Remarkable changes of the new Anti-Money Laundering Law in Vietnam

On 15 November 2022, the National Assembly of Vietnam (“NA”) passed Law No. 14/2022/QH15 on Anti-Money Laundering (“2022 AML Law”). The 2022 AML Law took effect on 1 March 2023 and replaced Law No. 07/2012/QH13 on Anti-Money Laundering adopted by the NA on 18 June 2012 (“2012 AML Law”).

Below are remarkable changes of the 2022 AML Law in comparison with the 2012 AML Law.

  1. Clearer definition of money laundering

The 2022 AML Law remains the definition of “money laundering” as an act of an individual or an organization to legitimize the origin of property obtained from crime.

However, unlike the 2012 AML Law, the 2022 AML Law makes “property obtained from crime” clearer, which covers any property directly or indirectly obtained from a criminal act and any income, benefit or profit derived from the property obtained from a criminal act.

  1. More reporting entities

The reporting entities is a legal concept provided by the 2012 AML Law and continuously used under the 2022 AML Law, which refers to companies and individuals that have obligations to conduct measures against anti-money laundering (“AML”) and comply with other obligations as required by the AML Law (the “Reporting Entities”).

According to the 2022 AML Law, the Reporting Entities are still classified into two groups, including: (i) financial entities, and (ii) companies and individuals conducting related non-financial businesses.

However, compared to the old Law, Reporting Entities under the 2022 AML Law cover a wider list of reporters as recommended by the Financial Action Task Force (“FATF”). Specifically:

  • Regarding financial entities

In addition to financial institutions which have operations in deposit and loan, financial lease, the 2022 AML Law supplements the following ones to the list of Reporting Entities:

  •  organizations of payment intermediary services.

In our view, it is timely and necessary to supplement the organizations of intermediary payment services which are the subject matter of reporting because e-wallet is now becoming the popular form of payment of clients which are considered to have potential risks for money laundering.

  • organizations providing foreign exchange services and monetary instruments on the money market.
  • Regarding Non-financial entities.

In addition to organizations and individuals engaged in non-financial business lines doing casino business; trading precious metals and gems; supply of accounting services; provision of notarial services; provision of legal services rendered by lawyers, legal professional organizations;  provision of business formation, management and administration services; providing services of acting as (or arranging for another person to act as) a director or secretary of a company to third parties; provision of legal agreement services, the 2022 AML Law:

  • supplements organizations and individuals engaged in lottery and betting businesses to the list of Reporting Entities.

In our view, it is timely and necessary to supplement the lottery and betting businesses to Reporting Entities they are considered to have potential risks for money laundering.

  • amends the name of such Reporting Entities as Real estate business (except leasing or subleasing of real property and real estate consulting) to be more suitable.

However, the providers of investment entrustment services to other organizations and individuals are removed from the Reporting Entities.

It is noted that the Government of Vietnam (“GoV”) is authorized to add new ones to the list of Reporting Entities after obtaining the approval of the NA’s Standing Committee.

  1. Principle on international AML cooperation

In respect of international cooperation in AML activities, the 2022 AML Law supplements the following principle:

 “In case there is no treaty or agreement between Vietnam and a foreign country, the exchange, provision, and transfer of information in international cooperation on the prevention and combat of money laundering shall be carried out on the reciprocity principle that is not contrary to the laws of Vietnam and is in accordance with international law and practices.”

  1. Statutory obligations of a Reporting Entity

Under the 2022 AML Law, a Reporting Entity must undertake, inter alia, the following measures:

  • Conducting customer due diligence (“CCD”) (i.e. Know Your Client);

For the first time, CDD is defined by the 2022 AML Law as the collection, updating, and verification of information on the identity of a customer, its beneficial owners, and the assigned person working as an agent of the customer (if any), as well as the information on the customer’s purpose and nature of the business relationship.

