Why investors should still consider Vanuatu’s CBI program, with Laszlo Kiss

Laszlo: Everybody is waiting for a court decision on a legal case between the European

Commission and Malta because of the Maltese citizenship, and that would decide

whether it is really a national prerogative to offer these programs or the EU has a say in

it. As soon as that decision would be done, then the results for all the other residency

programs should be rethought. If the results of the court case will not be positive for

these reasons.

Salman: Welcome to the investment immigration podcast by Uglobal.com with weekly

in-depth interviews with the world’s leading investment immigration professionals. Hi,

everyone. This is the Investment Immigration podcast, and I’m your host, Salman

Siddiqui. This week we are going to focus on Vanuatu and its CBI program. There’s

been a lot of developments in the South Pacific Ocean Nation in recent times. The

country recently held elections and has a new prime minister. We will talk about this and

we will talk about what this changed political environment means for investors looking to

gain citizenship there. The big news has been, of course, the decision of the Council of

the European Union to fully suspend the visa waiver agreement with Vanuatu due to

what it calls the alleged risks posed by its investor citizenship programs. A partial

suspension of the visa waiver agreement had already been in place since March this

year. To help us unpack all of this this week, our guest is Laszlo Kiss, owner and

managing director of Discuss Holdings Ltd.. He is based in Vanuatu. Welcome to the

show, Laszlo.

Laszlo: Hello. Happy to greet everybody who is listening to this podcast. I’m glad to be

with you.

Salman: Thank you so much. So, Laszlo, we’ll just jump right into the meat of the

matter. Do you think the EU is justified in saying that Vanuatu’s CBI program is seriously

flawed?

Laszlo: As nearly everything in life, everything has both sides, I would say. In a sense,

the and that needs a bit of explanation from me, if you do not mind.

Salman: Please go ahead.

Laszlo: The European Commission indicated there are serious deficiencies, some of

them. And I’m giving you not any kind of politically related answer. I do not want to be

nice. I’m really giving my professional opinion. I think that is how I can help people who

are listening to this podcast. Some of the concerns were definitely valid. One was, for

example, the not so strong due diligence check all the Caribbean five countries which

are competing at the end with Vanuatu appoint outside specialists to check the

applicants. Vanuatu only checks it through the publicly available databases and some

close databases, but definitely it is known in the business that it is easier to pass the

due diligence tests of one or two than the five other countries in the Caribbean. And we

are not even talking about Malta, which requires a four step due diligence procedure

trying to squeeze out bad people. So that concern I think was definitely valid. The

European Commission at least four times indicated to one or two that the due diligence

check is over, how they how it is done, how what is done is not enough. And criminals

are getting through the system back into Europe, through the Schengen visa free

agreement. And the European Commission was not happy about it. What was not good.

And then I’m giving you a yes and no. The European Commission also claimed that

because there are basically no or only five applications which were refused citizenship

applications, therefore, the process is not right.

Laszlo: In this respect, the European Commission was fully wrong because the first due

diligence check, then when it’s done, then the applicants later on apply for citizenship.

But if you do not pass the due diligence check, it doesn’t make any sense to apply for

citizenship because probably you would lose and you would lose 25% of the donation

which is given to the one or two government. So if you are refused at the due diligence

check, then that doesn’t make any sense to apply. So obviously then nobody applies

whose probably will be refused. So the number of refused applications is extremely

small, but that is for technical reason that people who are squeezed out during the

procedure do not want to apply for citizenship. So in this respect, the European

Commission had no right and that was just false information. The European

Commission was right to claim that name change is so easy and so fast that it could be

used for not so positive activities and it could be used for people, especially if the due

diligence check is not so strong and it can be used by bad people to get citizenship and

then change the name. And with that, basically they can really go freely under another

name, under another citizenship through the world, and that means a valid security risk.

I have to say that there is some truth in it that yes, no wonder that the five Caribbean

countries offering citizenship makes it very, very hard to change the name. It is. Some

countries allow it only two years of getting the citizenship. So definitely it’s not easy.

