Member of Financial Action Task Force (FATF)?
Vietnam is currently not a member of FATF.
On FATF Blacklist?
No.
Member of Egmont?
No.
ML background in region
Overview of country risks
Vietnam’s deeper integration into regional and world’s economy for the past few years has been a great opportunity for international money laundering crimes. However, money laundering activities only become clearly visible recently though bank accounts opening, securities trading, gambling, illegal transfer of foreign currencies out of the country, use of credit cards, etc.
Combating money laundering becomes one of the top concerns not only for the State Bank of Vietnam but also other relevant authorities in Vietnam. According to a report of the State Bank of Vietnam, in 2012, suspicious transactions have a total value of VND51,000 billion, while in 2013 is VND79,000 billion and in 2014, the value goes up to VND119,000 billion. This shows an increasing and alarming number of transactions suspicious of money laundering. We note that the Law on Anti-money Laundering took effect on January 1, 2013.
However, it seems that the anti-money laundering legal framework is still not sufficient, guiding implementation remains unclear, awareness of credit institutions of money laundering is low, ability to detect money laundering activities is weak, information technology in anti-money laundering activities is not sufficient, and especially punishment regime for violating acts of the AML is only formalistic. The government, especially the State Bank of Vietnam is strongly recommended to tighten their regulations in this sector.
Key directives/Legislative framework
- Law on Prevention of and Anti Money Laundering No. 07/2012/QH13, issued by the National Assembly on June 18, 2012 (AML);
- Decree No. 116/2013/ND-CP dated October 4, 2013 issued by the Government on detailing the implementation of certain provisions of the AML (Decree 116), amended by Decree No. 87/2019/ND-CP;
- Decree No. 88/2019/ND-CP dated November 14, 2019 issued by the Government on sanctions for administrative violations against currency and banking legal regulations (Decree 88);
- Decision No. 20/2013/QD-TTg dated April 18, 2013 of the Prime Minister on determination of high value transactions subject to report obligation (Decision 20);
- Circular No. 35/2013/TT-NHNN on guiding the implementation of certain regulations on anti- money laundering, issued by the State Bank of Vietnam on December 31, 2013 and amended by Circular No. 31/2014/TT-NHNN and subsequently supplemented and amended by Circular No. 20/2019/TT-NHNN; and
- Penal Code No. 100/2015/QH13 issued by the National Assembly on November 27, 2015, as amended by Law No. 12/2017/QH14 dated June 20, 2017 (“Penal Code 2017”). Penal Code 2017 became effective January 1, 2018.
Who are the regulators / monitoring authorities
Who are affected/reporting entities?
The following state authorities are responsible for reporting, preventing, and fighting against money laundering activities:
- SBV is mainly responsible to the Government for state administering the implementation of AML regulations;
- Ministry of Public Security is responsible for collecting, receiving and investigating information of money laundering related crimes;
- Ministry of Finance is responsible for implementing AML measures in insurance business, securities sector, prize-winning games and casinos;
- Ministry of Construction is responsible for implementing AML measures in real estate business sector;
- Ministry of Justice is responsible for implementing AML measures applicable to lawyers, legal practice organizations, notaries and notary public offices;
- The People’s Procuracy and the People’s Court coordinate with other agencies in the investigation, prosecution, and resolution of money laundering crimes;
- People’s Committees at all levels are responsible for conducting legal training on anti-money laundering in the province, co-ordinating with state authorities to implement policies, strategies, and plans to prevent and fight money laundering; and
- The Anti-Money Laundering Steering Committee is responsible for assisting the Prime Minister in preparing strategy, plans, policies and programs in the process of preventing and fighting against money laundering.
- Client acceptance policy;
- Processes and procedures to identify clients, verify and update client information;
- Transactions which must be reported;
- The process of review, detection, handling and reporting of suspicious transactions; the way to communicate with the clients who make suspicious transaction;
- Information keeping and security;
- Applying temporary measures and principles of handling the cases of transaction delay;
- Reporting and information supply regime to the State Bank of Vietnam and the competent state agencies;
- Professional training on the prevention of and combating money laundering;
- Internally controlling and auditing the compliance with the policies, regulations, processes and procedures related to the prevention of and combating money laundering, responsibilities of each individual and division in the implementation of internal rules in the prevention of and combating money laundering.
- For financial institutions:
- The clients open accounts or set up transactions with the financial institutions for the first time;
- The clients who make infrequent transactions of high value or carry out the transaction of electronic money transfer but lack the information about the name, address, account number of the originator;
- There are doubts about transaction or the parties concerned in transactions are related to the money laundering;
- There are doubts about the accuracy or completeness of the clients identification information previously collected.
- For relevant non-financial institutions or individuals:
- Doing business in prize-winning games, casinos: clients implementing high value transactions (i.e.¸ over VND60 million per day);
- Doing real estate management services, brokerage; real estate transaction floor: when providing these services to the buyer, purchaser and asset owner;
- Trading in precious metals and stones: when clients performing the sale and purchase transaction of precious metals and stones with value of over VND300 million per day;
- Providing notary and accounting services, the lawyer’s legal service and lawyer practice organizations: when preparing the conditions for conducting the transactions to transfer the land use right, house ownership, management of money and securities or other assets of the clients; managing the clients’ accounts at banks, securities companies; administrating and managing the operation of the clients’ companies, and participating in the activities of purchase and sale of business organizations on behalf of clients;
- Providing investment trust services: due diligence for the entrusting party;
- Providing services of establishment, management and executive of enterprise; supplying registration office, address or place of business; supplying services of company representative : clients requesting such services;
- Providing services of director and secretary provision of the enterprise to a third party: third party and director / secretary to such director;
- Providing services of representative supply for shareholders: shareholders and representatives of such shareholder.