According to the 2022 AML Law:

  • A financial institution must undertake CDD measures when (i) a customer first opens an account for or establishes a business relationship with the financial institution, or (ii) a customer conducts occasional transactions involving an amount equal to or above the statutory threshold or wire transfers without details of the name, address, bank account of the originator or transaction code required in the absence of the originator’s account, or (iii) there is a suspicion that a transaction or interested parties to a transaction involves/are involved in any money laundering offence, or (iv) it has doubts about the veracity or adequacy of previously obtained customer identification data.
  • The CDD measures shall also be applicable to non-financial businesses and professions under certain circumstances. For example:
  • Organizations and individuals conducting real estate businesses are required to undertake CDD measures when they provide real estate business services to their customers;
  • Those doing prize-awarding games, including electronic games; telecommunications network-based games, Internet-based games; casinos; lottery tickets; betting activities or operations shall be required to identify any customer with whom the transaction equals or exceeds the statutory threshold;
  • Those trading precious metals and gems shall be required to identify any customer with whom the value of transaction involving trading of precious metals or gems in cash or foreign-currency cash equals or exceeds the statutory threshold;
  • Those supplying accounting services, notarial services, legal services rendered by lawyers and legal professional organizations shall be required to conduct CDD when providing their customers with an accountant’s services; conducting public notarial procedures, acting on behalf of their customers to prepare for or carry out the transactions involving transfer of the land use rights and ownership of house and other property attached to land; providing the safe custody of money, securities or other assets to their customers; managing bank or securities accounts for their customers; managing and directing companies; participating in merger and acquisition of enterprises;
  • Registered service providers shall be required to apply CDD measures when providing customers with business formation, management and administration services; services of acting as (or arranging for another person to act as) a director or secretary of a company for third parties; legal arrangement services.

It is noted that the 2022 AML Law allows the Reporting Entities to implement CDD measures through a third party provided that the third party satisfies all conditions set forth in this Law. Nonetheless, the Reporting Entity remains ultimate responsibility for the result of CDD implemented by the third party.

The customer’s information to be collected by the Reporting Entities under the CDD measures include, among others: full name, date of birth, nationality, occupation, title, telephone number, ID card or passport numbers, permanent residence address and other present residence (if any), residence address in his/her home country and registered residence address in Vietnam (for customers being individuals); trading name, headquarter address, tax code, telephone number, website (if any), business sector, information of founders, legal representatives, directors/ general director or chief account (for customers or founders being organizations).

  • Assessing money-laundering risks

The 2022 AML Law adds a new requirement that Reporting Entities must conduct the assessment of money laundering risks which shall be updated annually. The report on risk assessment (after being approved in accordance with internal rules of the Reporting Entity being an organization) must be reported to the State Bank of Vietnam (“SBV”) and other relevant ministries (e.g. the Ministry of Public Security (“MPS”), the Ministry of Finance (“MOF”), etc.) within the timeline as required by the AML Law.

In particular, the national risk assessment on money laundering is implemented every 05 years. The SBV shall take the prime responsibility and coordinate with the relevant ministries for implementing national risk assessment on money laundering and submitting to the GoV for approval the updated national risks on money laundering and the action plan after the update.

  • Classifying customers by levels of money laundering risk

In brief, the Reporting Entities must elaborate and update their risk management process which contains provisions on classification of customers. If the 2012 AML Law only stipulated the risk classification for low risk and high risk customers, the 2022 AML Law requires classifications as low risk, medium risk or high risk and each classification will be subject to different requirements for CDD measures. The details on classification of customers will be provided by the SBV.

  • Making internal AML regulations

The 2022 AML Law requests all Reporting Entities (except for the micro-enterprises) to make their internal AML regulations, which must cover all mandatory terms as required by the AML Law.

