Introduction

Since joining the Asia-Pacific Group on Anti-Money Laundering in 2007, Vietnam has continuously improved its legal system to meet international standards for anti-money laundering efforts (AML).

In March 2023 the country's new AML law (AML Law 2022) came into effect. Under this law, the government is tasked with detailing:

• principles, criteria and methods for reinforcing national money laundering risks;

• customer identification;

• information on customer identification and beneficial ownership;

• unusual high-value or complex transactions;

• reporting obligations, provision of information, records, documents and reports;

• collection, processing and analysis of AML information;

• exchange, provision and transfer of AML information with competent authorities; and

• transaction postponement.

Consequently, in April the government issued Decree No 19/2023/ND-CP to provide guidance on some articles of AML Law 2022 (Decree 19).

According to the country's Law on the Promulgation of Legal Documents, the effective date of a decree must be at least 45 days from its adoption, except for cases of the abbreviated order and procedures which may come into force from the date of adoption. Decree 19 has been issued in an abbreviated process to take effect right from issuance, showing the importance and urgency of the AML regulations.

Know Your Customer (KYC) and determination of beneficial owners

Article 6 of Decree 19 has provided more detailed instructions on the cases in which financial organisations customer identification must be carried out compared to the AML Law 2022:

• when first-time accounts are opened, including payment accounts, e-wallets and other types of account;

• when irregular transactions are involved – these are transactions made by financial organisations's customers who do not have an account or whose account has been inactive for six months with a total value of D400 million or in foreign currency with equivalent value or more in a day, except for settlement or withdrawal of savings interest, credit card debt repayment, loan repayment to a financial institution, periodic payment registered with financial institutions, transactions to withdraw profits from securities investment activities or investment in bonds; and

• when the total transaction value in a day is D70 million or foreign currency of equivalent value for prize games business or D400 million or in foreign currency cash of equal value for business of precious metals and gems.

Accordingly, Decree 19 extends beyond traditional bank accounts, explicitly recognising e-wallet accounts as a type of intermediary payment prevalent nowadays in Vietnam. However, the transaction value has also increased compared to Decree No 116/2013/ND-CP's provisions, which were only D60 million and D300 million respectively.

Unusual high-value or complex transactions

Decree 19 provides criteria to determine unusual or complex high-value transactions. Generally, complex transactions do not match the scale, type and line of a customer's business or the frequency, method and scale of equivalent transactions in the same sector or industry. Meanwhile, high-value transactions are those that are clearly disproportionate to the income of a reporting entity's customer or do not match the value of regular transactions between a customer and a reporting entity.

Collecting, processing, analysing and exchanging information on the prevention and combatting of money laundering

According to Decree 19, agencies performing anti-money laundering functions and tasks under the State Bank of Vietnam shall exchange, provide and transfer this information with financial institutions at the request of competent procedure-conducting agencies in accordance with the Criminal Procedure Code. In particular, these agencies shall transfer those financial institutions' information or case files to investigating agencies or those tasked with conducting a number of investigative activities when there are reasonable grounds to suspect that the transactions mentioned in the relevant information and reports are related to money laundering. Accordingly, the reasonable grounds for suspecting a money laundering-related transaction mentioned in this information or report are as follows:(1)

• if the transaction is related to a blacklisted entity or person;

• if the transaction is related to an entity or person that is denounced or in emergency detention according to the notice of a competent authority, a person recommended for prosecution, arrest or detention or the suspect, accused or a person convicted in accordance with Vietnam's criminal procedure law related to money laundering;

• if the transaction is related to an entity or person undergoing an investigation, prosecution or trial process conducted by authorities in other countries and territories worldwide; and

• with respect to other transactions, if the agency performing the anti-money laundering functions and tasks under the State Bank of Vietnam finds that it may be related to money laundering or criminal activities based on the results of an analysis of the suspicious transaction information.

Therefore, regulations on anti-money laundering are increasingly strict. The State Bank of Vietnam will transfer any transactions related to the above-mentioned transactions to the investigating agency. Accordingly, financial institutions should conduct KYC procedures to identify customers in transactions with partners to check whether their partners are on the blacklist, or notice from competent authorities in Vietnam or other countries/governments to ensure that their business activities are not affected.

Postponement of transactions

For transactions in which the parties involved are blacklisted, the transaction may be subject to postponement.

Accordingly, Article 12 of Decree 19 has detailed instructions with regard to grounds for suspecting or detecting blacklisted parties involved in transactions. Specifically, these grounds include when:

• the person or entity involved in the transaction has information that completely matches that of the person or entity on the blacklist;

• the person involved in the transaction has one of the following groups of information:

o first and last name and birth date (day, month, year);

o first and last name, year of birth and nationality;

o first and last name and address;

o name and address;

o name and passport number;

o name and identity card number;

o citizen identification card number or personal identification number; or

o based on collected information, is believed to be related to terrorism, terrorist financing, proliferation and financing for proliferation of weapons of mass destruction; and

• the entity involved in the transaction has one of the following:

o transaction name;

o establishment licence number;

o business identification number or tax identification number that matches the information of the entity on the blacklist; or

o based on collected information, is believed to be related to terrorism, terrorist financing, proliferation and financing for proliferation of weapons of mass destruction.

When the postponement of transactions is applied, the applicator must immediately report to the State Bank of Vietnam.

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Comment:

Decree 19 addressed all of the obligations delegated under the AML Law 2022. The regulations on KYC have changed. Accordingly, the total value of transactions in one day that KYC must be conducted has also increased and the range of account types has expanded. Not only bank accounts but e-wallet accounts must also conduct this, similar to opening a bank account. In addition, transactions where there is a suspicion of money laundering will be transferred to the investigation agency. Accordingly, in addition to financial institutions that are obliged to make reports according to regulations, all enterprises should perform KYC procedures. This is to check if their partners are included in the cases on the blacklist or the investigation and prosecution lists of the competent state agencies in Vietnam or any other country to limit the influence of enforcement measures related to anti-money laundering for these groups of transactions. In particular, transactions will be subject to postponement and immediate reporting to the State Bank of Vietnam if there are grounds to suspect or detect that the parties involved are on the blacklist.

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Endnotes:

(1) Article 11 of Decree 19/2023/ND-CP.

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Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For legal advice, please contact our Partners.