Vietnam: Improving AML laws for financial crime prevention

Vietnam is cracking down on criminals and improving its financial crime prevention with the Anti-Money Laundering Law 2022 and the Law on Credit Institutions 2024

In recent years, the State Bank of Vietnam has issued new financial crime prevention laws after a series of high-profile money laundering and fraud cases.

The first was the Anti-Money Laundering Law 2022, which came into effect on March 1, 2023, and enhances all AML monitoring processes.

The second is the Law on Credit Institutions 2024, which aims to improve banking operations, transparency, and reduce risk, and came into effect on July 1, 2024, with additional laws on real estate coming into effect on January 1, 2025.

Anti-Money Laundering Law 2022

Vietnam has introduced a new anti-money laundering (AML) law that brings significant changes for financial institutions and other reporting entities. Here are the main points:

1. Definition of money laundering

The new AML law defines money laundering as ‘an act of an individual or an organization to legitimize the origin of property obtained from a crime.’ By defining money laundering in legal documentation, Vietnam is taking significant steps to ensure that its law is as robust as possible.

2. Expanded list of reporting entities

The AML law has expanded the reporting list of entities to now include:

• Financial institutions
• Payment intermediary service providers (newly added)
• Non-financial businesses (e.g., casinos, real estate, precious metals trading, accounting services)

The government can add more specific high-risk activities that pose money laundering risks to reporting entities after obtaining the consent of the Standing Committee of the National Assembly.

All institutions cited above must ensure that they can meet the State Bank of Vietnam’s standards by having AML software in place to ensure compliance.

3. Enhanced customer due diligence (CDD)

In line with many other financial laws and regulations around the world, Vietnam has enhanced its CDD requirements, with entities now having to:

• Collect and update customer identification information
• Access national databases via state agencies for verification

The law also allows for the verification of identification information through other organizations under certain conditions.

4. Risk assessment and management

Vietnam is requiring that all reporting entities (financial institutions, payment facilitators, etc.) must complete money laundering risk assessments. They must:

• Classify customers as low, medium, or high risk
• Apply risk-management measures based on customer risk levels

Just a month after the AML Law 2022 became operational on March 1, 2023, Vietnam outlined the mandatory reporting requirements for a range of high-value transactions and issued guidance on the implementation of the law. As such, detailed provisions on know-your-customer (KYC) processes were introduced. These allowed for:

• Verification of KYC information through outsourcing
• Enabling KYC through third parties
• Expanding the organizations responsible for conducting KYC procedures
• Expanding the subjects obligated to issue anti-money laundering reports to the SBV

5. Foreign Politically Exposed Persons (PEPs)

All banks must review the SBV list of foreign PEPs and:

• Conduct name screening on customers against the names appearing on the list
• Verify asset origins and monitor transactions of PEP customers
• Establish policies and procedures to identify and assess customers’ money laundering risk levels before providing new products and services

6. Reporting requirements

AML transaction screening is now more important than ever, with all large value and suspicious transactions having to be reported to the SBV. The law provides sector-specific indicators for suspicious transactions.

7. Transaction delays

Reporting entities must delay transactions for up to three working days and report to authorities if:

• Anyone involved in the transfer (sending or receiving) is on a blacklist
• AML transaction monitoring software flags the transaction as suspected criminal activity
• Requested by competent state agencies

The anti-money laundering law significantly boosts Vietnam’s AML framework, bringing it closer to international standards and requiring financial institutions to implement more robust financial crime compliance measures. There is hope within Vietnam that such efforts help move it from the Financial Action Task Force’s grey list.

Law on Credit Institutions 2024

In addition to the AML Law 2022, Vietnam passed a law on credit institutions in 2024. From July 1, 2024, the law aims to strengthen banking operations and increase transparency in the financial sector, helping to minimize the risks of financial crime. Here are the key changes to be aware of:

1. Reduced credit limits

Vietnam is gradually lowering credit limits for bank clients to ensure the diversification of portfolios and minimize risks.

• By 2029, limits will decrease from 15% to 10% for single clients and from 25% to 15% for clients and related persons.
• Non-bank credit institutions face similar but slightly different reductions – for single clients, credit must not exceed 15% (down from 25%) of equity capital, while credit for clients and related persons is reduced from 50% to 25%.
• Exceptions apply for entrusted loans where the credit institution or foreign bank does not bear risk, inter-bank lending, and cases approved by the prime minister.

2. Bancassurance restrictions

Credit institutions and foreign bank branches, and their employees, are now prohibited from bundling non-obligatory insurance products with banking services. This addresses past issues of the granting of loans only in exchange for customers also purchasing insurance at the same time.

3. Security agent services

Commercial banks can now act as third-party security agents for international financial institutions, domestic and foreign credit institutions, and foreign bank branches. This allows banks to serve as security agents in syndicated loans without being co-lenders, reducing the risk to which they were previously exposed.

4. Real estate collateral disposal

Starting on January 1, 2025, credit institutions and foreign bank branches (as well as debt management and asset management companies) can transfer all or part of real estate projects used as collateral to recover debts. This provision aims to help banks and real estate firms reduce risk by helping them manage debt and generate cash flow more easily. It is also expected to allow banks to more easily exit large projects that are mired in legal issues.

The law on credit institutions is expected to significantly impact banking operations in Vietnam. Because of the stringent requirements, credit institutions need to adapt quickly to ensure compliance.

How financial institutions can ensure compliance in Vietnam

With Vietnam’s AML law and law on credit institutions, all reporting entities need to make sure that they have software for AML transaction monitoring, CDD, KYC, name screening, and transaction screening.

SymphonyAI offers powerful, AI-led financial crime prevention tools across all these areas that allow financial institutions and other reporting entities the peace of mind to do business in the country while remaining compliant with all laws and regulations. A SaaS platform that can work with existing software, banks and financial institutions can ensure that they are taking advantage of the latest technology without needing to throw out their current transaction monitoring system or other financial crime compliance solutions.