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An observation: Anti-money laundering in Vietnam and ASEAN

A need for regional cooperation in combating money laundering

It is generally accepted that individual countries cannot fight against money laundering because money laundering cases are usually and unceasingly international. This is true for many developing countries that are short on expertise, resources, capacity and legal framework to effectively tackle and counter money laundering offences.[1] General Chris McDevitt, Chief Communication Unit of Australia in Ha Noi said that laundering money was one of transnational crimes, and the best way to fight against it is cooperating with each other. Thus, Mutual legal assistance treaties (MLATs) are designed with the aim of addressing some of these challenges which provide legal, practical assistance in fighting against money laundering crimes.

It is a fact that many developing countries do not have domestic legal framework in place and lack basic human and financial resources, expertise, and legal infrastructure to tackle money laundering effectively. Normally, they are still struggling to complete the required infrastructure to fight money laundering and develop the capacity to conduct such complex and resource-intensive investigations. Absent an adequate domestic framework, international cooperation could provide an option to track illegal funds which have been transferred and laundered in other countries. For instance, MLA could be ultimately useful in the event of money flowing to a developing country that pursues the political will but lacks sufficient resources and capacity to fight money laundering effectively. In such a case, the counter-partner country which maintains stronger instruments, systems and capacity in place to combat money laundering can assist the weaker one and contribute to build its capacity in looking to the provision of MLA. Without a doubt, international cooperation in money laundering matters contemplate that MLATs are well-matched to address these challenges because they create a binding obligation.

For the purpose of countering criminal crimes in general and money laundering in particular in an effective manner, the Treaty on Mutual Legal Assistance in Criminal Matter (MLATCM) was ratified by Malaysia, Singapore, Vietnam, Brunei Darussalam, Laos and Indonesia, the other four country members (Cambodia, Thailand, Myanmar, Philippines) are in the process of ratification. MLATCM can help states seek and provide assistance in gathering evidence for use in the investigation and prosecution of criminal cases. Forms of assistance covered by MLA typically include the power to summon witnesses, to compel the production of evidence and other relevant documents, to issue search warrants and to serve process.

Adding to MLATs, individual countries can cooperate with each other to combat money laundering effectively in many ways. Vietnam also entered into memorandum of understanding on information disclosure with individual countries in anti-money laundering, including Thailand, Malaysia, Indonesia, Laos, Cambodia, and South Korea. [2]

Anti-money laundering in Vietnam

In Vietnam, there are two ways of laundering the ill-gotten gains:[3]

  • Crimes occur in Vietnam, such as swindle, corruption, drug trafficking (the first crime), and then the criminal legalizes/launders the ill-legal gains into real estate transactions, or property transfer to a third party.  
  • More popularly, oversees criminals transfer dirty money into Vietnam.

It is generally understood many developing countries, including Vietnam, do not have this domestic legal framework at hand and lack basic human and financial resources, expertise, and legal infrastructure to effectively tackle money laundering. As always, they are still struggling to complete the required infrastructure to fight money laundering and develop the capacity to conduct such complex and resource-intensive investigations.

In 2009, Vietnam first criminalized money laundering (Article 251 of Penal Code). In 2011, Supreme People’s Court and Supreme People’s Procurary of Vietnam issued implementing regulations addressing money laundering offences in the Penal Code.[4] In 2012, National Assembly of Vietnam passed the Law on Anti-money laundering which creates legal framework for the country to seek and punish money laundering crimes. Decree 116/2013/ND-CP dated 4 October 2013 provides for detailed guidance on combating money laundering offences. It is observed that Vietnam has merely created legal framework for regulating money laundering offences, Vietnam has struggled to combat money laundering due to a lack of necessary resources and inconsistencies of criminalizing persons who conduct money laundering (law application and enforcement).

It is controversial in the literature and in the law application when applying Article 251 of Penal Code. It is said that when a crime grabs properties by using illegal acts, and then legalize ill-gotten gains into business and investment activities, such a crime will only be condemned to the “first crime” (or sourced- crime in which the criminal launders ill-legal money after it already is placed), not for money laundering. Therefore, it is unnecessary to condemn the money laundering because punishment of the first crime is more serious than the money laundering itself. However, this interpretation is not publicly recognized in the Penal Code.[5] According to an expert of Financial Action Task Force (FATF), Article 251 of Penal Code allows implicitly for accusing the person who has committed the first crime of money laundering, even though it is not expressed explicitly in law application and enforcement.

There are two examples showing that combating money laundering effectively will go a long way and needs time to be effective and efficient. In the case of Vu Van Lang, a trader of Liberty Reserves, which have been condemned for conducting a series of money laundering in the United States, the criminal Nguyen Phi Khanh was condemned to “stealing property” (the first crime), not to money laundering.[6]

In the case of Huynh Thi Huyen Nhu, the prominent and noticeable case in the banking sector in 2012, at first Hung My Phuong and Nguyen Thien Ly had been condemned to money laundering because the two suspects possessed ill-legal source of money (millions Vietnam Dong) which was lent to Huynh Thi Huyen Nhu at the interest rate of from 0,4%/day to 3,7%/day. However, the Supreme People’s Procurary proposed condemning the two criminals to “lending money with high interest”.[7]

[1] Anti-corruption Resource Center- www.u4.no, Mutual legal assistance treaties and money laundering

[2] Available at http://www.cand.com.vn/vi-VN/kinhte/2013/7/204531.cand

[3] Available at http://www.cand.com.vn/vi-VN/kinhte/2013/7/204531.cand

[4] Inter-Circular 09/2011/TTLT-BCA-BQP-BTP-NHNNVN-VKSNDTC-TANDTC dated 30 November 2011

[5] Nguyen Ngoc Minh, Vietnam People’s Police Institute, governing subject-matter in the money laundering offence in Penal Code

[6] Available at http://www.cand.com.vn/vi-VN/kinhte/2013/7/204531.cand

[7] Available at http://www.cand.com.vn/vi-VN/kinhte/2013/7/204531.cand