Vietnam Guide To Anti-Money Laundering.

 

20 January, 2017

 

 

Member of Financial Action Task Force (FATF)?

 

No, 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 01 January 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 18 June 2012 (“AML”);
• Decree No. 116/2013/ND-CP on detailing the implementation of certain provisions of the AML (“Decree 116”);
• 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 31 December 2013 and amended by Circular No. 31/2014/TT-NHNN; and
• Penal Code No. 15/1999/QH10 issued by the National Assembly on 21 December 1999, as amended by Law No. 37/2009/QH12.

 

Who are the regulators / monitoring authorities

 

Who are affected / reporting entities?

 

According to the AML, 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.

 

Legal requirements for KYC

 

Customer Due diligence

 

According to the AML, in which cases application of measures to identify clients are required depend on the types of entities and which business activities they are conducting. In particular:

 

–          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.

 

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

 

Record keeping

 

Records of clients’ transactions must be kept for at least 5 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 USD1,000 (for inbound or outbound transfer), must be kept for at least 5 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.

 

Whistleblowing

 

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 3 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 3 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 3 times of the violated amount, abandonment of holding certain positions or titles from one to five years.

 

Internal procedures & 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:

 

• 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.

 

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 111 out of 168 according to 2015 Corruption Perception Index, a barely budge compared with its rank in 2014 (119th) and in 2013 (116th). Sectors most affected by corruption are Police; Public administration; Health sector, Judiciary; and Land management. Vietnamese government has acknowledged 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 significantly improved after the adoption of the Anti-corruption Law by the National Assembly in 2005 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.

 

Draft Law provides a new chapter on Assets and Income Transparency and Control.  Deputies to the National Assembly and People’s Councils, officials holding positions as from deputy head of division in People’s Committee of districts, Secretary, Deputy Secretary, Chairman, Deputy Chairman of People’s Committee, people who work in public companies, credit institutions, etc. must enumerate their assets and incomes. In case their actual assets and incomes are bigger than ones enumerated, the competent authorities shall request tax authority to collect taxes applied on the discrepancy between actual assets and incomes and the ones enumerated; initiate a law suit before courts.

 

A new section of “Anti-corruption at social organizations” is added.  Chairman, General Secretary, Chief Accountant of a social organization must enumerate their assets and incomes.

 

Draft Law also provides a new chapter on “Forming a healthy and anti-corruption business culture.” Specifically, enterprises are liable to issue and implement a code of ethics internally in order to form a healthy and anti-corruption business culture.  In its charter and operation policy, the enterprise is responsible to provide its internal control mechanism to prevent conflict of interests, bribery, abuse of powers and other corruption acts. Chairman of Board of Directors, members of Board of Directors, General Director, Directors, Head of Inspection Committee, Chief Accountant of a public company, credit institution, investment fund must enumerate their assets and incomes.  Enterprises are liable to issue their policy on control of their management staff’s assets and incomes control.

 

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. US$ 100) 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 VND2 billion is subject to death penalty.

 

Forthcoming issues/legislation

 

Money transmitters

 

Money transfer transactions with nature mentioned under Customer Due Diligence and Record Keeping sections are subjects of the AML. The laws regarding these issue remain in force and there is no information that these rules will be revised in the short term.

 

 

For further information, please contact:

 

Oliver Massmann, Partner, Duane Morris

omassmann@duanemorris.com