Shortage of strict management over currency flows create gaps for money laundering

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A staff of a Vietnamese bank in Hanoi carries stacks of banknotes to a desk for counting

Although the Anti-Money Laundering Law came into effect earlier this year, the issue remains below the radar in Vietnam. Banks have not yet categorized depositors based on the risk of money laundering and regulations have yet to be drafted to enable implementation of the law, Nguyen Tri Hieu, an independent director of Ocean Bank tells Vietweek.

Vietweek: Some local banks are alleged to have business ties with the online currency exchange Liberty Reserve, which is being probed in the US for allegedly laundering US$6 billion. What do you think about the possibility?

Nguyen Tri Hieu: We have no evidence yet that Vietnamese banks had direct transactions with the entity. Vietnamese banks could say, "˜We send and receive payments on our customers' requests, and we don't know what Liberty Reserve is. The transactions are implemented under the law. We are not responsible for the origin of their money.'

It is easy for banks to demonstrate that they are not involved with LR. However, banks should investigate customers who frequently have extraordinary transactions. They should take responsibility if they don't.

How could money be laundered through Liberty Reserve and banks?

Liberty reserve allowed account holders to buy and sell its virtual currency known as LRs through third party exchangers. The third party could hold the LR fund in their accounts with Liberty Reserve or exchange it into currencies such as Vietnamese dong or US dollars.


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I use real money to buy virtual currency LRs from another LR user. The LRs I buy would be sent to my account in Liberty Reserve. My LRs could then be sold to others for real money, which would go into an account in a bank.

The traces of transactions are wiped out because they are carried out through many intermediaries. Liberty Reserve required customers to buy or sell LRs through third party exchangers.

There was no direct link between a customer's traditional bank account and Liberty Reserve's system.

Banks require customers to provide information about and the purpose of money transmitted through them while Liberty Reserve did not. Thus, criminals could use Liberty Reserve to launder their money.

What should banks do to monitor currency flows to avoid unintentionally taking part in money laundering?

In fact, some banks know while others do not that they are involved in virtual currency transactions or money laundering. It is difficult for them to monitor their currency flows.

However, there are signs to recognize individuals and organizations laundering money through virtual transactions. The individuals and organizations often have transactions involving the same amount of money. If banks have a good control mechanism [to monitor] customers' money flows and a good accounting software, they can detect customers involved in money laundering.

The more important thing is to categorize depositors by risk [of money laundering]. US banks have done this for long, but Vietnamese lenders have yet to. Depositors with high risks include casino owners, gold traders, and those who collect large volumes of cash like supermarkets.


Banks have not paid enough attention to implementing [the anti-money laundering law]. Though banks have provided anti-money laundering training for their staff, they do not scrupulously monitor the issue.

Vietnamese banks have yet to categorize depositors' risks. They should keep an eye on customers with high risk. In fact, Vietnamese laws and relevant agencies have yet to show concern about the issue.

Under the Anti-Money Laundering Law, banks cannot ask customers to provide information about transactions of up to VND500 million ($23,809). Can criminals make use of this to launder their money?

The law came into effect on January 1, 2013, but there are still shortcomings in its implementation. Banks have not paid enough attention to implementing it. Though banks have provided anti-money laundering training for their staff, they do not scrupulously monitor the issue.

According to the Anti-Money Laundering Law, customers carrying out transactions of VND500 million upwards have to provide information about and the purpose of the transaction. But criminals can split up their money into smaller chunks and transmit them to avoid the regulation.

Thus, banks should have accounting software to monitor money flows from customers who could transmit funds totaling more than VND500 million from several branches on the same day. When they detect someone doing it, banks should inform relevant authorities to investigate the origin of the funds.

Vietnamese banks do not yet have the software [for this].
What about the legal barrier?

The Anti-Money Laundering Law is a legal framework. But to properly implement it, it is necessary to have specific regulations. For example, we need to have legal regulations to categorize depositors based on risk. The current law does not require banks to do it. The task should be undertaken soon.

Exact information is not available about our monitoring of money laundering. Relevant agencies should publicize the information. The State Bank of Vietnam's Anti-Money Laundering Department should often provide information about its activities to the media, which would help disseminate the information to people. We can fight money laundering only when there is a society-wide check over the issue. The efforts of banks and relevant agencies are not enough.

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