Two Months after the VFSC New Rules Released, a Large Number of Licenses were Cancelled. Only 79 Left!

Many offshore brokers have left the country and renounced their VFSC licenses since the new VFSC rules were issued.

According to the new rules issued on October 16, brokers regulated by the VFSC should set up an office in Vanuatu and appoint local people as managers and directors. 

Since then, the following 16 brokers have canceled their VFSC licenses:

AUSFOREX

DBG Markets

ACY Securities

TOP1 Markets

IEXS

DUHFX

xDirect

SeventyBrokers

Eightcap

IRC Groups Limited

Clover Markets

Blafx

6itrade

UBFX

IQ Option

GMI Markets

The VFSC is one of the most preferred offshore regulators for brokers because of its lenient regulatory policies, attracting over 600 brokers to register with it in 2017.

However, some of these licensed brokers have engaged in fraudulent activity, which has led the Financial Action Task Force on Money Laundering (FATF) to place them on a gray list.

Being on this list could complicate international transactions, foreign direct investment, and the brokerage industry, as other global financial centers may block countries that are on the list. Take National Australia Bank, once a close business partner of Vanuatu, closed its correspondent account there.

In order to be removed from the "grey list" as soon as possible, Vanuatu has enacted and amended dozens of laws within only 2 years, including Amendment No. 11 to the Securities Dealers (Licensing) Act (2017), the VFSC-Remittance Directive, Amendment No. 8 to the Companies and Trust Service Providers Act (2017), etc.

In 2018, VFSC tightened regulation by requiring all brokers to pay a Vatu 5 million (approximately US$50,000) deposit as well as some other requirements.

In June, the FATF officially removed Vanuatu from its list of "High Risk Jurisdictions", because of the country's significant progress in anti-money laundering and counter-terrorism financing.

The tightening of regulations has led to a sharp decline in the number of brokers licensed in Vanuatu, down to around 150 by 2020. Now, with the new regulations coming into effect in October, only 79 VFSC licensed brokers remain in Vanuatu by December this year due to the increased cost of maintaining a VFSC license.