VIETNAM: 2005-2006 INCSR RESPONSE PART II FINANCIAL

UNCLAS SECTION 01 OF 03 HANOI 003358

SIPDIS

STATE FOR INL AND EAP/MLS AND EB/ESC/TFS
JUSTICE FOR OIA, AFMLS
TREASURY FOR FINCEN AND OASIA

E.O. 12958: N/A
TAGS: EFIN KCRM KTFN PTER SNAR VM CNARC FINREF CTERR
SUBJECT: VIETNAM: 2005-2006 INCSR RESPONSE PART II FINANCIAL
CRIMES AND MONEY LAUNDERING

REF: STATE 210324


1. (U) This cable is in response to an action request
(reftel).


2. (U) Summary: In addition to Vietnam's underdeveloped
financial sector, its large black market economy, weak
customs controls, and substantial remittances make it an
easy place to launder money. While the Government of
Vietnam has made some steps towards improving the situation,
increasing their cooperation with other nations and passing
anti-moneylaundering legislation, this issue will continue
to be a problem in Vietnam for some time to come. End
Summary.


3. (U) Vietnam is not an important regional financial
center. The Vietnamese banking sector is underdeveloped and
the Government of Vietnam (GVN) controls the flow of all
U.S. dollars in official channels. The nature of the
banking system makes it unlikely that major money laundering
or terrorist financing is currently occurring in financial
institutions. However, a "drug economy" does exist in
Vietnam's informal financial system. Vietnam has a large
"shadow economy" in which U.S dollars and gold are the
preferred currency. Due to the limited size of Vietnam's
banking system and currency exchange controls, even
legitimate businesses carry on transactions in this "shadow
economy". In addition, Vietnamese regularly use gold
shops and other informal mechanisms to remit or receive
funds from overseas. Official inward remittances in 2005
were estimated to be USD 3.8 billion while estimates are
that double that amount came through unofficial channels.
Foreign embassies and UNODC, among others, believe that a
percentage of transactions in the informal remittance
systems may come from narcotics proceeds.


4. (U) Article 251 of the Amended Penal Code criminalizes
money laundering. The Counter-narcotics Law, which took
effect June 1, 2001, makes two narrow references to money
laundering in relation to drug offenses: it prohibits the
"legalizing" (i.e. laundering) of monies and/or property
acquired by committing drug offenses (article 3.5); and, it
gives the Ministry of Public Security's specialized counter
narcotics agency the authority to require disclosure of
financial and banking records when there is a suspected
violation of the law. The Penal Code governs money
laundering related offenses.


5. (U) In June 2005, GVN issued Decree 74/2005/ND-CP on
Prevention and Combat of Money Laundering. The Decree
covers acts committed by individuals or organizations to
legitimize money or property acquired from criminal
activities. The Decree applies to banks and non-banking
financial institutions. The State Bank of Vietnam (SBV) and
the Ministry of Public Security (MPS) take primary
responsibility for preventing and combating money
laundering. The decree does not cover counter-terrorist
finance.


6. (U) SBV supervises and examines financial institutions
for compliance with anti-money laundering/counter terrorist
financing regulations. Financial institutions are
responsible for knowing and recording the identity of their
customers. They are required to report cash transactions
conducted in one day with aggregate value of VND 200 million
(around USD 13,000) or more, or equivalent amount in foreign
currency or gold. The threshold for savings transactions is
VND 500 million (around USD 31,000). Furthermore, financial
institutions are required to report all suspicious
transactions. Banks are also required to maintain records
for seven years or more. Banks are responsible for keeping
information on their customers secret, but they are required
to provide necessary information to law enforcement agencies
for investigation purposes.


7. (U) Foreign currency (including notes, coins and
traveler's checks) in excess of USD 7,000 and gold of more
than 300 grams must be declared at customs upon arrival and
departure. There is no limitation on either the export or
import of U.S. dollars or other foreign currency provided
that all currency in excess of USD 7,000 (or its equivalent
in other foreign currencies) is declared upon arrival and
departure, and supported by appropriate documentation. If
excess cash is not declared, it is confiscated at the port
of entry/exit and the passenger may be fined.


