Regulations implementing the Law on Anti-Money Laundering

The Government issued Decree 19/2023/ND-CP (“Decree 19”) dated 28 April 2023  detailing a number of articles of the Law on Anti-Money Laundering 2022.

Decree 19 takes effect from the date of signing (i.e. 28 April 2023), except for certain provisions which will be effective on 1 December 2023. Decree 19 replaces Decree 116/2013/ND-CP dated 04 October 2013, as amended. Below are some notably points of Decree 19.

Customer due diligence

Decree 19 specifies the transaction thresholds which require reporting entities to undertake customer due diligence (CDD) measures as follows:

• A financial institution must undertake CDD measures when a customer who hold no account with the financial institution or who has an account but having no transaction for six (6) previous consecutive months conducts deposit or withdrawal transaction or transfer with the value of at least VND400 million per day or equivalent in foreign currency. Exceptions to this requirement include: finalisation of savings or withdrawal of savings interest, repayment of credit card debt, repayment of loan borrowed by the financial institution, periodical payment registered with the financial institution, and receipt of profits from securities/bond investment;
• A prized gaming business must undertake CDD measures when a customer conducts a transaction with the value of at least VND70 million per day or equivalent in foreign currency; and
• A precious metal and stone dealer must undertake CDD measures when a customer conducts a cash transaction for purchase or sale of precious metal/stone with the value of at least VND400 million per day or equivalent in foreign currency.

The above transaction thresholds shall be applied from 1 December 2023. Decree 19 states that, until that date, all transaction thresholds stipulated under Decree 116/2013/ND-CP are applied.

Beneficial owners

Reporting entities shall determine those which are considered as beneficial owners under the criteria prescribed by Decree 19.

• If the customer is an organisation, the beneficial owner(s) are the person(s) directly or indirectly holding 25% or more of the charter capital of the organisation, or the person(s) having the right to ultimately control the organisation. If no person has been identified under the said criteria, the legal representative(s) of the organisation (except the individual(s) representing State capital in that organisation, if any) are considered as the beneficial owner(s) thereof. If the organisation is a company listed on a stock exchange and the information on its beneficial owners has been disclosed, the reporting entity considers these persons as the beneficial owners.
• If the customer is an individual, the beneficial owner is either the person actually owning one account or controlling the activities of such account; or the person establishing a transaction with the reporting entity and actually controlling such transaction.
• With respect to a transactional arrangement, the reporting entity will determine the beneficial owner(s) in accordance with Article 22.1(a) of the Law on Anti-Money Laundering 2022. With respect to a life insurance contract, the beneficial owner is the beneficiary in the life insurance contract.

Provision and exchange of information

Reporting entities must promptly provide the customer identification files, the analysis results, other files and information related to transactions subject to reporting requirement, and/or reports on high value transactions, suspicious transactions, and electronic money transfers at the request of the competent agencies. Those agencies include the Anti-Money Laundering Agency (AML Agency) under the State Bank of Vietnam, the investigation agencies, the People’s Procuracies, the specialized agencies in charge of protection of national security, and the inspection agencies.

In addition, the AML Agency may request reporting entities and other entities to provide necessary information for the purposes of analysis and transfer of information about anti-money laundering for verification, investigation, prosecution and trial.

Decree 19 also provides for the exchange, provision and transfer of information about anti-money laundering between the AML Agency, the agencies which perform legal proceedings and the relevant ministries for the purposes of verification, investigation, prosecution and trial of money laundering crimes as well as prevention and combat of money laundering.

Report on high value transactions

The Prime Minister issued Decision 11/2023/QD-TTg (“Decision 11”) dated 27 April 2023 on the thresholds of high value transactions subject to reporting requirement. Decision 11 will take effect from 1 December 2023. Under Decision 11, any transaction with a value of VND400 million or more must be reported to the State Bank of Vietnam. Currently, the applicable threshold is VND300 million as provided in Decision 20/2013/QD-TTg dated 18 April 2013.

Multi-level marketing business

The Government issued Decree 18/2023/ND-CP (“Decree 18”) dated 28 April 2023  amending a number of articles of Decree 40/2018/ND-CP (“Decree 40”) dated 12 March 2018 regarding multi-level marketing business. Decree 18 takes effect from 20 June 2023 and introduces some key changes as follows.

