Vanuatu’s economic citizenship programme, a “golden passport” scheme selling citizenship to foreign investors is under intense scrutiny for poor oversight and lax vetting. International authorities warn that the Pacific nation risks being greylisted by the Financial Action Task Force (FATF) and Organisation for Economic Co-operation and Development (OECD) for money-laundering risks if it fails to implement crucial reforms.
The global watchdog FATF has highlighted how such programs can “allow criminals more global mobility and help them hide their identity and criminal activities”. Similarly, the OECD in 2018 identified Vanuatu’s passport-for-sale scheme as a threat to tax compliance. These warnings come as Western governments take action against Vanuatu’s controversial citizenship-by-investment initiative, which grants nationality for roughly $130,000 in fees with only minimal background checks.
EU and UK Revoke Visa-Free Access
Mounting security concerns have already led to the loss of visa-free travel privileges for Vanuatu’s passport holders in Europe and Britain. The European Union suspended Vanuatu’s Schengen visa waiver in 2022 and permanently revoked it at the end of 2024 – the first time the EU has ever withdrawn visa-free status from a country over a economic citizenship scheme.
“Concerns over Vanuatu’s weak screening process” drove the EU’s decision, officials said in an interview with ABC News Australia. Brussels had repeatedly warned that Vanuatu’s fast-track citizenships posed “security and migration risks” to the bloc. In fact, an EU review found that Vanuatu had granted citizenship to individuals flagged on Interpol criminal watchlists, due to very short application times and scant due diligence. There were almost no rejections of applicants, deficiencies that the EU said created a serious security vulnerability.
London reacted with similar alarm. In July 2023, the United Kingdom terminated visa-free entry for Vanuatu nationals after finding “clear and evident abuse” of the citizenship-by-investment program. Home Secretary Suella Braverman imposed immediate visa requirements, noting that Vanuatu had been granting citizenships to people “known to pose a risk to the UK”. The UK’s move aimed to preempt a “wave of travelers” attempting to exploit visa-free access before tougher rules kicked in. British authorities deemed the crackdown “necessary and proportionate” to safeguard the UK’s security and immigration system.
Notably, these actions by the EU and UK are sanctions on Vanuatu’s travel privileges, not formal greylisting of the country itself. However, officials and experts caution that if Vanuatu does not tighten control of its citizenship scheme, it could face further penalties or inclusion on international watchlists.
The EU, for example, continues to list Vanuatu as a “high-risk” country for money laundering under its AML blacklist, despite Vanuatu’s earlier removal from the FATF grey list in 2018. In other words, Vanuatu’s reputation in global finance and security circles has suffered – a point echoed by the FATF and OECD warnings about the misuse of investment citizenship programs.
Cronulla News Predicted the Backlash
Interestingly Cronulla News, was among the first to foresee these diplomatic repercussions. As early as March 2022 – when the EU’s concerns first became public – Cronulla News reported that the UK was likely to revoke Vanuatu’s visa-free access due to the country’s “lack of security and due diligence” in vetting passport applicants.
Cronulla News cited sources in Vanuatu’s Citizenship Commission, warned that officials had failed to act on red flags raised by the EU. It noted that even after European regulators red-flagged Vanuatu’s program in early 2022, the government still did not thoroughly re-vet all passports issued since 2015. Cronulla’s reporting, which proved prescient when the UK did impose visas the following year, highlighted internal criticisms that political infighting and “ego issues” among Vanuatu’s leaders were hampering much-needed reforms. In fact, Vanuatu’s then-Prime Minister Bob Loughman set up a special task force to salvage the citizenship scheme, but according to sources it “failed to scrutinise the applicants” adequately.
The core issue is that Vanuatu’s citizenship-by-investment program has, until recently, applied only cursory background checks on applicants, according to international assessments. Both the EU and UK have voiced alarm that criminal elements may have obtained Vanuatu passports with ease.
A 2022 European Council review cited multiple failings in Vanuatu’s due diligence process – including a “shallow rate of application rejection,” very short processing periods that do not permit sufficient background checks, no residency or “genuine link” requirements for applicants, poor information-sharing with law enforcement, and even the granting of citizenship to individuals on Interpol wanted lists. These findings reinforced fears that fugitives or sanctioned persons could purchase a Vanuatu passport and then travel freely (at least until the recent visa restrictions) under a new identity. London’s investigation likewise found “evident abuse” of the system, concluding that some Vanuatu citizens acquired via investment posed security risks directly to the UK.
Such revelations have put Vanuatu at risk of greylisting by global financial crime agencies. Greylisting – used by bodies like the FATF – would formally designate Vanuatu as a jurisdiction under increased monitoring for illicit finance, potentially complicating its international banking and business ties. While Vanuatu is not currently on the FATF grey list, the country’s lax citizenship controls have drawn the attention of these regulators. The FATF in its reports has singled out citizenship-by-investment schemes as a vulnerability, noting that they can help wrongdoers “hide their identity and criminal activities behind shell companies in other jurisdictions”. In Vanuatu’s case, critics worry that proceeds of crime could be laundered through its citizenship program or that persons evading law enforcement could find a safe haven by obtaining Vanuatu nationality.
High-Profile Case Sparks Outrage: Lalit Modi’s Vanuatu Passport
One emblematic case fueling the controversy is that of Lalit Modi, a wealthy Indian businessman and former cricket league chief wanted on corruption charges. In early 2023, it emerged that Lalit Modi had purchased Vanuatu citizenship for $150,000 under the investment scheme ABC reported. Modi is a fugitive from India – accused of money laundering and financial fraud – who had been living in exile in London. Vanuatu had granted him citizenship (potentially allowing him to evade extradition) caused public uproar in both Vanuatu and India.
Vanuatu’s new Prime Minister, Jotham Napat, responded by ordering Lalit Modi’s citizenship to be cancelled. “As Prime Minister, we will not harbour fugitives or criminals,” Napat declared, affirming a “zero tolerance” stance toward anyone using Vanuatu’s citizenship program to escape justice. The Vanuatu government argued that Modi’s citizenship approval pre-dated the current administration and that if proper procedures had been followed, his ties to alleged crimes would have been caught. (The PM noted that Interpol had twice rejected requests for a notice on Modi, meaning no automatic red flag appeared during the original application vetting.
Nonetheless, the Modi affair has been a major embarrassment, undercutting Vanuatu’s assurances that it has cleaned up its citizenship scheme. It underscores exactly the scenario foreign authorities feared – a high-profile suspect obtaining a citizenship with “little to no” background checks.
For now, Vanuatu remains on the EU’s blacklist of high-risk money laundering jurisdictions, and its citizens must apply for visas to travel to both the EU Schengen zone and the UK.
Vanuatu’s economic citizenship program is at a crossroads. Years of light-touch vetting and lucrative citizenship sales have drawn condemnation from the FATF, EU, OECD and others on the global stage.
The immediate punishments – loss of EU and UK visa waivers – are already in effect, dealing a blow to the appeal of Vanuatu’s passport. Further consequences, such as formal greylisting by financial crime watchdogs, loom if Vanuatu fails to restore credibility to its processes. As the case of Lalit Modi illustrates, the stakes extend beyond bureaucratic lists to matters of international justice. Vanuatu’s challenge now is to convince the world that its citizenship is no longer for sale to bad actors, and that rigorous oversight can coexist with the revenue needs of a small island economy. The coming months will test whether these promised reforms are truly implemented, or whether Vanuatu’s “economic citizenship” paradise remains a haven for those with something to hide.
