Money laundry on the stock exchange

Deputy Governor of the State Bank of Vietnam Phung Khac Ke affirmed that dirty money was being laundered in the stock market.
There are two sources of investment capital in the stock market: domestic and foreign sources. Mr Ke said that a proportion of the domestically invested capital comes from illegal sources, i.e. from corrupt affairs.

Recently, Government inspectors have announced the ratio of losses in capital construction works at 10% - a very big figure. Every year, Vietnam spends VND200tril (12.5bil US$) on capital construction works, and 10% of this amount, or VND20tril (1.25bil US$), is pocketed by corrupt officials. They try to launder the money by throwing the money onto the stock market.

Mr Ke has stressed that the flow of illegal capital sources is one of the reasons for the heating up of the stock market.

He said that money laundering through the stock market should be stopped right now. The most effective long-term solution is to prevent and reduce the loss proportions in capital construction projects, which will only be attained by drastic measures to fight corruption. The State Bank and commercial banks will help by improving payment services and make it easier for people to open accounts. In the long term, the Government has to apply measures to encourage people to make payments via banks, which will help control money flows.
Regarding loaning to securities investors, Mr Ke confirmed the figures about the total outstanding loans funding securities investment deals that newspapers have reported. He said that this figure represents a very small percentage of capital of commercial banks, and that this should not be considered a worry.

“In general it is unreasonable to say that banks have injected too much money in the stock market,” Mr Ke said.

He has also announced that the stock market will have new commodities soon, when state owned banks are equitised. These commodities, according to Mr Ke, will be ‘valuable commodities’ for two reasons. First, the bad debts of the banks had been settled by 2000. Second, the chartered capital of the banks has been raised in the recent past, making the banks more attractive in terms of brand names and financial capability.

Source: VNE