Money laundering and 03 notes for foreign investors who invest into Vietnam

Money laundering is currently a global problem that has been causing negative impacts on all areas of each country including the economy, society and security. On 18 June 2012, Vietnam issued Law on Anti-Money Laundering which taken into effect on 01 January 2013. On 15 November 2022, Vietnam issued Law on Anti-Money Laundering No. 14/2022/QH15 (the “LAML 2022”) to fix the limitations of the 2012 one. The LAML 2022 will be taken into effect on 01 March 2023. 

Through this article, BLawyers Vietnam would provide some information money laundering acts and notes that foreign investors (the “FIs”) should take when conducting investment in Vietnam.

1. What is money laundering?

Money laundering is the conversion and transaction activities of crime to turn illegal assets into “clean money” or legal assets. Money laundering is an act by an individual or organization that try to create a legal appearance for the funds or assets obtained from a crime. Money laundering not only helps to hide the origin of illegal assets, but also creates a basis for individuals and organizations to use the laundered money to continue to contribute in other illegal transactions.

With favorable factors for money laundering activities such as the cash economy, developing technology trends, and the laws still have shortcomings in comparison with the rapid development of the economy and society, Vietnam becomes a promised land for money laundering criminals.

2. What relevant issues that FIs should note when making investments in Vietnam?

Since the regulations of money laundering are complex and related to criminal regulations, FIs when investing in Vietnam should note regulations for signs that Vietnamese law considers as signs of money laundering, to mitigate legal risks.

2.1. The case of the FIs shall report to competent authorities in Vietnam related to anti-money laundering

First of all, in order to be able to comply with anti-money laundering regulations of law, the FIs need to verify whether their enterprises are required to report when they suspect that their customers have signs of money laundering.

Accordingly, the FIs must make a report when investing in the following industries :

  1. Financial business such as: Lending; Financial leasing; Life insurance business; Payment intermediary services; Bank guarantees; Foreign exchange services; Securities brokerage, ect.;
  2. Non-financial business such as: Prize-awarding games; Real estate business, except leasing or subleasing of real property and real estate consulting; Dealing in precious metals, jewels; Lawyers; etc.;
2.2. Basic suspicious signs shall be noted by the FIs

The FIs must report to the State Bank of Vietnam when there are reasonable reasons to suspect that assets in transactions that are related to money laundering, reasons to suspect must be determined from reviewing, collecting and analyzing of information when customers, transactions have one or more of the following suspicious signs :

  1. The customer refuses to provide information or provides inaccurate, inadequate, and inconsistent identities.
  2. The customer induces the reporting entity not to report the transaction to the competent state authority.
  3. It is unlikely to identify a customer based on the information provided by the customer or a transaction relating to an anonymous party.
  4. The phone number provided by a customer does not work or exist after an account is created or a transaction is performed.
  5. The transaction is performed by order or according to the authorization obtained from entities and persons defined in the grey list.
  6. The transaction can based on the customer’s identification information or through examination of economic and legal concepts to determine the connection between the parties involved and criminal activities or the association with the entities or persons appearing on the grey list.
  7. The individual or organization participates in a transaction at great expense, which is deemed as incommensurate with their business situation and income.
  8. The customer requests the reporting entity to carry out a transaction without conforming to the procedures and processes required by law.
2.3. Responsibilities of the FIs

For investors who are required to report, it is necessary to understand these rules to identify customers with signs of money laundering so that can timely give suitable methods to handle.

For investors who are not required to report, it is also necessary to understand information to avoid falling into suspect cases of money laundering when participating in transactions with parties who are responsible to report as mentioned above.

Once a suspicious case of money laundering is detected, the FIs that are required to make a report have the right to apply temporary measures such as delaying the transaction or when there is a decision of the competent authority. they have the right to freeze accounts, seal or seize assets.

In case the aforementioned the FIs violate the regulations on reporting will be fined as follow:

  1. The fine ranging from VND80,000,000 to VND250,000,000 for the violator who is individual;
  2. The fine ranging from VND160,000,000 to VND500,000,000 for the violator who is organization.

In summary, the LAML 2022 has clearer and more specific provisions for money laundering. For reducing the risk of affecting to investment in Vietnam, the FIs need to pay attention to the signs mentioned above and comply with the law.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 02 February 2023

Writers: Tuyen Pham & Kha Hoang

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