Circular 09/2023/TT-NHNN guiding the Vietnam Law on Prevention and Combat of Money Laundering

On July 28, 2023, the State Bank of Vietnam issued Circular 09/2023/TT-NHNN guiding the implementation of several articles of the Law on Prevention and Combat of Money Laundering.

Basic information of Circular 09/2023/TT-NHNN guiding the Vietnam Law on Prevention and Combat of Money Laundering

Basic information about Circular 09/2023/TT-NHNN guiding the implementation of several articles of the Law on Prevention and Combat of Money Laundering includes:

• Date of issue: July 28, 2023
• Circular 09/2023/TT-NHNN includes 12 Articles.
• The Circular takes effect from the date of signing, except for the regulations on the money laundering risk management process in Clause 2, Article 5, and the regulations on the reporting regime for large value transactions that must be reported in Article 6. Regulations on reporting regime for electronic money transfer transactions in Article and suspicious transaction reporting forms in Appendix II of the Circular take effect from December 1, 2023.

Content of Circular 09/2023/TT-NHNN guiding the Vietnam Law on Prevention and Combat of Money Laundering

Scope and subjects of application

The scope of Circular 09/2023/TT-NHNN regulates:

• Criteria and methods to assess money laundering risks of reporting subjects; money laundering risk management process and client classification according to money laundering risk level;
• Internal regulations on money laundering prevention and combat; Reporting regime for large value transactions that must be reported;
• Suspicious transaction reporting mode;
• Electronic money transfer transactions;
• Form and deadline for electronic data reporting.

In addition, the Circular’s applicable subjects include:

• Financial institutions.
• Organizations and individuals doing business in relevant non-financial industries.
• Vietnamese organizations and individuals, foreign organizations, foreigners, and international organizations that have transactions with financial institutions, organizations, and individuals doing business in relevant non-financial industries and professions.
• Other organizations and individuals related to money laundering prevention and combat.

The regulation of the scope of regulation and subjects of application aims to build a legal system for money laundering prevention and combat under international requirements and standards on prevention and combat money laundering.

Money laundering risk management process and client classification according to money laundering risk level

Based on the results of assessing and updating money laundering risks according to the provisions of Article 3 of Circular 09/2023/TT-NHNN, accordingly, the reporting subject develops and promulgates a risk management process for money laundering. money laundering at reporting subjects. The money laundering risk management process must be expressed step by step by the scale, scope, and specific activities of the reporting entity to manage money laundering risks. The money laundering risk management process includes the following contents:

• Must determine the scope and objectives of money laundering risk management activities;
• Identify and evaluate the level of impact of money laundering risks at reporting subjects;
• Classify clients based on the following factors: clients; Products and services clients are using or intend to use according to low, medium, and high money laundering risk levels;
• Geographic location where the client resides or has its headquarters and other factors determined and classified by the reporting subject themselves following the actual situation and specified in the risk management process;
• Process to identify and assess money laundering risks before providing new products and services; Existing products and services apply innovative technology;
• Risk management process to perform, refuse, suspend, post-transaction control or review and report suspicious transactions, electronic money transfer transactions that are inaccurate or incomplete with required information;
• Applicable measures corresponding to clients’ money laundering risk levels, including frequency of updates, verification of client identification information, level of client transaction monitoring according to risk level on money laundering, client identification measures at a reduced level, and enhanced measures.

Specifying the money laundering risk management process step by step under the scale, scope and specific activities of the reporting subject aims to clarify the legal basis to ensure money laundering risks management from competent authorities, avoiding errors.