Laszlo: And when a country doesn’t enforce certain rules or doesn’t offer, let’s say,

strict procedure in this respect, then it is possible that when people bad people are

looking for the weakest link in this whole business, then maybe they would find Vanuatu

for that. And that is why that concern from the European Commission basically was

justified. On the other hand, the European Commission said that people could get into

the Schengen zone, which are basically living in a country or the citizens of a country

which has visa requirements to go to the Schengen zone or to Europe. But then the

United States, when it is granting citizenship to hundreds of thousands of applicants,

then also the American citizens, the new American citizens would be entitled to obtain

visa free travel to the Schengen zone. So what’s the difference why Vanuatu is singled

out for this and why other countries which also legally give citizenship to their

customers, also for people who are coming, let’s say from Nigeria or from countries

which require a visa to Schengen. So through the American citizenship they can get into

it. Why? That is not a problem. It’s like a double standard. The fifth matter which came

up, which was not published as much, is that the quality of the passports needs to be

improved. And at the end the Vanuatu government got an offer from an EU country to

develop a new passport to help the security concern of the European Commission to

decrease. Basically this is what has happened. So yes, in some part the European

Commission was right and in some part I think it was wrong.

Salman: Right. It’s a good way to also explain to our listeners that there are two sides to

a story. And thank you for sharing the other side. But let’s back up a little bit for the

benefit of our listeners. I would like to understand from you, where did it all start to go

wrong between the EU and Vanuatu? Given that the program has been around since

2015, so where did it go wrong?

Laszlo: You could start from the beginnings, but usually when a new citizenship

program is started, there are not many interested parties. It takes a certain time till the

country is recognized as a valid place and a legal system is good and everything goes

according to what is being promised. St Lucia was facing the same problem in 2013, but

they started on 14 when they started the citizenship program. It took them one and a

half years to spread the word around and Saint Lucia is also a good country now. It was

approximately 2019 where professionals, not just individual applicants, but

professionals who were introducing clients to Vanuatu, started to recognise the

advantages, the speed of the procedure, the due diligence process, the fixed costs,

which was slightly lower than the Caribbean, and therefore they started to market it

heavily and they started to market it heavily also in regions which unfortunately not to

hurt anybody’s feelings in regions and in countries where the lack of the local due

diligence also is not a big help. So and then they are because that is the case, then they

also have some people who are chased away from their own home countries and I’m

trying to be very nice. And then they were looking for a solution and one were to

because of the lack of the strict due diligence, they were able to manage to arrange

citizenship. Vanuatu started considerably increasing its business in 2018. We’ll see. It

started to get quite good.

Salman: And then a problem started to began when with the program.

Laszlo: According to my knowledge, they got a warning in 2019 from the EU That was

not the first warning for the security matters.

Salman: I see. So we can say that from 2019 onwards things start to go in a different

direction,

Laszlo: Definitely! And also, when I’m just giving you an idea of what could get wrong.

The European Commission had a personal meeting after they sent a legal warning, the

official warning in January and then in March that, yes, you have two or three months to

sort out matters and the deadline was May the fourth, that, yes, if nothing happens till

May the fourth, 2022, then unfortunately, the visa free agreement would be suspended.

On May the third. A government official sat down in Brussels with the European

Commission representatives. But no, he was not representing the Citizenship

Committee and nobody from the Citizenship Committee was there at that meeting which

decided the fate of Vanuatu. And I think that it was a big mistake not to take this

seriously.

Salman: I see. So was there any impact in Europe itself? It’s going through a very tricky

time at the moment. There is a war going on in Ukraine, do you think, post Ukraine war?

The sentiment in Europe, especially the EU, is to keep a very heavy check on Russian

nationals especially and Belarusians getting some kind of way into Europe? Do you

think that also added the pressure on Vanuatu?

Laszlo: No, the warnings were much but definitely before the vote. I mean, if you look

up the schedule then the first official warning was in January and then January we had

no war. So at the end it was just another case of why if Europe is, let’s say, unified in

the opinion that we shouldn’t let Russian customers to get to Europe very easily, then

why allow that to be done through one or two? That has nothing to do, by the way, with

the suspension of the visa free agreement, according to my opinion.

Salman: Okay. So let’s now talk about why is the EU so nervous about when we are to

security and filtering mechanism for its CBI program? So you mentioned a lot of things

already. I want to understand, is there any particular case from a particular country that

really got them so nervous about what happened and what particular things that they

want in terms of security to be there in the program?

Laszlo: There were some criminals who got through the system and they returned to

Europe under a different name.

Salman: I see. So these are documented cases.

