Vietnam is currently facing its largest financial fraud scandal to date. Truong My Lan, chairwoman of the Van Thinh Phat property conglomerate, has been accused of embezzling around $12.5 billion from the Saigon Joint Stock Commercial Bank (SCB). This massive fraud is particularly significant for a developing country like Vietnam, which is in dire need of strong governance. Lan’s actions, along with other similar cases, have disrupted the country’s efforts toward progress.
Truong My Lan comes from one of the wealthiest families in Vietnam. She began her business journey in 1992 by founding a company involved in commerce, restaurants, and hotels. By 2007, her business had expanded into real estate, leading to the formation of Van Thinh Phat Group Holdings with substantial capital. Over time, she also ventured into the banking sector, gaining control over several banks, including Saigon Commercial JSC. These banks later merged to form SCB.
Lan held an 80% stake in Van Thinh Phat Group Holdings, solidifying her control. She also owned 91.5% of SCB through proxies, despite the legal limit on individual ownership in banks.
Her personal life intersected with her professional dealings. Lan’s husband, Eric Chu Nap Kee, is a businessman in Hong Kong’s real estate sector, and their partnership may have influenced her business decisions, especially in real estate.
Lan’s career was not without controversy even before this scandal. She faced legal issues, including accusations of bribery and involvement in the Panama Papers, indicating her reach beyond Vietnam and suggesting international financial activities.
Everything changed on October 8, 2022, when Lan was arrested for illegally issuing bonds between 2018 and 2019, raising trillions of dong from investors. After her arrest, it was discovered that Lan had laundered money through property acquisitions and transferred funds overseas. From February 2018 to October 2022, she made 916 loan applications at SCB for a total of 545 trillion dong, misappropriating 304 trillion dong, causing huge losses for the bank.
Lan’s crimes went beyond bond fraud. She was also involved in issuing 25 bond issuances worth 30 trillion dong (around $1.23 billion). This made it difficult for authorities to track all victims of the fraud.
From 2012 to 2022, Lan borrowed over 1 quadrillion dong from SCB, representing 93% of the bank’s total loans and almost 20% of Vietnam’s GDP in September 2022. She controlled SCB through a network of more than 1,000 companies linked to Van Thinh Phat, allowing her to siphon significant sums from the bank.
This scandal sent shockwaves across Vietnam’s financial and political sectors, raising questions about the integrity of the banking system and the legitimacy of the Communist Party. The Vietnamese government, under General Secretary Nguyen Phu Trong’s anti-corruption campaign, is taking steps to combat systemic corruption.
So far, 100 accomplices have been implicated, and approximately 42,000 people have lost money, many of whom are struggling to recover their savings. The investigation has uncovered widespread corruption, including bribes paid to top officials at SCB, the State Bank of Vietnam, and the Government Inspectorate.
The trial is still ongoing, with over 100 boxes of case documents submitted to the court, suggesting a lengthy legal process.
The impact of this scandal on Vietnam’s economy and property sector is immense. It has exposed major flaws in the country’s economic and regulatory oversight, especially in the banking system, such as the ease of setting up shell companies and a lack of due diligence. In the property sector, the scandal has shaken business confidence. Local officials are hesitant to approve investment projects due to fears of corruption accusations, which may hinder economic growth.
Additionally, private companies are wary of doing business, fearing involvement in corruption probes. The government has tightened regulations on the commercial bond market, further complicating business operations.
In response to the scandal, Communist Party Secretary Nguyen Phu Trong stressed the need for a long-term anti-corruption strategy. This campaign has already resulted in the dismissal of high-profile officials, including two deputy prime ministers, for alleged corruption in unrelated matters.
As of now, the Ministry of Public Security has recommended that Lan be charged with bribery, violating banking regulations, and embezzlement. Alongside her, 85 other individuals, including government officials, are facing charges.
This scandal has shaken confidence in Vietnam’s economic stability, particularly in the banking sector. Financial experts warn that stricter financial regulations and higher costs for lenders may follow, with JP Morgan Research suggesting significant changes in the financial landscape.
In short, this case has revealed weaknesses in Vietnam’s banking system, including poor training for bank employees and an over-reliance on mortgage lending without proper feasibility studies. The fallout from this case will likely continue to impact Vietnam’s economy for years to come.