Solutions to Improve the Effectiveness of Anti-Money Laundering Work at Kien Long Commercial Joint Stock Bank

Identify and update information about beneficial owners;”. According to documents of the State Bank and Kienlongbank, beneficial owners are defined as: individuals who have actual ownership of an account or a transaction, have the right to control when customers make transactions for this individual or individuals who have the right to control a legal entity or an investment trust agreement. In reality, determining beneficial owners as in the above documents is very difficult to implement and is completely baseless and subjective.

- Clause 4, Article 8 of Decision No. 4287/QD – NHKL dated August 28, 2014, stipulates “Taking reasonable measures to determine the origin of assets” is very difficult to implement and there is no document guiding what reasonable measures are.

- Clause 3, Article 10 of Decision No. 4287/QD – NHKL dated August 28, 2014: “Transactions related to new technology”. Although Clause 1, Article 8 of Decree 116 stipulates that transactions related to new technology are “transactions using technology that allows customers to conduct transactions without having to meet directly with employees of the reporting entity”, Kienlongbank's regulation only limits transactions related to new technology such as Internet Banking, Mobile Banking, and types of bank cards, which is no longer appropriate because these technologies are not completely new to Kienlongbank and other credit institutions, not to mention that in the future, some other technologies will appear, but Kienlongbank's document cannot cover them all.

- Kienlongbank's current regulations on reporting suspicious transactions are still qualitative and lack clear regulations. For example:

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+ At point i, clause 1, Article 14, Decision 4287 stipulates that suspicious transactions must be reported when “There is a sudden change in the transaction turnover on the account; money is deposited and withdrawn quickly from the account; the transaction turnover is large during the day but the account balance is very small or zero”, the above provisions are not satisfactory. For example: what is considered a “sudden change”: what is the quantity, percentage of change…. or is it reasonable to stipulate that a transaction with “money is deposited and withdrawn quickly from the account” is a suspicious transaction? (because there are many such transactions in the system every day).

+ At point j, clause 1, Article 14, Decision 4287 stipulates that “transactions of transferring money of small value from many different accounts to one account or vice versa in a short period of time; money is transferred through many accounts; the parties do not

Pay attention to transaction fees; make many transactions, each transaction near the large value level must be reported. The regulation does not clarify what is "small value"?, how long is "short time".

Regarding customer identification and classification according to risk level: According to Article 6 of Decree 116, the responsibility for customer classification belongs to the reporting entity (credit institutions). At Kienlongbank, this responsibility is assigned to business units (Article 9 of Decision 4287). This has caused inadequacies in customer classification because each unit has the right to classify customers differently even though they are all similar. Therefore, this regulation is highly subjective.

Third , the training is not close to reality, and there is no post-training test.

The difference between the assessment of the PCRT specialist and the survey results shows that the current training is only perfunctory, lacking interaction between learners and teachers. Not to mention that the training is mainly via online videoconference with its limitations, which also greatly affects the quality of training. When asked about the difficulty in reporting money laundering activities, the specialist replied: “The current difficulty for the Teller is how to detect suspicious transactions: Because it is emotional, at first the Teller is very scared, because if he does not report, if something happens, he will be involved (to cause a suspicious transaction - Interviewer), and if he reports, is it reliable? Very confused. (shakes head...)”. This proves that training needs to be focused on more by Kienlongbank in the coming time.

Fourth , not yet deeply aware of the harmful effects of money laundering on Kienlongbank's operations. Not yet properly assessed and had the right actions to effectively implement solutions.

Chapter 4 Conclusion

Chapter 4 has studied and analyzed the current situation of PCRT work at Kienlong Bank, thereby realizing that although this work has had many positive changes in the past, Kienlongbank still has a lot of work to do to continue to improve this work.

CHAPTER 5: SOLUTIONS TO IMPROVE THE EFFICIENCY OF MONEY LAUNDERING PREVENTION AT KIEN LONG COMMERCIAL JOINT STOCK BANK

Based on the analysis of the current situation and the causes of the existing limitations in the PCRT work at Kienlongbank, chapter 5 will propose solutions to further improve the effectiveness of PCRT work at Kienlong Commercial Joint Stock Bank. In addition, chapter 5 also points out the limitations of the study and proposes further research directions.

