AML Legal and Policy Changes in Vietnam

In the wake of concerns expressed by the Financial Action Task Force that recently evaluated the extent to which Vietnam had complied with the FATF Recommendations, several changes in the policy and legal arena have taken place.

The most significant development is the establishment, in April 2009, of an inter-agency Steering Committee for AML chaired by the First Deputy Prime Minister. The Committee has representatives from 13 ministries and agencies. In June this year amendments were made to the Penal Code to address certain AML-related issues.

Vietnam is now into the second decade of the transition from a centrally-planned economy to a market-based economy, a process that commenced in 1986.

The State Bank of Vietnam has been the focal point for initiating various measures. One area where the Mission observed lack of progress is in relation to customer due diligence. Requirements for due diligence seem to apply predominantly in the banking sector. The applicable regime is far from being exhaustive e.g. there is no prohibition on opening or maintaining anonymous accounts; the concept of beneficial ownership is not reflected in the legislation (as it is not understood in Vietnam). Vietnam is essentially a cash-based economy where cash and gold are used for even for major land and other transactions. Gold traders do not appear to be currently subjected to mandatory AML requirements. Attempts are underway to popularize banking in the country which has a population of 86 million. A significant government initiative in this connection is to transmit the monthly salaries of public servants to bank accounts, thus encouraging the use of banks and ATMs. Fraud remains one of the common crimes- in 2007, for instance, some 69,000 individuals were prosecuted for criminal offences of which 60% represented fraud-related offences ranging from the submission of fraudulent deeds as collateral to using other people’s IDs to obtain funds.

The Vietnamese authorities did point out to the FATF Mission that some of the observations in the draft report were not technically correct. The authorities attributed misconceptions due to a lack of understanding of the nature of the country’s unique legal system and the absence of officially translated legal texts. Vietnam’s legal system has been subjected to, inter alia, French and American influences but indigenous concepts still prevail. Vietnamese law does not permit the extradition of its own nationals. Even though there is no specific legal provision, Vietnam does abide by UN Security Council resolutions relating to the prohibition on the financing of terrorist organizations etc. Many policy and legal changes are imminent and over the next few years Vietnam will hopefully tighten all existing loopholes. For comparative financial crime lawyers, Vietnam is perhaps an interesting case study as the country may be able to achieve the intended international goals of controlling money laundering but following a path slightly different from many other jurisdictions.

Further information:

APG Vietnam Mutual Evaluation Report on Anti-Money Laundering and Combating the Financing of Terrorism

Dr Dayanath Jayasuriya, Attorney-at-Law is the Managing Partner of Asian Pathfinder  Legal Consultancy and Drafting Services (email: ichpl@hotmail.com). He is a former Chairman of the Securities and Exchange Commission and the Insurance Board of Sri Lanka and is the author of a book on money-laundering and terrorist financing and of more than 50 articles on subjects such as financial crime, money laundering, compliance, corruption and fraud. 

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