by Russin & Vecchi
CENTRAL AUTHORITY FOR REPORTING
According to the Law to Prevent and to Combat Money Laundering No. 07/2012/QH13 (" Law on AML"), which came into effect on January 1, 2013, the following state authorities are responsible to report, prevent, and fight against money laundering:
- Anti-Money Laundering Administration ("AMLA") under the Banking Inspectorate and Supervision Department of the State Bank of Vietnam ("SBV"). The AMLA assists the Chief Inspector of the SBV to implement anti-money laundering ("AML") regulations and international AML commitments to which Vietnam is a signatory. The AMLA's duties and powers are set out in Decision No. 1654/QD-NHNN of the SBV dated July 14, 2009;
- SBV has the primary role to regulate and supervise implementation of AML regulations;
- Ministry of Public Security("MPS") is responsible for discovery and investigation of money laundering crimes;
- Ministry of Finance is responsible for implementation of AML measures in insurance, business, in securities, and in prize-winning games and casinos;
- Ministry of Construction is responsible for implementation of AML measures in the real estate business; and
- Ministry of Justice is responsible for implementation of AML measures which apply to lawyers, legal practice organizations, notaries and notary public offices.
OTHER ANTI-MONEY LAUNDERING REGULATOR(S)
On April 13, 2009, the Prime Minister issued Decision No. 470/QD-TTg to establish the Anti-Money
Laundering Steering Committee ("AMLSC"). The AMLSC assists the Prime Minister to administer and coordinate ministries and agencies to fight money laundering. It operates in accordance with rules subsequently provided in Decision 121/QD-BCDPCRT dated October 17, 2012.
The People's Procuracy and the People's Court coordinate with other agencies in the investigation, prosecution, and resolution of money laundering crimes.
People's Committees at all levels have the responsibility to co-ordinate with state authorities to implement policies, strategies, and plans to prevent and fight money laundering.
ARE LAWYERS COVERED BY MONEY LAUNDERING LEGISLATION?
Yes. Lawyers and legal practice organizations which include law offices and law firms, are responsible to report to the AMLA any transaction of a kind specified in Articles 21, 22 and 30 of the Law on AML.
If a person (including a lawyer or a member of a law practice organization) fails to comply with the reporting requirements, she may be subject to a monetary fine and sanctions pursuant to a draft decree on sanctions against administrative violations of regulations on monetary and banking activities. This draft decree is set for comments during 2013, and, when adopted, will provide administrative sanctions for violations of money laundering regulations. If, upon investigation, the AMLA and/or the relevant anti-money laundering regulators consider a failure to comply with reporting requirements to be concealment of information on money laundering, a lawyer may be criminally examined as defined under Article 251 of the Penal Code.
LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.
There are no AML regulations which apply specifically to lawyers. However, lawyers are referenced by the AML provisions in the following legislation:
- Law on AML;
- Penal Code;
- Law No. 23/2000/QH10 on the prevention and fight against narcotic drugs;
- Law No. 47/2010/QH12 on Credit Institutions; and
- Decree No. 116/2013/ND-CP of the Government dated October 4, 2013 details implementation of a number of provisions of the Law on AML (" Decree 116").
The Law on AML and Decree 116 have special provisions that apply to lawyers.
ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?
Visiting lawyers are subject to local laws on AML when they provide legal services to clients in Vietnam. A visiting lawyer would probably be seen to be covered by general AML provisions such as the Law on AML and Decree 116. The AML rule which specifies a lawyer's duty is the rule which obligates a lawyer to report to the AMLA any transaction of a kind specified in Articles 21, 22 and 30 of the Law on AML. For example, during a due diligence investigation involving a merger and acquisition ("M&A"), a lawyer, whether or not visiting, must report her suspicion, or her reasonable basis to suspect, that assets in a client's transaction have originated from a crime or are money laundered as specified in Articles 21, 22 and 30 of the Law on AML.
LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.
Apart from the language of the Law on AML and Decree 116, there is no guidance specifically for lawyers on money laundering.
IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?
Neither the Vietnam Bar Federation nor local bar associations are under any legal obligation to supervise or enforce compliance with AML regulations.
DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN THEY MUST BE UNDERTAKEN BY LAWYERS.
Pursuant to Article 20 of the Law on AML, law offices, and law firms must produce internal rules on AML with the following particulars:
- policy on accepting clients;
- procedures for client identification, verification and update of client information; client's transactions which must be reported;
- processes to check, detect, handle and report suspicious transactions; methods to contact clients who carry out suspicious transactions;
- storage and confidentiality of information;
- implementation of temporary measures, principles to deal with a situation in which a client's transaction must be delayed, e.g the related parties to the transaction are blacklisted by the MPS;
- regimes on reporting and provision of information to the SBV and competent state authorities;
- training on prevention and combat against money laundering for staff;
- internal control and audit of compliance with the policies, provisions, procedures on AML activities; responsibilities of each individual and department within the law office/law firm to implement such internal rules on AML.
Subject to the internal rules on AML, law offices and law firms need to apply measures for client identification when assisting or representing a client in a transaction involving:
- transfer of land use rights, house ownership; or
- merger and acquisition of a business entity.
DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?
The Law on AML generally provides that client classification is based on risk exposure by the type of client, goods/services involved, and the place of residence/head-office.
In light of the Law on AML, a law office or law firm should take into account the following high-risk clients and transactions and incorporate them into its internal rules on AML:
- politically exposed foreigners or their related persons, i.e parents, spouses, children, and siblings;
- transactions involving parties which are listed by the Financial Action Task Force or which are on the warning list published by the SBV.
ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?
There are no enhanced due diligence measures which lawyers must follow for particular types of clients or parties. A law office or law firm may, at its own discretion, include in its internal rules on AML enhanced due diligence measures for particular types of clients.
ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?
The law provides no simplified due diligence measures that lawyers must follow for particular types of clients. A law office or law firm may, at its own discretion, include in its internal rules on AML simplified due diligence measures for particular types of clients.
ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.
Vietnamese law does not address the matter whether a lawyer can rely on third party due diligence in respect of its AML obligations.
WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?
Article 21 of the Law on AML and Decision No. 20/2013/QD-TTg of the Prime Minister dated April 18, 2013 require a lawyer, law office, or law firm to report to the AMLA when providing legal services to a client which involves a transaction with a value of at least VND 300 million (approximately US$ 14,500). The report must be sent in writing or in an approved form of communication within two working days from the date on which the transaction is established. This appears to be an enormous obligation for lawyers and at the very least raises issues of confidentiality.
In addition, a lawyer, law office, or law firm must report to the AMLA when there is suspicion or a reasonable basis to suspect that assets in a client's transaction originate from a crime or that they relate to money laundering (which can be either the assets to be acquired or the assets used to pay for an acquisition).
Below are basic signs of suspicion in accordance with Article 22.2 of the Law on AML:
- A client provides inaccurate, incomplete, and/or inconsistent identification information;
- A client tries to persuade the lawyer, law office, or law firm not to report a suspicious transaction to competent state authorities;
- A client is unidentifiable on the basis of information provided by the client, or the transaction involves an unidentifiable party;
- After an account has been opened or a transaction has been conducted, the personal or office telephone number provided by a client is not contactable or does not exist;
- A transaction is conducted according to an order of, or as authorized by, an individual/organization named on the warning list;
- Based on the collected client identification information or the economic and legal grounds of a transaction, there may be a link between the parties involved in the transaction and criminal activity, or a relationship between such parties and an individual/organization named on the warning list;
- An organization/individual has participated in a transaction involving a large amount of money which does not correspond to either the income or business activities of the organization/individual; and
- A client's transaction is conducted through a reporting entity not in compliance with procedures stipulated by law.
