Vietnam’s Billion-Dollar Fraud: What Comes Next?
Truong My Lan, a prominent real estate developer, was recently convicted and sentenced to death for issuing scam bonds and using fake loan applications to cheat roughly $12.5 billion out of Sai Gon Joint Stock Commercial Bank, which she illegally controlled. The loans accounted for 93% of the total credit the bank has issued, and 3% of Vietnam’s entire gross domestic product.
Along the way, she paid $5 million in bribes to keep regulators at bay.
The scale of the theft exceeds Malaysia’s 1MDB debacle, and its potential impact recalls Albania’s destabilizing pyramid schemes. The failures in government oversight evokes criticisms of the U.S. and German authorities’ shortcomings around Bernie Madoff and Wirecard.
For Vietnam, this appears to be an embarrassing setback given the strides it made in the past decade to strengthen its banking sector, including structural reforms and a crackdown on corruption. Indeed, Vietnam is no stranger to massive bank fraud.
Between 2012 and 2014, the chairman of Vietnam Construction Bank effectively embezzled more than $417 million, in part by using the bank’s assets as collateral to borrow more than $200 million from a different, state-owned bank. A senior board advisor at the same bank had also embezzled $278 million by selling it property at inflated prices.
Just a few years earlier, a risk management executive at the state-owned Vietnam Joint Stock Commercial Bank for Industry and Trade pocketed nearly $44 million using forged documents.
In this tense climate, some corrupt bankers faced death sentences, which could be reduced to life imprisonment if the money were returned.
With analysts suggesting that high-level officials escaped accountability, the banking sector may still be entangled in a comingled web of corruption and commercial risks.
Despite the publication of the Wolfsberg Group’s Anti-Bribery and Corruption Compliance Programme Guidance since 2017, Vietnamese banks continue to maintain scant discussion of their anticorruption principles, as do other large companies in the country. And while domestic banks have improved their capital adequacy ratios (a measure of how much relatively safe capital a bank holds, against risk-weighted credit exposure), they still lag behind other banks in the rest of Southeast Asia, and well as foreign banks in Vietnam.
With exports softening and the real estate market in turmoil, there may yet be more fuel for Vietnam’s anti-corruption furnace.
FCPA Compliance Consultant, TRACE
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