Laszlo: Well documented cases, but not for the public. That was the biggest and

primary concern, which is for the security.

Salman: Yes. I see. Tell me what’s happening in terms of your own business now after

this statement from the EU, are your clients reacting following the recent

announcement? What are they saying to you?

Laszlo: When the restrictions were announced? I read the remarks of some

professionals over, let’s say, from Vanuatu, and I was very much surprised that they

didn’t touch the very adverse consequence of this suspension, which was that clients

who already obtained the citizenship were not able to visit Schengen visa free. So for

our reputation, when we sold, for example, Vanuatu citizenship to that applicant, they

obviously didn’t like the whole thing of what was going on because at the end they lost

something for which they thought they are paying and they paid. Legally, everything

was done legally, so they were not happy at all. So it came back to us that what can we

do? What can I say? And fortunately I cannot do anything. That was the decision of the

government not to take these concerns seriously and not to do anything whatsoever to

change the situation. But still, clients are angry that take what they bought and they paid

like 130,000 USD. So not a small amount of money for the privilege of having a

citizenship which allows them to afford certain things and compared to five other

countries.

Laszlo: Now it’s gone. Bye bye. So they are not happy. Meaning that it is not easy to

market Vanuatu now because at the end, what would happen if, let’s say the agreement

is not suspended and it is starting to work again? What would happen in half a year?

Would it be repeated? Would it be again happening? What would be the other

changes? When would be the case? When the United Kingdom would also say, well,

based on this, if the European Union is not taken into consideration, then maybe we

should also abolish the visa free travel. What about the United States? Would the US

government decide? So it’s a really tricky and I think it’s not really a good idea to go it

on this way. And then until the matter is cleared up, the only clients who are really

interested in Vanuatu now are the people who are not interested in the Schengen visa

free travel access, or they have no other way to get second citizenship because the

whole matter is closed. And that is mainly the Russians.

Salman: Right. And that must have made your job. Even harder, if not more frantic.

How are you dealing with the stress?

Laszlo: Well, stress. business is stress. What can we do at the end? I mean, stress is

every day is life . If you are in a business, you have to take stress. We are working with

governments. We are working with government regulations. They are changing all the

time. And yes, that creates stress. Yes. What can I do, really? If the government

changes its mind not to do something or to change the rules, I have to accept it as a fact

of life. So in this respect, if there is a change, it’s bad for the clients, it’s bad for me, bad

for the business. But still I cannot do anything whatsoever with it. I have to accept it.

Salman: I see. Okay. Moving on now, let’s talk about what’s happening in the country.

So Vanuatu recently had a change of government following snap elections. So what

changes are now expected in the country’s investment immigration policies under this

new government? So could you please tell us a little bit about this new government?

What is your outlook on investment migration and what can you tell our listeners about

it?

Laszlo: Look, I do not think that for every single question, the answer is that what the

government can do. Sometimes I feel that this matter was not taken seriously enough,

not just by the current ruling party or whoever was the previous one who would be the

new one. Vanuatu in the last three or four years, at least four times ran out of passport

booklets. They were somebody responsible for this. And I do not think it’s party related

or politics related. Somebody was not supervising the fact that, yes, if you pay 130,000,

you are approved. Let’s say the timeframe is four weeks time. Then unfortunately, we

ran out of passport booklets. Why you didn’t order more, Why you didn’t order double

the amount. What do you think? Because you are doing good business. You are you

have satisfied clients. So at the latest step we have to apologise that. Yes. And when

would you have the new passport booklets? Well, basically I do not know. What kind of

answer is that? This has nothing to do with politics. There were also two or three

problems with the marketing or how it professionally the applications were used.

Nothing to do with the European Commission at this moment. And unfortunately I do not

see if this is not taken seriously. If the new government doesn’t really make an order,

appoint a new head of the citizenship committee. Currently the passports are not signed

and the applications, even though they are approved, we are unable to provide the

passports to clients. What should I say to this? New government has to do something. A

decision has to be made. How important it is to keep the client base which is interested

in Europe, or they should concentrate on other countries. That is a valid business policy.

So far I heard nothing whatsoever or what is expected in the near or immediate future.

Salman: But for the benefit of our listeners, tell us a little bit more about the CBI unit

and when we are to how can potential investors contact them? What kind of red tape is

involved when dealing with them? Who is heading this unit? Because under this new

government, if you have any information to share, that would be helpful. I think.