Legal requirements for KYC
Customer due diligence
Application of measures to identify clients are required depend on the types of entities and which business activities they are conducting. In particular:
The abovementioned services providers/entities must update the client identification information on a regular basis during the period of having relations with the clients.
In addition, clients must also be classified into different groups, product and services used, their place of residence or headquarter based on different risk exposure levels.
Reporting requirements/obligations
Recordkeeping
Records of clients’ transactions must be kept for at least five years from the date of the transaction. Records of customer identification, accounting documents and reports of high value transactions, suspicious transactions and transactions of electronic money transfer exceeding VND500 million or equivalent amount in foreign currency (for domestic transfer) or $1,000 (for inbound or outbound transfer), must be kept for at least five years from the closing date of the transaction or the date of account closure or the reporting date.
Tipping off
The reporting entity/ individual is not allowed to inform a person involved in a suspicious transaction that it has reported or will report the transaction to the State Bank of Vietnam.
Whistle-blowing
The AML only sets out regulations on reporting to the State Bank of Vietnam instead of whistle blowing.
Offences
Enforcements
If the parties related to the transactions are included in the blacklist or there are grounds to believe that the transaction required to be performed is related to the criminal activities, the reporting entity/ individual must apply measures to delay the transaction within maximum three working days and must immediately report in writing and notify via phone to the competent State agencies and the SBV for cooperation. If the reporting entity/individual does not receive any feedback from the competent state agencies after three working days, it can proceed the transaction.
In addition, the reporting entity/individual must block the accounts or seal or temporarily seize assets of the individuals/organizations upon having decision of competent state agencies under the law and make report on the implementation to the State Bank of Vietnam.
Penalties
Persons violating the AML are subject to administrative sanctions of up to VND250 million, discipline or criminal penalty depending on the nature and seriousness of such violations. The criminal sanctions varies from one year to maximum 15 year imprisonment, together with partly or wholly confiscation of assets, monetary fine of up to three times of the violated amount, abandonment of holding certain positions or titles from one to five years.
The criminal sanctions against corporate legal entities include monetary fine of VND1 billion up to VND20 billion, together with business operation suspension of one to three years, banning from particular business field operations of one to three years, or forced termination and liquidation.
Internal procedures and training
Pursuant to Article 20 of the AML, reporting entities/ individuals must establish internal procedures on prevention and combating money laundering with the following contents:
Sanctions
International conventions
International cooperation in the field of prevention of and combating money laundering includes: (i) exchange of information on prevention of and combating money laundering; (ii) determining and blocking assets of the violating persons; (iii) performing judicial assistance and cooperation in extraditing money laundering offences; and (iv) other aspects. The process, procedures and cooperation methods are in accordance with international agreements to which Vietnam is a party.
CTF – Countering terrorist finance
The Ministry of Public Security is tasked with the preparation of a list of organizations and individuals related to terrorism and terrorist finance (blacklist). The reporting entity/ individual must promptly report to the competent anti-terrorism authorities, and at the same time send reports to the State Bank of Vietnam upon detecting organizations and individuals to conduct transactions included in the blacklist or when there is evidence that other organizations and individuals commit acts related to the money laundering crime for terrorism financing.
At the same time, the reporting entity/individual must apply measures to delay the transaction and block the accounts or seal or temporarily seize assets of the individuals/ organizations.
Anti bribery and corruption laws
Corruption is widespread throughout Vietnam. For information, Vietnam ranks 96/180 according to 2019 Corruption Perception Index, a significant increase compared with its rank in 2018 (117th). Sectors most affected by corruption are Police; Public administration; Health sector, Judiciary; and Land management. Vietnamese government acknowledges the negative impact of corruption on both Vietnam’s future prosperity and the Party’s own legitimacy, thus has adopted one of the most comprehensive and ambitious anti-corruption laws in Asia. The anti-corruption legal framework has seen some improvements after the adoption of the Anti-corruption Law by the National Assembly in 2005 (as amended in 2007, 2012 and 2018) and the National Strategy on Anti-corruption to 2020.
However, in the last ten years of implementation, considering the increasing level of complexity of corruption cases, the current legal framework has been proved to be inadequate to combat corruption in Vietnam. This prompted the Vietnamese Government to refine the current regime to make the policies fully effective and operational in practice.
There is no definition of “bribery” under Vietnam laws. However, in essence, it could be defined as an act of offering, promising, making or receiving money or anything of value (minimum threshold: VND 2 million (approx. $90) or intangible benefit: no clear guidance but sex, job positions, and education acceptance offerings may be considered) to induce or influence an act/omission or decision. The current laws only target people with positions and power (i.e., state officials). Please note the receipt of minimum VND 1 billion is subject to death penalty.
***
For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under [email protected]. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.
