Vietnam

Vietnam is a densely populated developing country that has been transitioning from the rigidities of a centrally planned economy since 1986. Vietnamese authorities have reaffirmed their commitment to economic modernization in recent years. Vietnam joined the World Trade Organization in January 2007, which has promoted more competitive, export-driven industries.

By the mid-1980-s, the Vietnamese economy was in chaos with inflation at 400 percent and widespread poverty. The country was on the brink of bankruptcy. The government of Vietnam declared a set of economic reforms known as doi moi in order to pursue market oriented economy. The situation improved and Vietnam is now one of the world’s fastest growing economies, surpassed only by China.[1] 

Foreign donors have pledged $6.5 billion in new development assistance for 2013. Hanoi has oscillated between promoting growth and emphasizing macroeconomic stability in recent years. In February 2011, the Government shifted policy away from policies aimed at achieving a high rate of economic growth, which had stoked inflation, to those aimed at stabilizing the economy, through tighter monetary and fiscal control. Vietnam's economy continues to face challenges from an undercapitalized banking sector. Non-performing loans weigh heavily on banks and businesses. In September 2012, the official bad debt ratio climbed to 8.8%, though some independent analysts believe it could be higher than 15%.

Vietnam recently become a significant player in the oil industry and appears to be benefitting economically while developing a diversified economy.[2]

There exists little evidence to suggest that money laundering is a major problem in Vietnam, but the country has a substantial gray economy that makes the identification of dirty money difficult. Vietnam, because of its geographical position, is a transshipment country for drugs from the Golden Triangle together with being an attractive target for overseas crime groups.

Vietnam is not an important regional financial center. The Vietnamese banking sector is underdeveloped and the Government of Vietnam (GVN) controls the flow of all U.S. dollars in official channels. The nature of the banking system makes it unlikely that major money laundering or terrorist financing is currently occurring in financial institutions.[3]

In addition, Vietnamese regularly use gold shops and other informal mechanisms to remit or receive funds from overseas. Official inward remittances in 2005 were estimated to be $3.8 billion while estimates are that double that amount came through unofficial channels. Reportedly, an unknown percentage of transactions in the informal remittance systems come from narcotics proceeds.

Article 251 of the Amended Penal Code criminalizes money laundering. The Counter-Narcotics Law, which took effect June 1, 2001, makes two narrow references to money laundering in relation to drug offenses: it prohibits the “legalizing” (i.e. laundering) of monies and/or property acquired by committing drug offenses (article 3.5); and, it gives the Ministry of Public Security’s (MPS) specialized counternarcotics agency the authority to require disclosure of financial and banking records when there is a suspected violation of the law. The Penal Code governs money laundering related offenses.

In June 2005, GVN issued Decree 74/2005/ND-CP on the Prevention and Combating of Money Laundering. The Decree covers acts committed by individuals or organizations to legitimize money or property acquired from criminal activities. The Decree applies to banks and non-banking financial institutions. The State Bank of Vietnam (SBV) and the MPS take primary responsibility for preventing and combating money laundering. The decree does not cover counterterrorist finance. SBV supervises and examines financial institutions for compliance with anti-money laundering/counter terrorist financing regulations. Financial institutions are responsible for knowing and recording the identity of their customers.

The 2005 Decree on Prevention and Combating Money Laundering provides for provisional measures to be applied to prevent and combat money laundering. Those measures include 1) suspending transactions; 2) blocking accounts; 3) sealing or seizing property; 4) seizing violators of the law; and, 5) taking other preventive measures allowed under the law.

The 2005 Decree also provides for the establishment of an Anti-Money Laundering Information Center within the State Bank of Vietnam (SBV). This center will function as the sole body to receive and process information. It will have the right to request concerned agencies to provide informationand records for suspected transactions. The Governor of the SBV will appoint senior officials of the center. The center is awaiting final approval from the Government before it can be formallyestablished. SBV acts as the sole agency responsible for negotiating, concluding and implementing international treaties and agreements on exchange of information on transactions related to money laundering. SBV is seeking donors’ assistance to strengthen its supervision capabilities in the context of Vietnam integrating into the world economy.

In October 2010, the Government of Vietnam (GOV) made a high- level political commitment and adopted an action plan to address its strategic anti-money laundering /counter-terrorist financing (AML/CFT) deficiencies. In March 2011, Vietnam’s Prime Minister  issued a decision that set out a revised action plan to adequately  criminalize money laundering and terrorist financing, establish  adequate procedures to identify and freeze terrorist assets,  improve the AML/CFT supervisory framework, enhance customer  due diligence and reporting, and strengthen international  cooperation. A second draft of the AML law, intended to address significant deficiencies, is now under review but fails to address the legal deficiencies that preclude the comprehensive criminalization of money laundering. The draft AML law is allegedly defective as it includes only preventative measures and not enforceable obligations with penalties for criminal offenses.

The amended AML provisions of the Penal Code took effect on January 1, 2010. These provisions define money laundering as an independent criminal offense. However, they do not meet current international standards, with deficiencies that include a very high burden of proof (essentially, a confession) to pursue money laundering allegations. Consequently, prosecutions are non-existent and international cooperation is extremely difficult.

This difficulty is compounded by the lack of administrative regulations providing guidance on implementation. The Penal Code also does not include a definition of ‘property’ that is in line with international standards and therefore limits the offense for  money laundering. Additionally, legal persons are not subject to criminal liability under the Penal Code. Vietnam currently has no plans to impose criminal liability on legal persons because of perceived conflicts with fundamental principles of domestic law.

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[1] Andrew McGregor, Southeast Asian Development (Routledge 2008) 56

[2] Andrew McGregor, Southeast Asian Development (Routledge 2008) 202

[3] However, a “drug economy” does exist in Vietnam’s informal financial system. Vietnam has a large “shadow economy,” in which U.S dollars and gold are the preferred currency. Due to the limited size of Vietnam’s banking system and currency exchange controls, even legitimate businesses carry on transactions in this “shadow economy.”