Laszlo: I have no information that who will be the new chairman. And that also shows

that, yes, if you have a business which you are in as a country, if I may say that, then if

that generates like 30% of your GDP, isn’t it one of the first job to make an order that if

something goes wrong?

Salman: It should be.

Laszlo: Nothing officially or unofficially coming? What is the plan? Vanuatu want

continue this way, want to increase the business, want to offer other possibilities or

whatever. No, we do not get these kind of answers. And then the European

Commission, because nothing has happened for six months since May the fourth, they

indicated, well, fair enough that they are suspending it basically now. So I think that the

next step should be that the Vanuatu government has to renegotiate the agreement.

Salman: Wow. So the government came to power when?

Laszlo: A month ago approximately, so there was time really to see, okay, what is the

political decision to handle this citizenship program. Something is changed. Something

is going the same way. We do not have an official indication about that.

Salman: You mentioned that if 30% of the country’s GDP depends on the CBI, then

these kind of policies should be out there anyway.

Laszlo: Some Vanuatu professionals who made the political question about what the

EU did and how the big countries, the big capitalists and all these countries, they want

to make an example of a small country, blah, blah, blah, blah. Well, if you are not

checking carefully every single applicant, which is the norm, which should be a norm in

these business, criminals would get through. That’s it.

Salman: That’s true. So what would you say to investors who are closely looking into

this developing situation in Vanavatu. At the moment you made it clear the government

is not really revealing much about what’s going to happen, but what should investors

really expect in the future? Would they have to go through more thorough due diligence

procedures, you hope? Because the previous government I’ve been reading was

heavily criticized for supposedly not doing enough on that front.

Laszlo: That was the opinion coming from international press, definitely. Now, still, I

think that a decision has to be made. To let this continue this way or to change it. And I

think that it should be in a normal world. But then COVID and everything just really

made everything very complicated that, yes, in a normal world, if so much money is

coming, which could pay for all the damage caused by the hurricanes, by the storms

and everything, then I expect that, yes, this would be taken on the level that it should

be, but it’s not. There are the political considerations, maybe the government forming

politics. I would say that we have no knowledge really of what is going on and what is

expected as the final decision to agree with the European Union about the new treaty or

with the old one. And then negotiations are starting and then there is a deadline, a

month or so with commitments and so on or nothing. We have no idea what is going on.

Therefore, I cannot say anything about the future.

Salman: Just give me an understanding of the investment immigration industry in

Vanuatu about how this is affecting people like you as an industry there. Of course, I’m

sure business must have gone down for a lot of people. And if you could shed some

light on the industry there and what are you hearing from your colleagues and how does

this affect you all?

Laszlo: At least half of the demand came from the people who wanted Schengen visa

free travel. Half of the business is gone. And as I mentioned, those people who already

got will not make a referral to their business acquaintances that yes, the system is good.

Look at how easy it is for me now. Previously I had to stand in a queue for the consulate

and I was at the mercy of Consul officer. Now everything is legally done and it is so, so

please do it. Contact these people and they will sort it out for your cell phone also. But

they are not recommending to anybody. It is when it seems like it’s a downhill type of an

activity that, yes, less and less people are interested. They heard something. And also

on the other side of it is people who hear that, yes, there is something happened with

Vanuatu. There were some restrictions then abolishment of visas, then they would only

listen to it. And so it would be very hard to market Vanuatu as a country because then

people just hear a little bit. They do not understand what it is, but then they would say,

okay, let’s use another country. I just do not want to take any kind of risks for the future.

So it influenced the business. And I’m quite sure that if there are honest agents working

with clients, they have to say that, well, not anymore. So all in all, compared to the five

Caribbean countries, what is the advantage which Vanuatu could offer? Speed of the

procedure. Again, the security aspects then are coming into first place.

Salman: Do you think the problem can be solved realistically, Like if the due diligence

procedures are put in place? The EU Commission is satisfied with a proper proposal

from the government that, look, we understand there was a problem, we know we can

fix it. We’ll give you some assurances. Do you think there is hope to fix the system?

Laszlo: Yes. But then somebody representing the citizenship business from one or two

has to be there at the negotiations with the European Commission.

Salman: Right. And at the moment there is no such thing happening.

