US embassy cable - 04HANOI3335

UNCLAS SECTION 01 OF 03 HANOI 003335 
 
SIPDIS 
 
STATE FOR EB/ESC/ESP, S/CT, EAP/BCLTV, IO/PHO, INL 
TREASURY FOR FINCEN, OASIA, GENERAL COUNSEL, TASK FORCE 
ON TERRORIST FINANCING, AND OFAC JUSTICE FOR OIA, AFMLS 
 
SENSITIVE BUT UNCLASSIFIED 
 
E.O. 12958:  N/A 
TAGS: PTER, EFIN, KTFN, ETTC, PREL, VM, EUN, CTERR, CNARC, FINREF 
SUBJECT:  VIETNAM:  INSCR RESPONSE PART II, MONEY 
LAUNDERING AND FINANCIAL CRIMES 
 
REF:  A) STATE 254401, B) HANOI 003239 
 
1. (U) Summary:  Although the government monitors 
international financial transactions in Vietnam 
closely, it is not clear whether the procedures are 
adequate to preclude money laundering or terrorism 
financing.  Some branches of the government are more 
cooperative than others in trying to address this 
problem.  Information provided discusses anti-money 
laundering/anti-terrorist financing issues, policies, 
laws, implementation of regulations and plans in 
Vietnam during the year 2004.  Discussion is ordered 
according to questions posed Ref A. End Summary. 
 
General Questions 
----------------- 
2. (SBU) Vietnam is not an important regional or 
offshore 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.  Vietnamese officials remain confident that 
their strict banking regulations prevent money 
laundering and terrorist financing.  However, the issue 
is difficult to monitor since there are no laws in 
effect at this time to support international money 
laundering investigations, resulting in a lack of legal 
and policy-driven authority for Vietnamese law 
enforcement officials to cooperate bilaterally.  The 
"drug economy" exists 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 transfer money though 
gold shops and other informal mechanisms to remit or 
receive funds from overseas.  Officially, expatriate 
remittances account for 3 billion U.S. dollars and 
unofficially the number may be more than double that 
amount.  It is believed that a percentage of 
transactions in the formal and alternative remittance 
systems results from narcotics proceeds. 
 
3. (SBU) There has been an increase in financial crimes 
as a result of the developing economy; this is not 
limited to money laundering.  The black market for 
smuggled goods is not significantly funded by narcotics 
proceeds.  Vietnam has three free trade zones known as 
export processing zones (EPZ).  Companies operating in 
EPZs manufacture goods for export and enjoy customs 
benefits (e.g., duty free for imported materials).  A 
foreign invested enterprise must have a license to 
operate in the EPZ. The investment license often 
stipulates what activities the company can do or what 
products they can manufacture. 
 
Laws and Regulations to Prevent Money Laundering/ 
Terrorist Financing 
--------------------------------------------- ---- 
4. (SBU) Although Vietnam does not yet have a separate 
law on money laundering or terrorist financing, it is 
working on anti-money laundering legislation, in the 
form of a Decree that is expected to be issued in the 
first quarter of 2005. The Decree is expected to cover 
all serious crimes without specific reference to such 
offenses covered in the Penal Code.  In addition, 
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 counternarcotics agency the 
authority to require disclosure of financial and 
banking records when there is a suspected violation of 
the law.  The implementing regulations have not yet 
been promulgated.  The State Bank of Vietnam, which has 
the lead on countering terrorist financing, can also 
request the disclosure of information when it believes 
that a transaction might fall within this category. 
Furthermore, the State Bank requires banks to report 
suspicious transactions of any kind. 
 
5. (U) The Asian Development Bank is working with the 
GVN on draft banking legislation.  The GVN is also 
working with international financial institutions to 
increase its banking supervision capabilities. 
Currently banks are required to maintain records from 
seven to up to 20 years.  Banks are responsible for 
client confidentiality but are also required to provide 
information to law enforcement authorities for 
investigation purposes.  Banks are responsible for 
checking all identification and relevant papers 
presented for opening accounts and implementing 
transactions. 
 
6. (U) Foreign currency (including notes, coins and 
traveler's checks) in excess of USD 3,000, cash 
exceeding Vietnamese Dong (VND) 5,000,000 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 3,000 (or its equivalent in other foreign 
currencies) or in excess of VND 5,000,000 in cash 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. 
 
International Cooperation 
------------------------- 
7. (U) The GVN is a party to the 1999 International 
Convention for the Suppression of the Financing of 
Terrorism and to the UN International Convention 
against Illicit Traffic in Narcotic Drugs and 
Psychotropic Substances (Vienna Convention).  The GVN 
and the USG signed the Letter Of Agreement On 
Counternarcotics Cooperation in December 2003, to 
establish and to support projects designed to combat 
the production and trafficking of illicit narcotics and 
other forms of transnational criminal activities. As a 
member of the UN, Vietnam is bound by UN Security 
Council Resolution 1373.  GVN has circulated to its 
financial institutions the lists 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 Qa'ida 
organization or the Taliban, and has reported that no 
names or assets have been identified.  Vietnamese legal 
provisions on counter terrorism financing are covered 
in various legal documents such as the Law on Credit 
Organizations, the Penal Code (Article 84 and Article 
20, Paragraph 2) and others.  The GVN should amend its 
Criminal Code to create expanded terrorism offenses, as 
a Decree cannot create offenses.  The GVN should 
establish a separate legal document governing the 
prevention and suppression of terrorism financing.  The 
GVN should also enforce cross border currency controls 
and regulate the use of gold as an alternative 
remittance system. 
 
8. (SBU) Post suspects that some U.S. currency derived 
from illegal drug trafficking enters Vietnam's 
financial institutions.  Drug trafficking networks are 
capable of laundering an estimated tens of millions of 
dollars per month back to Vietnam, exploiting U.S. 
financial institutions to wire transfer money to 
Vietnamese bank and remittance accounts, as well as 
engaging in smuggling bulk amounts of U.S. currency 
from the United States to Vietnam.  To date, the 
Ministry of Public Security (MPS) has not supported any 
anti-money laundering initiatives to counter either of 
these activities.  MPS has repeatedly refused to 
respond to requests for assistance in identifying 
instances in which U.S. citizens have entered Vietnam 
in possession of USD 10,000 or more in cash, which by 
U.S. law should have been declared prior to exiting the 
United States.  Furthermore, MPS does not comply with 
requests for the results of their investigations 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. 
The GVN should provide implementing regulations for 
international cooperation. 
 
Asset Forfeiture and Seizure Legislation 
---------------------------------------- 
9. (SBU) Under existing Vietnamese legislation, there 
are provisions for seizing of assets linked to drug 
trafficking.  In the course of its drug investigations, 
MPS has seized vehicles, property and cash; though the 
seizures typically are directly linked to the drug 
crime and the 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.  Post has posed written questions to 
the Economic Police Department, MPS, related to the 
current laws, jurisdiction and cooperation regarding 
investigation and seizure of assets and is awaiting a 
response. 
 
10. (SBU) Comment:  DEA Hanoi has received minimal 
cooperation from MPS.  Economic officers and assistants 
met several times with officials from the State Bank of 
Vietnam and the Ministry of Justice who agreed that 
lack of authority pending adequate legislation hampers 
cooperation.  Although Vietnamese officials are also 
reluctant to share draft legislation due to lack of 
authority, post recognizes an apparently sincere desire 
on the part of government, banking and some law 
enforcement officials to finalize new legislation and 
implementation regulations. 
BOARDMAN