A report of a suspicious transaction must be made within 48 hours from the time of the transaction. A lawyer, law office, or law firm is obliged to report to the AMLA and to the competent anti-terrorism authorities upon discovery of a transaction in which (i) the related parties are blacklisted by the MPS, or (ii) there is evidence that the related parties have committed or are committing acts related to a money laundering crime for the purpose of terrorism financing.
In case any sign of criminal activity is detected within a transaction, the transaction must be immediately reported to the SBV, and the provincial police department or the provincial People's Procuracy in which the transaction is discovered.
DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?
Because it extends to both legal and non-legal communications, Vietnam's attorney/client privilege is in theory larger than that of many other countries. However, in practice the Court's power to compel disclosure is immense, and often renders the attorney/client privilege meaningless. For example, Articles 22, 313, and 314 of the Penal Code set out criminal sanctions for persons who know of criminal activity but fail to denounce it. Specifically for a money laundering crime under Article 251 of the Penal Code, a person may be imprisoned from one to 15 years if:
- she conceals information on the origin, nature, location, or process of movement or ownership of money or property which she clearly knows has been gained from (i) the commission of a crime, or (ii) the movement, transfer or conversion of money or property gained from the commission of a crime; or
- she obstructs the verification of such information.
There is a substantial body of opinion by lawyers and law school lecturers that states that the obligation to disclose criminal activities extends to situations in which a lawyer has a client who has committed a crime and the lawyer has information about the crime. Thus, although these articles do not mention whether their scope extends to attorneys who are merely "suspicious" (rather than have knowledge of) criminal activities, it would seem that Vietnam's relatively weak attorney-client privilege would not provide any exception to the requirement to report a suspicious transaction.
DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?
Yes. In light of Article 28.2 of the Law on AML, a lawyer who reports or provides information on a suspicious transaction is deemed not to have breached the provisions of law on confidentiality of client information. This is to protect lawyers from the violation of her duty to keep information confidential as stipulated by the Law on Lawyers.
Under the Law on Lawyers, a lawyer must not disclose information about cases, matters, or her clients which she learns during the course of practice, except where a client provides written consent or where the law stipulates otherwise. The Law on AML provides a defence for lawyers who breach this duty of confidentiality when they provide information to the authorities of a suspicious transaction or a transaction valued at VND 300 million or greater.
ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?
A lawyer must postpone a transaction in which:
- the related parties are blacklisted by the MPS; or
- there is one of the following reasons to believe that such a transaction is related to a crime:
- a transaction is instructed by a convicted criminal, and assets in the transaction originate from (i) those owned/managed by the convicted criminal, or (ii) those of an organization which the convicted criminal owns or controls during or after she has committed the crime; or
- there is evidence that the related parties have committed or are committing acts that relate to a money laundering crime for the purpose of terrorism financing.
A lawyer must immediately report either of the above situations in writing to the SBV and competent state authorities. The postponement of the transaction may not exceed three working days from the date of application. If the lawyer does not receive a written response from the relevant authorities within three working days, the lawyer can continue to work on the transaction.
If, upon investigation, the AMLA and/or the relevant authorities determine the transaction to be suspicious, or relates to a crime, it can request that the lawyer discontinue providing consultancy on the transaction.
IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.
A lawyer is not allowed to inform a person involved in a suspicious transaction that she has reported or will report the transaction to the SBV.
DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.
There are no restrictions other than the need to perform a due diligence investigation of suspicious circumstances, as specified in Article 22.2 of the Law on AML.
ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.
Yes, there are. A lawyer, law office, or law firm must (i) regularly update client identification information during the period in which a relationship with a client is established, and (ii) ensure that information on current transactions that are instructed by the client must be consistent with the information that was known by the lawyer/law office/law firm about the client and the client's business activities, risks, and origin of assets.
If a lawyer assists a client to draft an authorization agreement (i.e an agreement to authorize an organization/individual to perform, on the client's behalf, a transaction that relates to assets owned/managed by the client), the lawyer/law office/law firm must store, maintain, and update information on such an agreement and its beneficiaries.
DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.