5.1 Conclusion

Money laundering is currently a problem in the economy, not only in developing countries but also in developed countries. Vietnam is a developing country, the proportion of cash in circulation is still high, regulations on income control have not been completed... these are the challenges for Vietnam in the fight against money laundering. Accordingly, money laundering through the banking system is always complicated and sophisticated. As a credit institution operating in the banking sector, Kienlongbank is increasingly integrating deeply with the international financial market. Kienlongbank's operating system is developing strongly with cooperation with many domestic and foreign institutions. The increasingly large scope, scale and nature of operations means that Kienlongbank must face the risks of money laundering, terrorist financing and commercial fraud - which are emerging issues globally.

Faced with that challenge, over the years, Kienlongbank has always tried to implement specific plans to improve the effectiveness of money laundering prevention and control. However, this study shows that although money laundering prevention and control at Kienlong Commercial Joint Stock Bank has improved, there are still many issues that need to be addressed, such as raising awareness from senior leaders to employees, professional knowledge of employees who directly contact customers, and software to support money laundering warnings at Kienlongbank's business units.

Based on the analysis of the current situation and causes of the shortcomings and limitations, the author has also proposed a number of appropriate solutions in the current context of Kienlongbank. However, during the research process, although the author tried to study the documents,

Serious research but due to limitations in knowledge and time, the content certainly still has many shortcomings and needs to be supplemented and completed in the near future.

5.2 Solutions to improve the effectiveness of anti-money laundering work at Kien Long Commercial Joint Stock Bank

5.2.1 Change the awareness of leaders and employees about anti-money laundering work.

Because in the end, the issue of anti-money laundering is a matter of awareness, because only with correct awareness can there be correct actions. Only when the leaders and employees of Kienlongbank realize that money laundering causes a financial institution to lose its reputation in the eyes of customers and partners, thereby threatening the existence and development of the bank. At that time, customers, borrowers, investors and depositors will stop transacting with the bank suspected of money laundering, causing them to lose the opportunity to make a profit and increase the overall risk of the investment and lending portfolio.

Not only does it threaten the existence of the bank itself, money laundering will also destabilize the financial market and have many other consequences... It can be said that support and awareness of anti-money laundering risks from the board of directors is also one of the prerequisites for a successful anti-money laundering system.

5.2.2 Issue specific procedures to guide the implementation of Kienlongbank's PCRT regulations.

Accordingly, there needs to be more specific guidance on money laundering at the following stages: Opening and using accounts; regulations on customer identification, simple and enhanced customer identification. Thereby, Kienlongbank needs to identify risks and signs of money laundering in each product and service, each business activity and transaction such as: In transaction accounting activities; credit activities; trade finance activities; securities activities; card activities... At the same time, it is necessary to build and immediately apply a three-level risk management model as some domestic and foreign banks are applying, meeting the requirements of international practice.

In addition, it is necessary to rectify the work of identifying and updating customer information to tellers, controllers, and deputy directors in charge of accounting. Because in the work of preventing and combating money laundering, identifying and updating customer information is considered the core content in the work of preventing and combating money laundering. Accordingly, Kienlongbank needs to collect information and thoroughly understand customers in all key business activities of the bank, from credit operations, guarantees, recognition

deposits, payments,... Banks need to closely contact with functional agencies such as: the State Bank's CIC credit information center, Interpol to proactively grasp customer information.

Currently, Kienlongbank is using the TCBS Corebanking program to update transaction customer information (Persons code). However, this update is often quite sketchy and lacks information such as: phone number, permanent address, contact address... making it difficult to extract information when necessary, affecting the work of identifying and updating customer information.

5.2.3 Further promote the operational efficiency of the PCRT department, especially the role of the head.

Department heads and department heads need to be given more authority to avoid the current situation where when suspicious transactions arise, they must seek the opinion of higher-level leaders without being able to make their own decisions. This reduces objectivity and thereby reduces the effectiveness of anti-money laundering work. In addition, it is necessary to promote the role of members of the anti-money laundering department - those who represent the field in the bank's operations, turning them into "nuclei" that actively contribute to the process of building regulations and monitoring compliance of business units in the entire system.

5.2.4 Invest financial resources in information technology systems to support PCRT work.

Accordingly, focus on organizing research, applying scientific and technical advances and effectively using software to detect and prevent suspicious transactions. Allocate a reasonable budget for investing in technical technology to develop warning software, early detection of suspicious transactions as well as financial resources for training, improving technical skills for responsible staff. However, investing in a PCRT system requires two essential modules: Filtering: immediate prevention and Profiling for later analysis:

For Profiling: Examples of money laundering scenarios are provided to be installed into the system, and results from scenarios being built are tested; all suspicious transactions are collected for profiling; rules with parameters define the components of the scenario (for example: accounts with transactions greater than 300 million VND...; customers with more than 5 accounts at the bank; list of black customers, countries, and nations that do not cooperate in money laundering provided annually by reputable organizations...

