 33% of total revenues in 2020 and 2021,14 or 12.3% of the GDP in 2020 and 10.2% in 2021). The introduction of the visa waiver suspension, in 2022, triggered a decline in revenue collected under the schemes of 27%(15) leading the schemes to account for about half of what they amounted to in 2021 in terms of GDP, i.e., 5.3% in 2022 and 5.5% in 2023.
ii. Statistics: applications received, passports issued, and rejection rate
Statistics show a high number of successful applicants, with the vast majority from nationalities that would otherwise require a visa to enter the EU. Table 1 below shows statistics received from Vanuatu’s authorities concerning the period 2015 until 2021.
| Statistics 2015 - 2021 | |
| Total applications received | 14 504 between 2015 and 2021 |
| Total number of citizenships awarded | 13 489 between 2015 and 2021 |
| Total passports issued | 10524 between 2015 and 2021 |
| Rejections/citizenship revoked | 1 015 (Rate ~9.6%) between 2015 and 2021 |
| Successful applicants – main nationalities | China (6 628), Nigeria (430), Libya (292), Iraq (276), Syria (276), Russia (247), Lebanon (222), Iran (154), Republic of Korea (88), Yemen (74), Sudan (29) |
Table 1: Vanuatu’s statistics submitted in January 2022 related to the period 2015-2021
However, there are numerous inconsistencies in the data submitted by Vanuatu to the Commission over the years.
Statistics on the number of successful applications shows discrepancies. Data received from Vanuatu in 2020 indicated around 4 000 as the total number of successful applications for the period 2015 - August 2020, while the above-mentioned statistics from 2022 indicate a total of around 13 500 citizenships awarded. Similarly, the number of applications refused and revoked provided in 2022 (1 015) differs from previous statistics (submitted in 2020), which indicated that the number of applications refused for the period 2015 – August 2020 was only one, while 15 citizenships granted were subsequently revoked.
As regards statistics concerning the years 2021-2023, Vanuatu provided different sets of data on three different occasions. On 12 July 2023, Vanuatu indicated 682 as the total number of applications received in 2022 and 676 as total number of applications received in the first six months of 2023. On 23 October 2023, Vanuatu provided data that seemed to show that the number of successful applicants dropped drastically in the last three years compared to the previous years: (144 in 2021, 127 in 2022, 130 in 2023). However, on 23 March 2024, following the reiterated request of the Commission to provide clear and consistent statistics, Vanuatu sent yet another different set of data, indicating 1072 total applications received in 2021, 875 in 2022, and 1113 in 2023, with respectively 4, 5 and 22 rejections.
These inconsistencies, besides making the data provided difficult to assess and compare, also indicate a general lack of reliability in the internal control process of the schemes by the competent authorities of Vanuatu.
iii. Amendment of the Citizenship Act
In March 2023, Vanuatu introduced an amendment to its Citizenship Act16, aiming to mitigate the risks identified by the Commission. The main changes introduced are the following:
- Screening of the applications and due diligence checks are now carried out by three institutions: i) Vanuatu Police Force, ii) Financial Intelligence Unit (FIU) and iii) Immigration Services who refer to the Secretary General and replace the Internal Screening Committee appointed by the Prime Minister17;
- Applications from applicants listed on the Interpol database are refused;
- The duration of the screening procedure by the three institutions should not take more than 14 days and, in any case, if more time is needed, it should not take more than 30 days;
- Applications submitted by citizens from a list of ‘restricted countries’ or countries included under (unspecified) UN sanctions lists are disregarded;
- The deadline for a decision on whether to grant citizenship by the Citizenship Commission is set in three months.
The impact that these changes have had in view of remedying the circumstances that led to the suspension are addressed in the sections below.
iv. Sensitive and banned nationalities
As shown in Table 1, the countries of origin of successful applicants mostly include countries whose nationals must be in possession of visas when crossing the external borders of the Union.
In 2023, Vanuatu introduced a legislative change aiming to restrict the possibility for nationals of some countries to apply for its citizenship. In particular, the amended Citizenship Act establishes that the Citizenship Commission must not accept an application if that applicant is a resident or citizen of a country that has been listed by the Citizenship Commission as a restricted country or listed under an unspecified list of United Nations sanctioned countries (such as Yemen, Syria, Sudan, North Korea and Iran)18, unless the applicants show that they have not resided in the restricted country for the last 5 years and provide evidence of permanent residency abroad. As Russia and Belarus are not part of these lists, Vanuatu has continued accepting Russian and Belarusian applicants also after the Russian aggression against Ukraine.