Decree No. 74/2005/ND-CP of the Government dated June 7, 2005 on the prevention of and fight against money laundering ("Decree 74") was replaced by Decree 116. However, Decree 116 does not contain provisions on sanctions against violations of money laundering regulations as Decree 74 did. According to the Law on AML, a person who violates the provision on AML, depending on the nature and seriousness of the violation, may be disciplined, or administratively sanctioned, or criminally examined. If she violates the Law on AML and causes damage, she must compensate the injured party.
As we mention above, a new decree on sanctions against administrative violations of regulations on monetary and banking activities has been drafted. It covers money laundering offences, such as:
- Failure to produce internal rules on AML;
- Failure to conduct procedures for client identification, verification and update of client information;
- Failure to classify clients based on risk exposure;
- Failure to establish a risk management system to identify politically exposed foreigners; Failure to check whether a client is named on the warning list;
- Failure to report suspicious transactions, or a high-value transaction, or acts related to money laundering for the purpose of terrorism financing;
- Failure to postpone a client transaction as specified in the Law on AML, or failure to report the postponement of the transaction to competent state authorities; and
- Performance of prohibited acts as specified in Article 7 of the Law on AML.
Lawyers may also be examined under Article 251 of the Penal Code, like other offenders, for involvement in money laundering activities. A prison term of one to 15 years may be imposed. In addition, an offender may be subject to the following penalties:
- Confiscation of all or part of her property;
- A fine equal to three times the amount of money or the value of property used in the commission of the crime; or
- Prohibition from holding certain posts, or engaging in certain professional practice areas or jobs for one to five years.
HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?
There are no reports of a lawyer in Vietnam being involved in any cases/lawsuits/prosecutions in connection with money laundering.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS' COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
Vietnam is not a member of the FATF. However, Vietnam became the 33rd member of the Asia Pacific Group on Money Laundering (APG) in May 200711. The APG conducted the second round of a mutual evaluation of Vietnam in November 2008. The first mutual evaluation report was made on July 8, 2009 ("2009 Report").
According to Recommendations 24 and 25 of the 2009 Report, Vietnam has not yet implemented AML/CFT (Combating the Financing of Terrorism) requirements, nor issued guidelines for Designated Non-Financial Businesses and Professions ("DNFBPs") (including lawyers) to comply with Decree 74.Vietnam lacks an effective regulatory and supervisory framework to monitor and ensure DNFBPs comply with their AML obligations. For example, the Bar Association of Vietnam has indicated that no guidelines for lawyers have been issued in relation to Decree 74. The Bar Association of Vietnam has highlighted difficulties in reconciling the requirement to report suspicious transactions with the duty of client confidentiality.
The APG recommended in its report that relevant DNFBP regulatory and supervisory agencies should work closely with AMLA and the SBV in order to develop a strategy to amend Decree 74, and to enhance the implementation of the FATF requirements by DFNBPs.
The APG has worked directly with government agencies and ministries on developing anti-money laundering policies and laws. It has also worked with financial institutions to assess the effectiveness of measures used to prevent criminal financial transactions.
The APG uses the FATF's 40 + 9 Recommendations as its principal guidelines for the implementation of effective AML/CFT standards and measures. The APG uses similar mechanisms to those used by the FATF to monitor and facilitate progress for effectively implementing international standards. The FATF Recommendations were revised and released in 2012.2
Since its inception, the APG has worked closely with the FATF. The APG and the FATF have reciprocal rights of attendance at each other's meetings as well as reciprocal sharing of documents and participation in working groups. The APG and the FATF are involved in mutual evaluations of shared member jurisdictions.3
1The link to APG Members:
2The FATF Recommendations are available at http://www.fatf- gafi.org/topics/fatfrecommendations/documents/internationalstandardsoncombatingmoneylaunderingandth efinancingofterrorismproliferation-thefatfrecommendations.html
3About APG, Relationship to the FATF, available at http://www.apgml.org/mutual-evaluations/page.aspx?p=a901712a- 54e4-4b3b-a146-046aefca6534
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.