Banking Fraud in Vietnam

Written by Lexi Dean | April 22, 2024

Real estate businesswoman, Truong My Lan, was sentenced to death last week over her role in Vietnam’s largest fraud case. Death penalties are not uncommon in Vietnam’s system, but they are rare in financial cases. She was arrested in 2022 after illegally controlling Saigon Joint Stock Commercial Bank (SCB) to give out loans to “ghost companies” that amounted to $27 billion in losses.

 Prosecutors claim she illegally managed 90% of the bank by distributing funds to herself and others. She was convicted of bribing government inspectors and embezzling around $12 billion from SCB. Lan pleaded not guilty to these embezzlement and bribery charges. She was found guilty of masterminding the fraud. She will appeal the verdict of the People’s Court of Ho Chi Minh City, according to her lawyers. The central bank in Vietnam eventually took over the SCB after recognizing the need to intervene to prevent a collapse.

This fraud case raises questions about other banks’ practices in Vietnam. Likewise, it threatens the country’s economic perspective and future relations with potential foreign investors. The State Bank of Vietnam deputy governor, Dao Minh Tu, told the press that the bank must interfere to avoid devastating economic shifts. SCB is in a tough situation. It needs assistance, and without lending, it will collapse. However, if lending continues at a rate consistent with the past six months, the national treasury will dry up and damage the country’s financial system. 

The bank’s deposits plummeted 80% to about $6 billion in December 2023, and the bank could potentially run out of deposits by the middle of the year. SCB struggles with liquidity issues and the ability to make timely payments when customers transfer money to different banks. While lending has slowed over the past few months, the central bank has given 592.7 trillion dongs, or about $24 billion in “special loans” as of early April. The Vietnamese dong dropped to a record low in all of this. This fraud case will have severe economic burdens on Vietnam if the central bank is unable to help SCB stay on its feet.