For Filtering: Warning process in Filtering; support customer identification, update customer information; risk rating based on risk matrix, risk matrix must be built based on: bank products and services that customers use, customer's country of residence...

5.2.5. Improve training quality

Pay more attention to training to improve awareness and skills on anti-money laundering measures for all employees involved in currency and other asset transactions; coordinate with the Banking Inspection and Supervision Agency and related units to organize training for employees of units in charge of professional and technical aspects of anti-money laundering in each region. The content of employee training must be appropriate to the job and the level of money laundering risk related to the job.

The solution to the current situation is formal training, dealing with the regulations of the State Bank.

5.3 Limitations and future research directions

5.3.1 Limitations of the study

During the research process, although the author tried to overcome difficulties and did his best, he could not avoid the following limitations:

Money laundering is a sensitive issue, it is very difficult to approach the interviewees as well as the data collection is relatively difficult, because the data on money laundering is mostly confidential, encrypted to send to the PCRT Department (in the form of Confidential documents), so during the implementation process, the author only had access to suspicious transaction reports. This makes the thesis lack the vividness of data on large transaction reports and electronic money transfer transactions.

Limitations in qualitative data analysis and processing techniques: the qualitative method is a relatively difficult method. In Vietnam, there are not many studies with the same quality as this method in the economic field, so using this method in the research topic is a big challenge for the author. Therefore, in the research, there will certainly be some errors, not strict in the way of processing and analyzing data.

5.3.2 Future research directions

The study has clearly shown the current situation of PCRT work at Kienlongbank. However, to have a more comprehensive and accurate view of the Vietnamese banking system, there needs to be research on the banking system in Vietnam. Therefore, a study with a wider scope and more effective research methods could be a feasible research direction in the future.

Chapter 5 Conclusion

Based on the analysis of the current situation, the problems that Kienlongbank is facing and the lessons learned presented in the previous chapters, chapter 5 presents a system of detailed solutions suitable for the actual situation of Kienlongbank such as applying a three-level risk control model, focusing on training, improving the effectiveness of the PCRT department, changing the perception of PCRT... In addition, chapter 5 also presents the difficulties and limitations of the study and proposes further research directions.

REFERENCES

I. Vietnamese

1. Government, 2005. Decree 74/2005/ND-CP dated June 7, 2005 of the Prime Minister on prevention and combat of money laundering .

2. Government, 2009. Decision 470/QD-TTg dated April 13, 2009 of the Prime Minister on the establishment of the Steering Committee for Anti-Money Laundering.

3. Government, 2013. Decree No. 116/2013/ND-CP dated October 4, 2013 detailing the implementation of a number of articles of the Law on Anti-Money Laundering.

4. Government, 2013. Decision 20/2013/QD-TTg dated April 18, 2013 of the Prime Minister regulating the value of large-value transactions that must be reported .

5. Hai An, 2014. International cooperation in preventing and combating money laundering . Online financial magazine

6. Le Thanh Tam and Nguyen The Tung, 2016. Strengthening anti-money laundering through banking activities when Vietnam joins the Trans-Pacific Partnership Agreement . Journal of Economic Research, No. 6 (457) June 2016.

7. State Bank, 2013. Circular No. 35/2013/TT-NHNN dated December 31, 2013 guiding the implementation of a number of regulations on anti-money laundering.

8. State Bank, 2014. 49 recommendations of the Financial Action Task Force (FATF)

9. Kien Long Bank, 2015. Annual report.

10. Nghi Thu, 2015. Monitoring special transactions in the banking sector to prevent money laundering and terrorist financing . Online Finance Magazine.

11. Nguyen Van Ngoc, 2014. System of solutions to prevent money laundering in Vietnam until 2020. Banking Magazine, No. 6, March 2015.

12. Paul Allan Schott, 2007. Reference guide on anti-money laundering and counter-terrorist financing. Culture and Information Publishing House, Hanoi.

13. Pham Manh Hung, 2010. “Solutions to prevent money laundering at Vietnamese commercial banks” . Banking Magazine, No. 21, November 2011, pp. 5-9.

14. National Assembly, 2012. Law on Anti-Money Laundering No. 07/2012/QH dated June 18, 2012

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