A Closer Look at Vietnam’s Anti-Money Laundering Law
Vietnam’s National Assembly approved its updated Anti-Money Laundering (AML) Law in 2022, which went into effect on March 1, 2023. The AML Law aims to prevent financial crimes, such as money laundering and corruption, and will enhance the transparency of Vietnam’s financial system.
The Anti-Money Laundering (AML) Law of 2022 in Vietnam has been implemented since March 1, 2023, amending the 2012 Law. This newly enacted law introduces significant changes that establish a more rigorous anti-money laundering regime. Businesses need to be aware of these changes to comply with the law and adapt their internal regulations accordingly. The key amendments include expanding the definition of money laundering activities, imposing additional reporting obligations on digital wallet providers, introducing new measures for client information verification, and implementing a fresh risk assessment policy, among other important modifications.
As Vietnam’s economy continues to grow and advance, the government is taking steps to align its policies, including the new AML Law, with international standards. These policies aim not only to safeguard the integrity of Vietnam’s financial system but also to bolster foreign investor confidence.
A broader definition of anti-money laundering
The 2022 AML Law expands the definition of money laundering to include the act of individuals or organizations seeking to legitimize the origins of properties obtained directly or indirectly from criminal activities.
A longer list of reporting entities
The new AML Law requires organizations that provide payment services, such as digital wallet services, collection, and payment services, to implement know-your-customer (KYC) measures.
Under the 2022 AML Law, the below list of business entities needs to implement KYC measures:
- Financial leasing activities;
- Payment services;
- Bank guarantees activities;
- Securities investment consulting, securities underwriting;
- Management of securities investment funds;
- Life insurance business;
- Casino business;
- Currency exchange activities;
- Accounting and legal services;
- Trading in precious metals;
- Foreign exchange services; and
- Management of securities investment funds.
The 2022 AML Law provides clarity on the information that the aforementioned entities are required to obtain through the KYC reporting procedure. This includes:
- Determining if the customer is a Vietnamese citizen.
- Identifying whether the customer is a foreigner with single citizenship.
- Verifying whether the customer is a foreigner with multiple citizenship.
- Assessing whether the customer falls into the category of a ‘stateless individual’.
- Identifying if the customer is an organization.
Money laundering risk assessment policy
The AML 2022 Law introduces new requirements for risk assessment, which the government will review every five years in cooperation with the State Bank of Vietnam.
Further, the reporting entities must also conduct their own AML assessment, and any updates resulting from these assessments must be disseminated publicly to all departments, as well as to the State Bank of Vietnam and relevant ministries.
Client information verification
The new AML also broadens the definition of politically exposed persons (PEPs) to include foreign individuals with political influence and holding senior positions in organizations in Vietnam or abroad. Many PEPs hold positions that can be abused for anti-money laundering activities in addition to other forms of corruption.
The reporting entities are responsible for taking proper measures to verify the source of wealth of the customer who is recognized as a PEP, as well as monitor the transactions conducted with this customer. The new law, however, remains silent regarding domestic PEPs.
Internal regulations for micro-enterprises and individuals
The previous 2012 AML Law obligated the reporting entities – which includes micro enterprises, individuals, and organizations – to issue internal regulations on the prevention and combat of money laundering. It was up to the reporting entities to enforce these internal regulations.
The new AML Law has relaxed the requirements for micro-enterprises and individuals to develop internal regulations. They must, however, adhere to the following practices:
- Develop a Customer Acceptance Policy (CAP): This enables the business to decline account opening, establish or terminate a business relationship, and conduct transactions as necessary.
- Internal training: Develop and train employees on best anti-money laundering practices.
- Promoting awareness across the entity’s operation: Disseminate these regulations to branches and subsidiaries of the business.
Suspicious transaction reporting: Indicators and reporting timeframes
Reporting entities must implement KYC measures thoroughly to identify suspicious transactions. Suspicious payments include:
- Any sudden changes in the volume of transactions, deposits, or withdrawals on e-wallets. Large volume transactions during the day while the balance remains at a relatively low level or zero.
- Frequent, small deposits, followed by a large transfer to another e-wallet or withdrawal from the current account or vice versa.
- Frequent, small transactions are transferred from various e-wallets to a specific e-wallet account over a short period. The transactions are transferred through various accounts, relevant account holders neglect the transfer fees, and the transaction volume always reaches the reporting limit.
- The customer’s e-wallet suddenly receives an unusually large deposit.
Suspicious transactions in the securities and life insurance sector can include:
- Non-residents liquidating investment contracts to transfer money out of Vietnam.
- Customers regularly sell their stocks in the portfolio and request the securities company to sign a payment order to withdraw cash from commercial banks.
- Foreign investors residing in countries or territories that are a high risk for money laundering by establishing securities investment funds or securities investment companies in Vietnam.
Under the new law, the reporting time for large-volume transactions and electronic transfers is done within one working day from the day the transaction takes place.
How can businesses in Vietnam adapt to the changes in the Anti-Money Laundering Law?
Businesses should train their employees on anti-money laundering best practices; this is especially crucial for managers who oversee the day-to-day operations of a business.
These practices should be developed under a risk assessment framework, which should be revised periodically to recognize and mitigate potential threats in time, as well as develop new tools to combat money laundering.
Moreover, businesses must have reliable anti-money laundering systems in place, such as by using software that provides key data intelligence. This will enable the entity to identify potential money laundering activity more accurately, and then proceed to take necessary steps.
ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in Singapore, Hanoi, Ho Chi Minh City, and Da Nang in Vietnam, in addition to Jakarta, in Indonesia. We also have partner firms in Malaysia, the Philippines, and Thailand as well as our practices in China and India. Please contact us at email@example.com or visit our website at www.dezshira.com.