I want you to imagine the following. You rock up 40 minutes late to a meeting with a senior figure at the FCA.
“Sorry bro,” you say. “I was stuck in a meeting with Rachel Reeves for way longer than I expected.”
This would be a surreal series of events but something like this happened during the TradeInformer trip to Vanuatu. After getting along like a house on fire with the ex-finance minister, we ended up being very late to our meeting with Joshua Tari, Manager of the Supervision Department at the Vanuatu Financial Services Commission. I guess the difference in the analogy is that a lengthy meeting with Reeves would probably be a boring, ‘grim up north London’ nightmare, whereas the one with John Salong was actually fun.
Anyway, Vanuatu is a laid back kind of place and Tari was still happy to chat. Tari was also the perfect person to talk to as he is the officer in charge of the financial dealer license programme in Vanuatu. Here’s what we discussed.
Can you tell me a bit about what you do at the regulator?
I was brought in by the old commissioner to do a few different things, but mainly it was to set up a proper supervision unit and function then leave. So I told the commissioner, I’ll be here for three years. Now it’s been six.
Why did that happen?
When I first joined it was a bit of a mess to be honest, it was the company service provider phase. That’s why we did the licensing, put the supervisory measures in place, and generally tried to clean everything up a bit. Now I think we have very good companies. These are big, global businesses. There were around 600 companies when I joined. Now there are only 74. So there was lots of work to do.
What changed?
When I came here six years ago, I started by looking through the legal set up of the 600 companies – they were only paying an application fee. So there were a lot of companies because they only had to pay about $500 to set up. We had to add a license fee, this was one of the reasons that a lot of people left.
We then still had a lot of problems because we would go to the person paying the license fee but it could be a middleman, removed from the actual company ownership. So we saw that could not continue and one of the requirements we added was that you had to have a physical presence and office here, with clarity on ownership.
Then there are also audits, local directors, and so on. We do regular site visits. You know, in the first half of this year we had to do more than 70 site visits. Sometimes we have to come back because things are not in order.
So these two things are what pushed most companies out. They didn’t want to pay the $50,000 as capital for the licensing. They didn’t want to have the local presence, with an office, directors, and so on, as well as meeting the financial reporting standards.
Can you explain that $50,000 deposit. It’s supposed to be government bond or something like that?
The simplest way to think about it is that it’s part of the capital for licensing and you get it back if you return your license. You can lose it if you are involved in fraud or something similar. But if you return your license, and first file all your accounts and deal with any customer complaints, then you will get that money back.
So do you receive complaints then?
Yes, we get them regularly. If we get them, we’ll look at them first and see if the complaint is a valid one. If it is then we go to the licensee and say, ‘ok, we’re giving you 30 or 60 days to address these complaints.’ And if they don’t then it has an impact on them, so we won’t give you back the bond, for example.
There are far, far less complaints than there used to be though. When I started it was about 20 every day. Now they are rare and it tends to only come down to the same one or two companies that get them.
Exness, eh?
I’m not going to mention any names. The difficulty with complaints is that you need to tell if they are legitimate or not. Investment by its nature has risk attached to it and if someone loses money, they are often going to be angry. So we have to say, ‘are they angry because the company did something illegitimate or because they lost money?’ Finding that out can be difficult. The other thing is that we can immediately see, because of this, which company is good at dealing with complaints themselves and which is not. Because if the company is good, then the client won’t feel like they have to come to us.
I spoke to someone who worked at the Kenyan regulator and part of the way they formulated the rules for this industry was by speaking to other regulators, like the FCA and CySEC. So do you ever have those kinds of contacts? The other thing I’d be interested to know is if you ever get complaints from them? Perhaps because brokers here are onboarding clients from their jurisdiction?
No, not at all. We haven’t had complaints from any other regulator. We get requests from them for licensing and vice versa. So if someone is applying for a license in Australia or Mauritius, we might get a request from ASIC or the Mauritius regulator about that, in terms of the company’s background, any warnings, and so on. The bigger thing is learning from other regulators how to govern this industry. That is another area where we have a lot of communication with other regulators.
We also had discussions with Cyprus recently because we are working on becoming a member of IOSCO. We have to create a reporting standard that meets the IOSCO standards, so we’ve been discussing that with them as well.
Final question, can you say anything about what your long-term goal is here? I mean, you’ve put these regulations in place, you’ve got more than 70 firms regulated here. Do you have a particular vision in mind?
To take a step back, when I first joined the commission it was about improving the quality of companies and the reputation of Vanuatu as a regulatory jurisdiction. Good business is sustainable business. When you have good businesses, it improves our reputation and more good businesses come. That works the other way too – good companies don’t want to go to a place with bad businesses.
Another reason is we have to comply with the FATF recommendations and international standards. Those standards require UBO information. You have to have proper reporting systems. You have to have on-site inspections. All these things have to be complied with. So to meet those standards, we had to change our whole way of thinking and change how the industry operated.
That took a lot of time because it’s not something that you can change today and expect things to happen overnight. We started three years ago now, and I think you can see the results today, in terms of the quality of businesses coming here and the large number that are no longer here. It’s not a complete process at all. We are still having to make sure the business is booked in Vanuatu, that decisions are actually made here, that staff have the necessary training. We don’t want people messing around. There are a few companies that have met the high standard we want but a lot have not, although they are progressing.
But if we look at why we are doing this, it is also because this model creates more jobs, more opportunities for people, more development in the country, and more revenue for the government. Licensees must train local people and we make them report on their progress.
There are probably 150 people working now in this industry directly, but then you also have lawyers, accountants, and so on who are employed indirectly. So foreign direct investment in physical things is ok but today it’s more important to have the brains. If more people move here and hire local people, we are bringing more knowledge to the country and can improve our economy. We already see that happening.