Measures for clients with high money laundering risk

The Circular regulates clients with high levels of money laundering risk, in addition to applying identification measures based on the Law on Prevention and Combat of Money Laundering and the Government’s Decree detailing several articles of the Law on Prevention and Control of Money Laundering. , anti-money laundering reporting subjects must apply enhanced measures, including:

• Have management approval at least one level higher than the approval level applicable to clients with an average level of money laundering risk to establish or continue to maintain a business relationship with high-risk clients;
• Collect, update, and verify additional information of individual clients to serve client risk assessment and management, including the following minimum information: Average monthly income of clients goods for at least the last 6 months before the time of assessment; Contact information of the agency, organization or owner of the facility where the client works or where the client has their main income (if any); information related to the source of money or assets in the client’s transaction;
• Collect, update, and verify additional information of organizational clients to serve the assessment and management of client risks, including the following minimum information: industry, production, business, key revenue generating services; total revenue in the 02 most recent years before the time of assessment; information related to the source of money or assets in the client’s transaction;
• Collect, update, and verify additional information (if any) to serve client risk assessment and management;
• Enhanced monitoring of client transactions conducted through reporting objects and business relationships through the application of control measures and transaction sample selection to check and ensure client transactions consistent with the purpose and nature of the client’s business relationship with the reporting object and the client’s business activities; promptly detect suspicious signs and review suspicious transaction reports;
• Increase the frequency of updating client identification information compared to clients with an average money laundering risk level.

Enhanced assessment measures for high-risk clients are specified in Article 3 of Circular 35/2013/TT-NHNN, while Circular 09/2023/TT-NHNN is specified in Clause 5, Article 4, and is Regulation is one of the contents of the money laundering risk management process and client classification according to money laundering risk level. In addition, evaluation measures are also specified more specifically and clearly with 6 measures, while Circular 35/2013/TT-NHNN points out 4 measures (with approval from higher management levels at least at one level; Collect additional information about clients who are individuals and organizations; Closely monitor transactions of high-risk clients and update information periodically every 6 months or when reporting object knows that client information has changed).

With regulations on enhanced measures for clients with high levels of money laundering risk, it can be seen that Circular 09/2023/TT-NHNN pays special attention to updating, collecting, and verifying client information based on the requirements of Recommendation 10 on updating client information, the Financial Action Task Force on Money Laundering (FATF) requires financial institutions to perform client identification and to regulate financial institutions clearly in law and each country can determine how to impose specific client identification obligations and the measures to be taken in the event of failure to collect client information. Accordingly, it is necessary to strengthen supervision and update information for clients with high money laundering risks to prevent illegal acts, and promptly detect and review. This is a necessary regulation in the context of increasingly sophisticated and frequently changing money laundering activities.

Regulations on suspicious transaction reporting regime

If the previous Circular 35/2013/T-NHNN stipulates the suspicious transaction reporting regime only stops at quoting articles of the Law on Prevention and Combat of Money Laundering and does not have specific instructions, then Circular 09 / 2023/TT-NHNN has specific guidance on suspicious transaction reporting regime including:

• Firstly, the reporting subject is responsible for reporting to the Agency performing the functions and tasks of preventing and combating money laundering when detecting suspicious transactions as prescribed in Article 26 of the Law on Prevention and Combat of Money Laundering. Reporting is done in paper documents according to Appendix II issued with this Circular or reported by electronic data when a compatible information technology system is established to serve data reporting. electronic data as prescribed in Clause 1, Article 10 of this Circular and does not apply in case of reporting to other competent state agencies as prescribed in Clause 3, Article 37 of the Law on Prevention and Combat of Money Laundering.
• Second, the Circular clearly states that the amount of a client’s transaction amount is not the basis for reporting a suspicious transaction as prescribed in Article 26 of the Law on Prevention and Combat of Money Laundering, but depends on whether the transaction has been completed or not. Not yet.
• Third, the Circular points out the responsibility of the agency performing the functions and tasks of preventing and combating money laundering is to confirm the receipt of the suspicious transaction report by sending an email to the email address. by individual or department as prescribed in Point b, Clause 9, Article 5 of this Circular or in writing within 05 working days from the date of receiving the suspicious transaction report; given to the subject reporting arising problems (if any).
• Finally, there are organizations and individuals providing accounting services; providing notary services; Providing legal services by lawyers, law-practicing organizations must review, collect, and analyze information to report suspicious transactions when providing accounting services; Carry out notarization procedures, prepare conditions for transactions on behalf of clients or perform transactions on behalf of clients to transfer land use rights, home ownership, and other assets attached to land; manage clients’ money, securities or other assets; Manage client accounts at banks and securities companies; company operations and management; Participate in business buying and selling activities on behalf of clients.

