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Think like a criminal: How one person stole 13 billion USD from a Vietnamese bank

Updated: 3 days ago

One of the most talked about fraud cases in the past few months is perhaps the case of Truong My Lan, a property tycoon who stole over USD 13 billion from a Vietnamese bank. This is equivalent to 3% of the country’s GDP in 2022. It is also larger than the combined wealth of the top 5 wealthiest people in Vietnam, and enough to get her into the top 3 biggest fraud cases in history. In our “Think like a criminal” series, we will look into her case, and uncover how she and her team managed to swindle such a gigantic amount of money out of the bank.

A humble beginning

Truong My Lan started as a humble fabric vendor in Ben Thanh Market in Ho Chi Minh City. She married Chu Nap Kee, a real estate businessman in Hong Kong. Together, in 1992, they founded and ran Van Thinh Phat, and over the next 20 years, Truong rose to be the wealthiest property tycoon in Vietnam.

Real estate is a business that is always short of funding. A project typically requires a large initial investment, enormous construction costs, and other regulatory and operational fees. The waiting time between making the investment and harvesting the fruits of your labour can also be substantial. Specifically in Vietnam, that waiting time could be a few years, and only then will you have enough funds back to invest in another project. For someone as ambitious as Truong My Lan, it was impossible to wait. She had to find a way to generate as much profit as possible.

Seizing the opportunity

The period between 2010 and 2012 was a low moment for Vietnamese businesses. The economy was still recovering from the 2008 financial crisis; many banks were performing badly and having to restructure. Truong My Lan seized the opportunity to buy cheap shares from the banks’ shareholders who were selling out. Similar to other Asian countries, Vietnam is no stranger to corporations and property tycoons taking over and controlling banks. The Vietnamese government mandates that no entity can own more than 5% of a bank; in the rare case that they do, the entity must report to the Central Bank of Vietnam, and to the State Securities Commission of Vietnam. Truong found a way around this, by creating shell companies and fake entities to act as shareholders. She even went as far as creating foreign shell companies to “diversify”, to appeal to Vietnam’s recent focus on attracting foreign investors. By the end of the operation, Truong held 91% of Saigon Commercial Bank (SCB), together with 80 shareholders. More than a scheme, this was an elaborate, well-structured and tight-knit system to steal money from the bank.

An elaborate ecosystem

The system consisted of four groups, each with their own purpose. The whole ecosystem had over 1000 companies and organisations, all crucial to the smooth running of Truong’s operation.

Group 1 consisted of banks, securities firms, and financial institutions. Their job was to generate funding from the economy and the public. Some of the organizations in this group included SCB, Tan Viet Securities (TVSI), and Viet Vinh Phu Financial Investment Corporation, all large and well-established financial institutions in Vietnam. SCB alone generated VND 600k billion (USD 23.57 billion) in deposits made by the public.

Group 2 were Vietnamese companies in real estate, food/beverage, hospitality and so on, that have assets and genuine activities. The purpose of this group was to withdraw money from the institutions from Group 1. Van Thinh Phát (Truong’s main real estate company), Viva Land (Saigon Peninsula), and An Dong were some of the names on this list.

Group 3’s job was to act as shareholders for organisations in Group 1, as well as boosting the credibility of the companies in Group 2. They were shell companies or entities who were created or hired to borrow money and act as shareholders in banks. Some of the companies were also set up in “prioritised” industries that benefit from lower interest rates, such as agriculture. 

Group 4 were foreign companies or companies overseas, whose focus was to receive and manage the funds extracted via illicit means. These companies were set up in tax havens such as the British Virgin Islands and the Cayman Islands. They also helped to increase the credibility of domestic companies by means of investment (Group 2 and 3). These companies were mainly run by Chu Nap Kee. One of these companies actually appeared in the Panama Papers, showing that it had invested in An Phu Corporation, a company in Truong’s ecosystem.

Sophisticated tactics

The four groups in Truong’s ecosystem worked together in a highly coordinated and sophisticated manner, using refined tactics. They first created a fake customer to borrow, then pushed the collateral to be valued highly, and used these overvalued assets to create fake loan applications with all the necessary documents to deceive the regulators. We will also talk about the tactics to push the value of these assets up, as they are quite interesting and sophisticated. The asset in this case would be a piece of land. Truong’s team would buy the surrounding land at a ridiculous price, creating a “land fever”. They would also start construction, build infrastructure, and even buy houses in the original property, pushing the value of the land up even further. The land would then be sold or used as collateral in Truong’s fake loan application.

Another tactic to build a fake loan application was to get other companies in the ecosystem to pump revenue or assets into the company making the application. If someone from Group 2 already had bad credit, another company from Group 3 would step in and send the application in their name. It did not matter what they did, as long as in the end, there were appropriate documents to deceive the bank and regulators.

Since Truong My Lan controlled almost all of SCB, her team also received “special treatment” from the bank. All their loan applications were marked with the code “HSTT”, which signals to SCB to expedite loan assessment and disbursement of funds. Only after that did the bank hand in the collateral for valuation. This unusual procedure is unfortunately still sometimes the case in Vietnam, as the country’s control over bank activities remains loose. The total number of loans made through this procedure was an astonishing 2500. From 2012 to 2022, SCB loaned money to 1366 customers, of which, 93% belonged to Truong’s team.

Laundering the money

Surprisingly, Truong chose a rather traditional approach to laundering her swindled money - withdrawing and distributing it in cash. Her driver was one of the regulars in this procedure. When the police came to search Truong’s house, they also found a large amount of cash hidden in her basement. This tactic is quite effective in Vietnam, as the country is yet to have strict regulations and controls over transactions in cash. The withdrawn amount was then invested into a company within the ecosystem, to use as “clean money” to buy properties and other assets. It could also be sent abroad to a company in Group 4, which would use that amount to invest back, so it looks like a foreign shareholder investing in a Vietnamese company. This then of course further increases the credibility of these domestic companies.

What happens now?

Truong My Lan has been sentenced to death, earlier in April. Her associates, including regulators that were paid to turn a blind eye, have received a range of sentences based on the nature of their involvement, from 16 years in prison to a life sentence. However, on the 26th of April, Truong My Lan appealed her sentence from behind bars. Many companies and corporations related to Truong My Lan and her associates are also still under investigation, which means that the case is not closed, and more could come to light. 

The impact

Needless to say, Truong’s case has shaken Vietnam’s banking and real estate industry to its core. Customers in other Vietnamese banks have been impacted; as a loss of confidence in SCB has led to a contagion effect, making other banks reduce their lending activities. SCB’s losses could also cause the national treasury to dry up, as the Central Bank has to supply funds to keep the bank alive. The case also revealed to the world the flaws in Vietnam’s banking system and regulations, which greatly damages the country’s reputation among its trade partners. 

More importantly, it shows an unjust system, where small businesses have limited access to cheap, secure funds. Property tycoons controlling or taking over banks is no stranger to Asia; Japan and South Korea both have extremely strict laws over this. As mentioned above, Vietnam also has regulations in place, they just are not always sufficiently enforced. The country itself needs to step up its game, to regain the trust of its citizens and international partners. Stricter regulations and rigorous enforcement in the banking sector, perhaps with the help of digital tools, are much needed for sustainable economic growth and stability.

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