The Law on Anti-Money Laundering (AML), passed by the 13th National Assembly on June 18, 2012, and effective from January 1, 2013, is a comprehensive legal document regulating AML, creating a legal basis for gradually improving the effectiveness of AML work in Vietnam, moving towards conformity with international AML practices and standards.
On September 9, 2022, the Banking Supervision and Inspection Agency (State Bank of Vietnam) and the General Department of Customs (Ministry of Finance) signed the "Regulations on Coordination, Exchange, and Provision of Information between the Banking Supervision and Inspection Agency and the General Department of Customs".
Accordingly, the regulations stipulate the principles for coordinating the exchange and provision of information; information security; the content of information exchange and provision; the form and timeframe for information exchange and provision; the responsibilities of the parties; the contact point for receiving and requesting information exchange and provision; the authority to sign documents for information exchange and provision, etc.
1. What is money laundering?
Money laundering is the act by which individuals or organizations attempt to convert profits or other assets obtained from criminal activities into legitimate assets.
Based on the provisions of the Law on Anti-Money Laundering 2012 and the Penal Code 2015 (amended 2017), the acts defined as money laundering include:
- Participating directly or indirectly in financial, banking, or other transactions aimed at concealing the illegal origin of money or assets obtained through one's own criminal activities, or knowing or having reason to believe that they were obtained through the criminal activities of others;
- Using money or assets obtained through one's own criminal activities, or knowing or having reason to believe that they were obtained through criminal activities committed by others, to conduct business or other activities;
- Concealing information about the origin, true nature, location, movement, or ownership of money or property obtained through one's own criminal activity, or knowing or having reason to believe that it was obtained through the criminal activity of others, or obstructing the verification of such information;
- Committing any of the acts specified in points a, b, and c of this clause with respect to money or property known to have been obtained from the transfer, assignment, or conversion of money or property resulting from another person's commission of a crime.
- To assist organizations and individuals involved in crimes to evade legal responsibility by legalizing the origin of property obtained from crime;
- Possession of property is considered illegal if, at the time of receiving the property, the person knew that the property was obtained through crime, with the intention of legitimizing its origin.
2. Methods of money laundering in Vietnam
In general, there are four common methods of money laundering today:
2.1. Through the use of financial systems
Splitting and transferring large sums of money to avoid attracting the attention of authorities is one of the main methods. According to Article 3 of Decision No. 20/2013/QD-TTg dated April 18, 2013, of the Prime Minister, financial institutions or individuals engaged in non-financial business activities with the function of sending and transferring money must report to the State Bank of Vietnam if they wish to transfer more than 300.000.000 VND abroad. Therefore, these individuals often split the money into smaller amounts, transfer it multiple times as required, or hire others to transfer the money to avoid detection.
2.2. Through the international trade system
They established numerous import-export companies to conduct business with foreign countries, using temporary import and re-export procedures to conceal the illegal transfer of up to 30.000 trillion VND from Vietnam to overseas. The money launderers transformed illegal money transfers into legal ones, cleaning the source of the funds by using the guise of international payments through banks. This money did not necessarily originate in Vietnam; it could have been transferred from abroad and then transferred out of Vietnam through money transfers.
2.3. Real Estate/Property Purchase
The purchase of real estate or other high-value, highly liquid assets such as diamonds, designer handbags, and watches is also one of the main methods used for money laundering. The perpetrators will buy and sell these assets multiple times in various locations to legitimize the flow and origin of the funds.
2.4. Through virtual currency
Using virtual currency is a very new and sophisticated method of money laundering. Virtual currency, also known as cryptocurrency, is a digital asset designed to act as an intermediary for exchange like real money, such as Bitcoin (BTC), Binance Coin (BNC), etc.
In Vietnam, cryptocurrencies like Bitcoin are not recognized as currency and are not legal tender under Vietnamese regulations. Using cryptocurrencies for money laundering is much easier than the traditional methods mentioned above, and the potential for tracing their use is very limited.
3. State management of the prevention, combating, and handling of money laundering crimes.
3.1. Completing the legal framework
The draft Law on Anti-Money Laundering (amended) will be submitted to the National Assembly for comments and is expected to be passed in one session at the 4th Session of the 15th National Assembly (October 2022). One of the notable new points in the draft Law is the addition of regulations on assessing national, sectoral, and reporting-responsible risks of money laundering.
The State Bank of Vietnam stated that the Law on Prevention and Combat of Money Laundering, passed by the 13th National Assembly on June 18, 2012, came into effect on January 1, 2013. Over the past eight years of implementing the Law on Prevention and Combat of Money Laundering and its guiding documents, alongside the achievements, there are still shortcomings and limitations in the legal provisions on prevention and combat of money laundering (PCW) that have affected the effectiveness of PCW operations.
Specifically, regarding the scope of application of the Anti-Money Laundering Law, according to current regulations, the reporting entities include two groups: financial institutions (FIs) and non-financial businesses (DNFBPs). However, several new activities have emerged, such as those related to virtual assets and the provision of intermediary services connecting borrowers and lenders based on technology platforms. The legal framework for these activities is currently under research and development. However, once the legal framework for licensing and managing these activities is enacted, the current Anti-Money Laundering Law will not adequately cover these newly emerging activities. These activities pose a potential risk of money laundering because most of them are conducted online, resulting in a high degree of anonymity among the parties involved.
3.2. Accelerate the action plan
Deputy Prime Minister Le Minh Khai signed Decision No. 941/QD-TTg promulgating the National Action Plan on preventing and combating money laundering, terrorist financing, and financing the proliferation of weapons of mass destruction for the period 2021-2025.
Coordination in providing and sharing information between Customs agencies, Tax authorities, and the State Bank of Vietnam regarding money flow management and traceability aims to improve the effectiveness of anti-money laundering efforts. Strengthening the review of import and export activities, large or unusual cash transactions, or transactions showing signs of money laundering are also key areas of focus.
Information related to suspicious transactions should be forwarded to the competent authorities for verification and processing, and account freezing measures should be taken if necessary.
Businesses, in the course of their operations, also need to build or update information related to preventing and combating money laundering. This helps businesses minimize risks from indirectly participating in or supporting suspicious transactions, limiting the possibility of becoming an accomplice to money laundering. Strictly limiting the use of cash in payments and ensuring transactions are conducted through banks enhances information transparency and reduces risks.
Businesses, in the course of their operations, also need to build or update information related to preventing and combating money laundering. This helps businesses minimize risks from indirectly participating in or supporting suspicious transactions, limiting the possibility of becoming an accomplice to money laundering. Strictly limiting the use of cash in payments and ensuring transactions are conducted through banks enhances information transparency and reduces risks.
