Bayes expert explains Vietnamese billionaire fraud case

Vietnam has been rocked this past week by Truong My Lan, a female Vietnamese billionaire being sentenced to death for defrauding the Saigon Commercial Bank over an eleven-year period.

Through bribing officials and manoeuvring via proxies and shell companies, Truong allegedly arranged the merger of three smaller banks into Saigon Commercial Bank and owned up to 90 per cent of the shares – a sharp contrast to the country’s law stating individuals are allowed to own no more than five per cent of shares in any bank.

What makes this story eye-opening is the extent to which her actions became common knowledge, with the funds from Saigon Commercial Bank being used to purchase real estate properties in leading locations.

Anh Tran, Professor of Finance at Bayes Business School (formerly Cass), explains the implications behind this case, and why it spells trouble for the country in the world market.

“Bank fraud cases are always serious because of what they leave behind,” he said.

“These fraud cases generally result in financial losses for businesses, organisations and individuals, which has a significant wealth and other non-monetary impact on the victims. The fraud cases also undermine trust and confidence that everyone has on the banking system and the government's role in them. Large-scale cases have spillover effects into credit and financial markets, the government and the economy.”

Professor Tran explained that historic actions have made this fraud possible.

“Vietnam is a developing country, transitioning from a closed one to market-oriented under the Communist Party's direction in 1986.

“The country's infrastructure and legal system have been developed gradually over time but financing constraints, bureaucratic hurdles, and inadequate training have slowed down the progress of many infrastructure projects, the improvement of laws and the efficiency of legal institutions.”

It is the first time a female businesswoman has been sentenced to death for a crime like this in Vietnam. Professor Tran explained that this case may serve as an example for Nguyen Phu Trong, the Communist Party General Secretary’s drive to conduct the anti-corruption fight more efficiently, but more must be done within the banking sector to ensure situations like this don’t happen again. “The banking and legal system needs to be updated with new developments from the international financial markets and best practices in international banking laws,” Professor Tran added.

“The country should engage more with international partners to apply models of good governance and risk management. Regulators need to closely monitor banks to detect and prevent fraud in order to safeguard the stability of the financial system.”

All quotes should be attributed to Anh Tran, Professor of Finance at Bayes Business School (formerly Cass).