  • Paying special attentions to unusual transactions:

Under the 2022 AML Law, special attentions must be made to:

  • Complex or unusual large transactions according to the GoV’s regulations;
  • Transactions with natural or legal persons in the countries or territories falling on the FATF’s list or the Greylist.
  • Reporting when conducting high value transactions and suspicious transactions

In general, the 2022 AML Law requires the Report Entities to report to the SBV on transactions in the following key circumstances:

  • High value transactions: The 2022 AML Law provides that the transaction value will be decided by the Prime Minister (“PM”). However, under the 2012 AML Law, the current threshold of high value transactions to be reported is VND400 million (approx. USD 17,167) and above under Decision No. 11/2023/QD-TTg dated 27 April 2023 of the PM. In this regard, reports must be made within 01 working day from the date on which transactions are electronically made.
  • Suspicious transactions: Suspicious transactions may include (i) those to be conducted at the request of the accused, defendant or convictee and has a reasonable ground to suspect that the properties in the transaction owned or originated from properties owned or controlled by such person; or (ii) those possibly related to money laundering after examining, collecting and analyzing information when the customer or transaction show one or more signs of suspicious activity as stipulated, or otherwise determined by the Reporting Entity. In this regard, reports must be made (iii) within 03 working days (in lieu of 48 hours under the 2012 AML Law) from the date on which the transactions arise, or (iv) within 01 working day from the date on which the subject matter of reporting detects the suspicious transactions.

Accepting the basic suspicious signs of a transaction under the 2012 AML Law, the 2022 AML Law specifies some specific suspicious features in some strictly regulated sectors, e.g. securities, insurance, prized gaming and casino.

  • Storing information, files, documents and reports

The Reporting Entities must archive CDD information, files and documents; the results of any analysis and assessment undertaken of customers and/or transactions subject to reporting requirement; Report on the high value transactions, suspicious transactions and electronic remittances of money as well as information, files and documents accompanying the reported transactions; and other files and information related to customers and transactions subject to reporting requirement for at least 05 years after the transaction is completed, the account is closed or the date of report or the date of transaction (as the case may be).

  • Applying interim measures

Interim measures in the context of the AML Law refer to the measures to be applied by the Reporting Entity itself or at the request of the competent authorities on the temporary and urgent basis as specified by law. Under the 2022 AML Law, these measures include (i) postponement of transactions and (ii) sealing of assets, freezing of assets or accounts or temporarily seizing of assets.

It is noted that the period of postponement must not exceed 03 working days from the date of application of this measure. When applying this measure, the Reporting Entities must report promptly to the SBV and other relevant authorities. In such case, the Reporting entities shall be excluded from legal liability for any consequence following application of this measure. In respect of sealing of assets, freezing of assets or accounts or temporarily seizing of assets, Reporting Entities will only do so at the request of the relevant authorities.

  1. Authorities responsible for AML activities in Vietnam

Under the 2022 AML Law, relevant authorities being responsible for AML activities in Vietnam include:

  • The GoV, which has overall responsibilities in Vietnam.
  • The SBV, which acts as the key contact point for all activities in relation to preventing and fighting against money laundering in Vietnam.
  • The MPS, which pays more attentions to suspicious transactions in Vietnam, which relate to money laundering, terrorist financing; carries out investigations of money laundering-related crimes in Vietnam; and takes charge of making a list of natural or legal persons involved in terrorism and terrorist financing activities.
  • The People’s Procuracy and the People’s Court, which coordinates with other relevant authorities in the investigation, prosecution, and dealing with money laundering crimes; and bears responsibility for international cooperation in mutual legal assistance in AML activities.
  • Other relevant ministries (e.g. in addition to the MOF, the Ministry of National Defense, the Ministry of Construction, the Ministry of Justice as stipulated by the 2012 AML Law, the Ministry of Industry and Trade, the Ministry of Investment and Planning, the Ministry of Home Affairs, the Ministry of Foreign Affairs, the Ministry of Information and Communications are now added) at the national level, and people’s committees at all local levels, are responsible for coordinating with the SBV and other relevant authorities in conducting AML activities in their managed sectors and localities.