Additional conditions for registration of MLM business

In order to conduct multi-level marketing (“MLM”) business, an enterprise must satisfy certain conditions stipulated in Decree 40 (such as capital, IT system with a server in Vietnam, website, communication system) and obtain an MLM Registration Certificate from the Ministry of Industry and Trade. 

Decree 18 provides additional registration conditions for foreign owned enterprises. Each shareholder/owner being foreign investor or foreign owned economic organisation must have at least 3 consecutive years of MLM operation in a country or a territory, and submit audited financial statements or other document confirming discharge of tax and financial obligations in the most recent 3 financial years, or the evidence of at least 3 consecutive years of MLM operation issued or certified by a competent agency/organisation in the application dossier for registration. Decree 18 also requires such enterprise to submit a business licence with retail distribution rights, including the activity of retailing in the MLM mode, as part of the application dossier for registration.

The technical explanatory document on IT systems in the application dossier for registration must contain information about (a) server IP address and physical server location, and (b) the operation mechanism of the system (including information describing the system, data entry and storage, and data administration), in addition to the information stipulated in Article 44 of Decree 40.

MLM participants

Decree 18 provides that MLM participants are those persons who have full capacity for civil acts and reside in Vietnam. Foreigners can participate in MLM if they have a work permit in Vietnam issued by a competent authority in association with the enterprise in which they participate in the MLM business, unless they are exempted from the work permit requirement by law.

Seminars, conferences and trainings

Under Decree 18, an MLM seminar, conference or training means introducing, honouring, supplying information, providing guidance, training and/or sharing information relating to MLM business. Where there are 30 or more persons, or 10 or more MLM participants attending an MLM seminar, conference or training, the MLM enterprise must submit its notification file to the relevant provincial Department of Industry and Trade (“DOIT”) at least 15 working days prior to the proposed date of holding the MLM seminar, conference or training.

The MLM enterprise is permitted to hold the MLM conference, workshop or training if the DOIT does not request in writing for any amendments and/or supplements within 7 working days (instead of 5 working days as currently provided in Decree 40) after the date of receipt of the notification file.

Minimum sales revenue from non-participant customers

Under Decree 18, an MLM enterprise must ensure that sales revenue from non-participant customers accounts for at least 20% of the MLM sales revenue of that enterprise in a financial year. Thus, MLM enterprises would need to have policies that encourage MLM participants to sell goods to end users, rather than just focusing on development of the selling network.

Other issues

Decree 18 amends certain provisions on bonus payment plan. The bonus payment plan of an MLM enterprise must specify the ranks and titles of MLM participants, the conditions to be achieved, commissions, bonuses and other economic benefits payable to each rank and title of MLM participants. The MLM enterprise is required to apply the bonus payment plan only to its participants in Vietnam.

Decree 18 adds more prohibited acts in MLM business for MLM enterprises and MLM participants. Those enterprises and participants are prohibited from providing information about foods by using images, equipment, clothing, names and letters of medical establishments, doctors, pharmacists, medical staff; or letters of thanks/thank you notes from patients, or articles from doctors, pharmacists or medical staff. The provision of information about foods that have contents posted, quoted or commented by the patient describing that the food has an effect of treating disease is also prohibited.

Directive for improving foreign investment

The Prime Minister issued Directive 14/CT-TTg dated 24 May 2023 on solutions for improving foreign investment efficiency. This Directive addresses the following solutions, among others, to further improve the investment climate and the efficiency and quality of flow of foreign invested capital into Vietnam:

• With respect to the legal framework: to complete the laws and policies related to investment activities such as amending the regulations on foreign employees working in Vietnam, the regulations on import of used machine, equipment and technology chain; reviewing inadequacies in tax laws and providing the roadmap for application of the global minimum tax rate.
• With respect to investment incentives: to research and develop measures (e.g. cash subsidies, training supports, infrastructure development supports) that promote foreign investment other than tax incentives, based on the conformity with international commitments and fairness among investors.
• With respect to investment management and supervision: to enhance the State management and supervision capabilities by (a) synchronizing the regulations related to investment and business to avoid overlaps that cause confusion and uncertainties to the business of investors, (b) cutting down the procedures that are troublesome and time-consuming for investors, and (c) evaluating and carefully assessing technologies, standards, goods quality, environment for investment projects falling within the sectors in which there are indications that the investor has abused the origin in Vietnam in order for evasion of trade remedy measures or tax.