v. Fees
According to the latest information provided, four investment options are currently available in Vanuatu19. Vanuatu’s investor citizenship schemes are among the cheapest in the world for individual investors and families (for a single applicant the fee amounts to USD 130 000). The fee per person strongly decreases according to the number of applicants under the same application (USD 180 000 for a married couple with two children). 20
During the dialogue, Vanuatu has not shown any concrete intention to increase the investment fees as a possible way to reduce the number of citizenships granted.
vi. Residence requirements
Residence or physical presence in Vanuatu is not required before citizenship is granted, or even during the application process. In March 2024, Vanuatu informed the Commission of ongoing interinstitutional discussions to ‘address’ the issue of residence requirements. However, no further information has been submitted on the content and timeline of possible legislative amendments.
vii. Application process
The programme is administered by the Citizenship Office. The office neither interacts with the applicants nor with the country of origin. Interested investors submit their applications through designated agents, who are solely responsible for all interaction with the applicants. Agents must be Vanuatu citizens (citizenship must not be acquired through the investor schemes) and have their main registered office in Port Vila, Vanuatu. They are required not to sell below or above the set price by law, and they are not remunerated for marketing the schemes. Vanuatu provided to the Commission a list of 71 designated agents. In April 2024, the official website of Vanuatu’s Citizenship’s Office included a list of 60 designated agents. 21
Agents are also in charge of marketing and promotion of the schemes. Most of them, on their websites, have been promoting Vanuatu’s schemes as allowing visa-free entry to the EU, as providing a faster application process compared to other schemes, and explicitly mentioning the possibility to change name after acquiring the citizenship. Agents participate partly in processing applications. They carry out the first stage of due diligence checks of applications before submitting them to the Citizenship office, which then transmits them to the three institutions for clearance and due diligence checks.
viii. Screening/vetting procedures
After receiving the applications from the agents, the Citizenship Office checks each applicant’s documents against a checklist before they are submitted to the decision body (the Citizenship Commission).
As mentioned above, Vanuatu adopted a number of legislative changes in 2023, though it has failed to provide satisfactory proof that these changes are being implemented and are sufficient to mitigate the security risks of its investor schemes. As mentioned above, the amendments introduce a new screening process, with a Screening committee consisting of three institutions: i) the Vanuatu Police Force, ii) the Financial Intelligence Unit (FIU) and iii) the Immigration Services, which amongst others check the applicants’ details against Interpol and other international databases. The vetting process is also extended for a period from 14 to a maximum of 30 days.
While on the one hand this new procedure appears to mitigate the risk of granting the citizenship to persons who are listed in Interpol databases, on the other hand it does not include other necessary elements to properly assess the absence of security risks of the applicants. In particular, there are no adequate means for the authorities of Vanuatu to verify the veracity of the documents issued by the applicant’s country of origin or residence, including identity documents and criminal records, since these authorities do not exchange information with the applicants’ country of origin or residence.
During the dialogue, Vanuatu merely indicated the references to the legislative changes, without providing sufficient accompanying explanation and information on the reliability and robustness of this screening process. It is therefore not possible for the Commission to assess whether the security risks flagged at the time of the suspension decision have been mitigated by these changes.
Furthermore, contrary to other third countries operating investor citizenship schemes, Vanuatu does not seem to rely on international due diligence firms for identity, reputational and security screening. This, coupled with the fact the Vanuatu’s authorities have no contacts with the authorities of the countries of origin of the applicants, makes it highly unlikely that Vanuatu is able to thoroughly assess the authenticity and veracity of the applicants’ documents and information.
ix. Name change
Before 2021, persons who acquired the citizenship of Vanuatu through an investor citizenship programme could also subsequently apply for an identity change in Vanuatu. During the dialogue, Vanuatu informed the Commission that in 2021 the relevant legislation the Civil Registration Act 28 of 2021 under section 24(1A) was amended providing that persons holding dual citizenship could not have a change of name registered in Vanuatu. However, Vanuatu also informed the Commission that it does not hold any records of the name changes that were registered until 2019, so it could not provide any information on the number of persons who acquired the citizenship through investment and subsequently changed their name, or on any follow-up checks on those persons.
x. Commission of enquiry - review of passports granted under the previous screening process
In February 2023, Vanuatu established a Commission of enquiry tasked with investigating any alleged wrongdoings committed during the operation of the schemes since their establishment. In April 2024, Vanuatu informed that the Commission of enquiry’s investigation were still ongoing and that it could not provide a clear date on the delivery of its findings.
Furthermore, Vanuatu has not implemented any structural ex-post monitoring mechanism to address the potential security loopholes of the more than 10 000 passports issued before the change of legislation and allegedly more robust screening procedure. While Vanuatu informed the Commission that, based on case law, it is possible to revoke the citizenship where this has been obtained with fraud or against the law, it has not provided information on actual cases of revocation of citizenship acquired through the investor schemes. The fact remains that the existing volume of passports issued under the citizenship scheme since 2015, under the same conditions that made possible the issuance of passports to individuals that should not have been granted the citizenship due to their Interpol listing and falsified applications continue to constitute a potential risk or threat to the security of the Member States.