Currently, the regulations on analyzing and handling suspicious transaction information of the State Bank in the current Law on Prevention of Money Laundering are not clear and do not demonstrate the basic business processes in information analysis. information from receiving information, analyzing information according to professional processes, and transferring information on money laundering prevention and combat. In addition, these regulations do not cover all the key tasks in the operations of the focal unit performing the function of Anti-Money Laundering under the State Bank such as supervision, warning, and information exchange with domestic and foreign agencies and units in implementing anti-money laundering work. Continue to review and carefully consider regulations on reporting suspicious transaction results to improve them to minimize limitations in applying regulations into practice.

However, Article 6 of Circular 09/2023/TT-NHNN guiding the implementation of regulations on reporting suspicious transactions somewhat clarifies and ensures accurate implementation.

Electronic money transfers of 500 million VND or more must be reported

Regarding the reporting regime for electronic money transfer transactions, a notable point in Circular 09 /2023/TT-NHNN is that electronic money transfers of 500 million VND or more must report transactions differently from Circular 35/2013. /TT-NHNN does not have specific regulations on how much money must be reported for transactions in electronic money transfers. At the same time, Circular 09/2023/TT-NHNN stipulates specific cases in which reporting subjects must carry out the responsibility to collect information in Clause 3 of this Article and report to the agency performing the functions and tasks of the department. Anti-money laundering using electronic data according to the provisions of Clause 1, Article 10 of this Circular when delivering electronic money transfers. Cases include:

• Electronic money transfer transactions in which all financial institutions participating in electronic money transfer transactions specified in Clause 1, Article 8 of this Circular are in Vietnam (hereinafter referred to as domestic electronic money transfer transactions) with an electronic money transfer transaction value of 500,000,000 (five hundred million) VND or more or in foreign currency of equivalent value;
• Electronic money transfer transactions in which at least one of the financial institutions participates in the electronic money transfer transaction specified in Clause 1, Article 8 of this Circular in countries and territories outside of Vietnam (hereinafter referred to as an international electronic money transfer transaction) with an electronic money transfer transaction value of 1,000 (one thousand) US dollars or more or in another foreign currency of equivalent value.

In addition, if Circular 35/2013/TT-NHNN stops at clarifying the content of the report, including information about the organization issuing the money transfer order; organizations serving beneficiaries and individuals, money transfer organizations, and beneficiary individuals and organizations, Circular 09/2023/TT-NHNN stipulates that the content of electronic money transfer reports must include the following information: the originating and beneficiary financial institution; individuals participating in electronic money transfer transactions; organizations participating in electronic money transfer transactions; Information about transactions. Accordingly, Circular 09/2023/TT-NHNN has more specific regulations than such regulations based on FATF Recommendation No. 16 on electronic money transfers to ensure that basic information Records of the originator and beneficiary of electronic money transfer transactions are always available and immediate, serving the work of reviewing cash flows to prevent money laundering. At the same time, to detect and prevent criminals from using electronic money transfers to transfer illegal funds.

Responsible for implementing

Circular 09/2023/TT-NHNN regulates the implementation responsibilities of the Chief of Office, Chief of Bank Inspection and Supervision, Heads of Agencies performing the functions and tasks of preventing and combating money laundering, Heads of agencies unit of the State Bank of Vietnam and the reporting object is the organization responsible for organizing the implementation of this Circular. At the same time, if there are any problems during the implementation and implementation process, organizations, individuals, and reporting subjects can report them to the State Bank of Vietnam (through the agency performing the functions of money laundering prevention) for guidance. The regulation aims to ensure the implementation responsibility of relevant units in the State Bank and reporting subjects according to the provisions of the law on prevention and combat money laundering.

Clients who need advice on state banking law, and anti-money laundering law, please contact Viet An Law Firm for the best support.