Rescheduling debt repayment terms

The State Bank of Vietnam (“SBV”) issued Circular 02/2023/TT-NHNN (“Circular 02”) dated 23 April 2023 on credit institutions and foreign bank branches rescheduling debt repayment terms and retaining debt groups to support customers. Circular 02 takes effect from 24 April 2023.

Circular 02 allows credit institutions and foreign bank branches (collectively “banks”) to reschedule debt repayment terms for loans and finance leases of non-bank customers who face financial difficulties when certain conditions are met, such as customers are unable to repay the principals and/or interests when they fall due because of reducing revenue and income. The rescheduled repayment term must not exceed 12 months from maturity date of the outstanding balance rescheduled for the repayment term. Banks may reschedule debt payment terms for customers up until 30 June 2024.

Banks shall retain the debt groups for debts rescheduled under Circular 02 as classified at the nearest time prior to the rescheduling date. In the case where a debt rescheduled under Circular 02 is overdue and the bank does not continue to reschedule the repayment term, the bank must carry out debt classification according to the SBV’s regulations on classification of assets and the establishment and use of risk provisions in the operation of banks.

Regarding risk provisioning, Circular 02 requires banks to make provisions for all outstanding balances of customers in accordance with the SBV’s regulations on classification of assets and the establishment and use of risk provisions in the operation of banks.

Banks are required to issue their internal rules on rescheduling of debt repayment terms and retention of debt groups and send a copy to the SBV. In addition, banks must file reports on rescheduling of debt repayment terms and retention of debt groups to the SBV by 10th of each month.

Certificate of transfer of a technology encouraged for transfer

The Prime Minister issued Decision 12/2023/QD-TTg (“Decision 12”) dated 15 May 2023 on issuing Certificates of transfer of technology encouraged for transfer. Decision 12 comes into effect from 1 July 2023.

Under the investment laws, projects receving transfer of technologies on the list of technologies encouraged for transfer will enjoy investment incentives or special investment incentives after obtaining the Certificate of transfer of a technology encouraged for transfer (“Certificate”). Decision 12 provides the following procedures for obtaining the Certificate:

• The Certificate will be issued when the contents about technology transfer have been implemented and products have been made.
• The transferor or the transferee shall submit an application file to obtain the Certificate. The application file must contain, inter alia: the application form; a copy of the technology transfer agreement; an explanation of the contents of the transfer; a copy of in-principle investment approval, investment registration certificate or enterprise registration certificate or other equivalent document of the technology transfer parties.
• The licensing authority (i.e. the Ministry of Science and Technology or the relevant provincial Department of Science and Technology) shall, within the required timeframe, evaluate the application file and then issue the Certificate or explain the reasons for its refusal of the application file.

The licensing authority may revoke the Certificate where (i) there are false contents in the application file, (ii) a violation of the contents of such Certificate is committed, and (iii) it is so requested by a competent State agency in case of violation of relevant law.

Import of scraps

The Prime Minister issued Decision 13/2023/QD-TTg (“Decision 13”) dated 22 May 2023 promulgating the list of scraps permitted to import for use as production materials. Decision 13 takes effect from 1 June 2023 and replaces Decision 28/2020/QD-TTg dated 24 September 2020.

Decision 13 issues a new List of scraps permitted to import for use as production materials (the “List”). Business entities may only import scraps included in the List for use as production materials for their production establishments according to the designed production capacity to produce goods and products.

Decision 13 removes certain types of scraps from the List such as paper scraps under HS Code 4707.90.00, scraps and small pieces of plastics under HS Code 3915.90.00, granulated slag (slag sand) from metallurgy of steel or iron under HS Code 2618.00.00. With respect to paper scraps under HS Code 4707.90.00 and scraps and small pieces of plastics under HS Code 3915.90.00 licensed to import pursuant to a separate environmental licence granted by the competent authority prior to 1 June 2023, business entities may continue to import these scraps until the environmental licence expires. Meanwhile, import of granulated slag (slag sand) from metallurgy of steel or iron under HS Code 2618.00.00 as materials for cement production will comply with the laws on construction materials as from 1 June 2023.

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