The fight against money laundering and terrorist financial activities has been a long running issue of interest and many counties have adopted laws and mechanisms to combat these problems. The FATF, the Financial Action Task Force, has 34 member jurisdictions and 2 regional organizations. Vietnam has issued Decree 74/2005/ND-CP on 7/6/2005 concerning anti-money laundering (“Decree 74”). This decree is in force since 1/8/2005. Decree 74 is relatively complete and the anti-money laundering provisions are in line with the practices and standards of other nations, namely those of the FATF.
A number of key issues concerning AML
(i) How money is laundered: the basic process behind money laundering is to hide the markings and erase the illegal origins of money (turning “dirty” money into “clean” money). Money is laundered through a variety of ways, though it normally goes through 3 basic steps:
(1) Division (the money is divided into smaller amounts and injected into the financial system through securities transaction accounts, buying unlisted securities and waiting for them to be listed to sell, depositing it into a bank, buying money orders or bank drafts, burying insurance contracts, etc.);
(2) Dispersal (creating several layers of complex financial transactions to hide the source of those funds and to make the task of tracing them more difficult. For example, unlisted securities are bundled together and sold once they are listed, the proceeds are then transferred into a bank and transformed into real estate investments);
(3) Consolidation (once the amounts that were divided have been “cleaned” or their origins been obscured, they are gathered together and remitted into the economy as “clean” money). In summary, “dirty” amounts of money are run through numerous transactions and channels that are seen as clean (and so their illegal origins fade away).
(ii) Money laundering channels: money is laundered through a number of channels but the one that is most frequently used is through financial institutions (banks, insurance, nonbank credit institutions), securities firms, real estate firms, large commercial law firms… as per Article 6 of Decree 74. The main channels mentioned above managed by the State Bank and the Ministry of Finance. That is the reason why the State Bank has already issued Circular # 22/2009/TT-NHNN on 17/11/2009 (“Circular 22”) guiding the implementation of applicable money laundering prevention measures for institutions subjected to State Bank management (financial institutions, foreign exchange bureaus and payment service providers).
On 08/03/2010, MHB’s General Director issued decision number 23/QD-NHN providing internal regulations concerning AML and containing AML measures, means of recognizing suspicious transactions, guidelines on reporting and responsibilities of relevant departments…
The work of the AML program is to have a clear understanding and to pay more attention in order to avoid risking the bank’s reputation.