8. (U) The 2005 Decree on Prevention and Combat of Money
Laundering provides for provisional measures to be applied
to prevent and combat money laundering. Those measures
include 1) suspending transactions; 2) blocking accounts; 3)
sealing or seizing property; 4) seizing violators of the
law; and, 5) taking other preventive measures allowed under
the law.


9. (U) The 2005 Decree also provides for the establishment
of an Anti-Money Laundering Information Center under the
State Bank of Vietnam (SBV). This center will function as
the sole body to receive and process information. It will
have the right to request concerned agencies to provide
information and records for suspected transactions. Senior
officials of the center will be appointed by the Governor of
the SBV. The center is awaiting final approval from the
Government before it can be formally established.


10. (U) MPS is responsible for investigating money
laundering related offences. There is no information
available on arrests and/or prosecutions for money
laundering or terrorist financing since January 1, 2005.


11. (U) SBV acts as the sole agency responsible for
negotiating, concluding and implementing international
treaties and agreements on exchange of information on
transactions related to money laundering. SBV is seeking
donors' assistance to strengthen its supervision
capabilities in the context of Vietnam integrating into the
world economy.


12. (U) MPS is responsible for negotiating and concluding
international treaties on judicial assistance, cooperation
and extradition in the prevention and combat of money
laundering related offenses.


13. (U) Vietnam is a party to the 1999 International
Convention for the Suppression of the Financing of
Terrorism. Vietnam plans to draft separate legislation
governing counter terrorist financing, though they will not
set a specific time frame for this drafting. Currently SBV
circulates to its financial institutions the list of
individuals and entities that have been included on the UN
1267 sanctions committee's consolidated list as being linked
to Usama bin Laden, members of the Al Qaida organization or
the Taliban, or that the USG has designated under relevant
authorities. To date no related assets have been
identified.


14. (U) Vietnam has been a party to the UN International
Convention against Illicit Traffic in Narcotic Drugs and
Psychotropic Substances (Vienna Convention) since 1997.
Under existing Vietnamese legislation, there are provisions
for seizing assets linked to drug trafficking. In the
course of its drug investigations, MPS has seized vehicles,
property and cash, though the seizures are usually directly
linked to drug crimes. Final confiscation requires a court
finding. Reportedly, MPS can notify a bank that an account
is "seized" and that is sufficient to have the account
frozen. However, MPS is not allowed to seize assets in
order to investigate them; they must receive separate
information that confirms and/or proves the money is
laundered before it can be frozen. A further restriction of
their investigative powers is that Vietnam authorities
cannot act on information or investigative findings provided
by outside agencies.


15. (U) The U.S. Drug Enforcement Agency (DEA) is engaged in
a number of investigations targeting significant MDMA
(Ecstasy) and marijuana trafficking organizations, composed
primarily of Viet Kieu (overseas Vietnamese),in both the
United States and Canada. These drug trafficking networks
are capable of laundering tens of millions of dollars per
month back to Vietnam, exploiting U.S. financial
institutions to wire or transfer money to Vietnamese bank
and remittance accounts, as well as engaging in the
smuggling of bulk amounts of U.S. currency from the United
States into Vietnam. The DEA has provided the Economic
Police Unit of the MPS with information detailing the
methods as well as identifying the bank accounts in Vietnam,
which drug organizations have used to launder drug proceeds.
Even with this information, the MPS stated that unless they
have statements from the money remitters and the recipients
of the money acknowledging its illegitimacy, they are unable
to seize that money. Recently, the DEA Hanoi office
received unprecedented cooperation from MPS on two
undercover money laundering transactions where the MPS
provided an undercover officer to receive alleged drug
proceeds in Vietnam from the United States. However,
despite requests made by DEA, MPS provided no investigative
information on the businesses, bank accounts, or people that
facilitated this illegal money remittance to Vietnam. These
actions emphasize the lack of willingness and/or legal
ability of MPS to support cooperative anti-money laundering
efforts. MPS has denied the requests from DEA Hanoi office
for assistance in identifying instances in which U.S.
citizens have entered Vietnam in possession of $10,000 or
more in cash, which by U.S. law should have been declared
prior to exiting the United States. Furthermore, MPS
continues to stonewall on requests for the results of MPS'
investigation into bank accounts and individuals (and their
assets) in Vietnam identified by DEA investigation as
complicit in the laundering of drug proceeds from the United
States.
MARINE