Laszlo: And that was nobody from the citizenship coming, nobody from that business

participating in that crucial meeting on the last day of the visa free travel on May the

third.

Salman: So if we take out the schengen aspect of the Vanuatu CBI program, how do

you convince an investor that Vanuatu still remains a good opportunity for them in this

scenario? I’m sure you still get calls from clients and if I’m your client and I’m looking for

an option maybe to go to the US or my concern is not Europe really, how do you

convince them that it’s still a workable deal for me?

Laszlo: Do I want to convince them? I’m sorry to ask back, but I’m not so sure that what

has been going on for the last six months. Maybe the prudent business idea for me is to

stop and to say to the clients who are interested about Vanuatu, look, there is a risk of

we do not know what would happen in the near future. Maybe you shouldn’t choose

Vanuatu for the time being because that is a kind of a legal situation and nobody knows

what would be the end result. Do I really want to market then Vanuatu with any kind of

unforeseen changes like the United Kingdom or the US making something? That’s

number one. Number two is that when word gets out that there is a problem with

Vanuatu citizenship, again, nothing more but problem with Vanuatu citizenship, what

would the compliance Department of Financial Institutions say if somebody who gets a

new citizenship is coming from Vanuatu? What is it? I heard that Vanuatu has a

problem with citizenship and the EU canceled some kind of travel possibilities. Then

why should we accept the client from Vanuatu? Definitely. I expect that for compliance

wise there would be financial institution who would make people with Vanuatu

citizenship harder than it was before. That’s nature.

Salman: You’re very honest with all of this, so I appreciate you saying it like it is without

filter, but given all this bleak picture. You’re out there. What do you think will happen to

all the programs, in your opinion, for example, in the region or in the Caribbean? Do you

think what’s happening to Vanuatu will eventually catch up with other places as well if

they don’t fix their due diligence stuff?

Laszlo: The other countries are, as I said, they are really using outside detective

agencies to check the applicants in their home country, while one or two doesn’t, which

means that people who know this, and especially the criminals and then these detective

agencies are employing previous policemen and so on, who have access to certain

information and who is good and who’s not. I’m not saying that the five Caribbean

countries couldn’t make a mistake or those detective companies or investigative

companies cannot make a mistake. But at the end they are frightening people away to

try the citizenship if they have something which was quite bad. Now, if they keep up

sending away bad guys, if I can say bad guys, then the only risk is the political opinion

of the European Parliament, which doesn’t like these kind of residency programs or the

visa free travel. I do not want to get into politics, but to give you a final answer,

everybody is waiting for a court decision on a legal case between the European

Commission and Malta because of the Maltese citizenship, and that will decide whether

it is really a national prerogative to offer these programs or the EU has a say in it. As

soon as that decision would be done, then the results for the Caribbean programs and

all the other residency programs should be rethought. If the results of the court case will

not be positive for these business. We do not know what would be. I have my

professional opinion, but then time is running out. So all in all that would be part of

another conversation. That should be part of another conversation.

Salman: But it’s an important point that the future of Malta that would have

repercussions all over the industry. So that’s a very valid point. And any last words that

you want to have through this platform to potential investors and maybe to your own

government there about what needs to be done to bring Vanuatu’s CBI program back

on track.

Laszlo: All we want is that good service to customers who are interested and who

would be happy to work with Vanuatu for that. Certain changes need to be done.

Otherwise, it would be much, much harder. So it is a decision I would really encourage

and I would say we would be so happy, obviously, if we could increase the business up

to the level of how it was generating money for all the parties having satisfied clients.

But then a decision has to be made. We cannot do anything, only advising certain

things. But I think it’s not really at the point that advice is really needed.

Salman: Thank you so much, Laszlo, for your time. Thank you so much for sharing

insights from the industry about what really is happening inside there and about your

suggestions about how it can be brought back on track. There is still hope that someday

this will be back on track. We should be hopeful about that.

Laszlo: Definitely. Definitely. That’s the case we would be all happy to have. It was

good. It was working well. The promises which we made to customers were kept and

everybody was happy. I would like to see it back.

Salman: Great. So finally, a shout out to the listeners out there. We’ll have more such

episodes with on programs from around the world. So please stay tuned and see you

guys next time. Thank you. You’ve been listening to the investment immigration podcast

by Uglobal.com. Join us again soon for more in-depth conversations exploring

investment immigration opportunities from around the world.