5. Conclusion
In light of the above updated assessment, the Commission considers that Vanuatu has not provided satisfactory remedies to the circumstances that led to the suspension of the visa exemption. In particular, the quality of the responses to the Commission’s requests and the numerous inconsistencies in the data provided, as well as the lack of sufficient explanations regarding the new legislation and its implementation, led the Commission to the conclusion that the operation by Vanuatu of investor citizenship schemes would continue to pose substantial risks to the public policy and internal security of the Member States if holders of Vanuatu’s passports would be able to resume visa-free travel to the EU.
Therefore, in accordance with Article 8(7) of the Visa Regulation, the Commission has decided to propose an amendment to that Regulation, transferring Vanuatu from the list of visa-free countries to the list of visa-required countries22. To allow the necessary time for the European Parliament and the Council to examine the Commission proposal, the Commission has also extended the period of suspension of the visa exemption by six months23, until 3 February 2025.
1 Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 23 January 2019 on Investor Citizenship and Residence Schemes in the European Union (COM(2019) 12 final), p. 23.
2 Report from the Commission to the European Parliament and the Council, Sixth Report under the visa suspension mechanism, COM(2023) 730 final.
3Regulation (EU) 2018/1806 of the European Parliament and of the Council of 14 November 2018 listing the third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement (OJ L 303, 28.11.2018, p. 39).
4Agreement between the European Union and the Republic of Vanuatu on the short-stay visa waiver (OJ L173, 3.7.2015, p. 48).
5 As explained in detail in the Proposal for a Council Decision on the partial suspension of the application of the Agreement between the European Union and the Republic of Vanuatu on the short-stay visa waiver, COM(2022) 6 final.
6 In particular, in July 2019, it came to the Commission's attention that applicants had been granted citizenship under Vanuatu's investor citizenship schemes despite them being listed in Interpol's databases and that some applicants had presented forged documents (in particular forged clean criminal records) that the relevant authorities of Vanuatu failed to detect.
7https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/residence-citizenship-by-investment/
8 Proposal for a Council Decision on the partial suspension of the application of the Agreement between the European Union and the Republic of Vanuatu on the short-stay visa waiver (COM/2022/6 final).
9 Council Decision (EU) 2022/366 of 3 March 2022 on the partial suspension of the application of the Agreement between the European Union and the Republic of Vanuatu on the short-stay visa waiver (OJ L 69, 4.3.2022, p. 105).
10 Commission Implementing Regulation (EU) 2022/693 of 27 April 2022 on the temporary suspension of the visa exemption for nationals of Vanuatu (OJ L 129, 3.5.2022, p. 18).
11 Commission Delegated Regulation (EU) 2023/222 of 1 December 2022 on the temporary suspension of the visa exemption for all nationals of Vanuatu (OJ L 32, 3.2.2023, p. 1).
12 Council Decision (EU) 2022/2198 of 8 November 2022 on the suspension in whole of the application of the Agreement between the European Union and the Republic of Vanuatu on the short-stay visa waiver (OJ L 292, 11.11.2022, p. 47).
13 Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2018/1806 as regards the revision of the suspension mechanism, COM/2023/642 final.
14Vanuatu: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Vanuatu (imf.org), International Monetary Fund, Country Report No. 23/115, March 2023
15Ibid.
16 Amendment n.1 of 2023 of the Citizenship Act (CAP 112), published on the Official Gazette of the Republic of Vanuatu on 21 March 2023.
17The Internal Screening Committee consisted of the Secretary general as the Chairperson, the Compliance Officer of the Citizenship office; the Director of Immigration Services, the Principal Passport Officer, one legal officer from the State Law Office nominated by the Attorney general and a Police Officer nominated by the Commissioner of Police.
18 According to the statistics provided by Vanuatu’s authorities for the period 2016-2021, nationals from the five restricted countries applied and obtained Vanuatu’s citizenship. Syria (276), Iran (154), Republic of Korea (88), Yemen (74) Sudan (29).
19 Development Support Program (DSP), Vanuatu Contribution Program (VCP), Capital Investment Immigration Plan (CIIP), Real Estate Option Program (REO).
20 https://vancitizenship.gov.vu/index.php/citizenship/fees-and-charges
21https://vancitizenship.gov.vu/index.php/about-us/designated-agents
22 Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2018/1806 as regards Vanuatu, COM(2024)365.
23 Commission Delegated Regulation (EU) …/… amending Regulation (EU) 2018/1806 as regards the extension of the temporary suspension of the visa exemption for nationals of Vanuatu, C(2024)3650.
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