Vietnam’s Upcoming FATF Mutual Evaluation Report

After China, Vietnam has enjoyed the world’s second fastest growing economy for the past 25 years1. Adopting the formula established by Japan, Korea, and China, Vietnam’s success is export driven. The country’s strength is its young, educated and productive workforce1)Vietnam’s success merits a closer look.20160806 FNC215

In 2012, Vietnam’s economy suffered a setback to both exports and economic growth as China’s economy slowed, and the FATF downgraded Vietnam’s status to that of a jurisdiction not making sufficient progress2)Improving Global AML/CFT Compliance: on-going process – 16 February 2012.

At least two international Banks, HSBC and Wells Fargo terminated their corresponding banking relationships with domestic Vietnamese banks making it extremely difficult for the Vietnamese banks to conduct business on the world stage.
Vietnam GDP growth

By February 2014, Vietnam’s status with the FATF had been restored to that of a jurisdiction no longer subject to the FATF’s on-going global AML/CFT compliance process3)High-risk and non-cooperative jurisdictions and the country’s economic progress was restored4)Vietnam.

The first FATF AML/CTF Mutual Evaluation Report (MER) for Vietnam occurred in 2009. It was that evaluation that led to the 2012 downgrading. Vietnam’s next evaluation is scheduled 2019, and will be based on criteria set out in the 2012 FATF recommendations5)Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems which place increased emphasis on effectiveness, rather than just compliance.

Vietnam is a known trade route into China for illicit Ivory and rhino horn. Increasingly it is also believed that the illegal wildlife traders worldwide are linked to drug smuggling6)Do dope-smugglers also peddle ivory?. Vietnam has a reputation as one of the worst wildlife trafficking hubs7)Vietnam’s crackdown on traffickers of endangered species is only superficial, which makes it surprising that it has such a poor track record for the AML/CFT prosecutions.

It appears that vested interests are a serious factor undermining the willingness of authorities to introduce the necessary legislation, and then investigate and prosecute the crimes8)Graft-busting in Vietnam.

According to Transparency International, Vietnam has the second highest level of corruption in the Asia Pacific region9)People and Corruption: Asia Pacific. The banks, which are key to the effectiveness of AML/CFT, are also riddled with corruption10)What a spate of arrests says about Vietnam’s banking sector.

Direction from senior party leadership is required to give the relevant authorities the motivation to save Vietnam from a relapse in its FATF status.

If Vietnam’s economic growth is to stay on course, it’s leaders will need to recognize the threat that the country faces from failure to prove the effectiveness of its commitment to AML/CFT, at the next MER.

As Asian countries compete with each other, the importance of GDP figures for political leaders cannot be overstated. As evidence, Vietnam has the reputation of publishing GDP statistics impossibly early, before the end of the year11)Is India Lying About Its World Beating Economy?.

Sustained commitment to meeting the FATF recommendations at the highest level of government is the only way for Vietnam to ensure that it obtains a positive evaluation in 2019.

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