21-3-2024 (HANOI) In 2021, Nguyen Thi Thanh Thuy, a former factory worker, readily entrusted her entire life savings of 800 million Vietnamese dong (approximately $32,000) to a new high-interest savings scheme offered by Saigon Joint Stock Commercial Bank (SCB), a state-licensed institution. Believing her money was secure with a reputable bank, little did she know that her hard-earned savings were being funneled into an intricate web of deceit – a scheme that Vietnamese authorities have dubbed the nation’s largest-ever fraud case.
Unbeknownst to Thuy and countless others, their investments were channeled into bonds illicitly tied to property tycoon Truong My Lan, whose trial for embezzlement, bribery, and abuse of power commenced this month. The alleged fraud’s staggering magnitude – an astounding 304 trillion Vietnamese dong (approximately $12.2 billion) siphoned from SCB through a network of ghost companies, proxies, and bribed central bank officials – has sent shockwaves through Vietnam’s financial landscape and cast a pall over the nation’s efforts to cultivate a business-friendly environment.
“I placed unwavering faith in the bank staff’s assurances,” laments the 61-year-old Thuy, her voice laced with anguish and disillusionment. “Now, I have lost all trust in the domestic banking system.” With her family’s entire savings obliterated, Thuy has found herself thrust into the unfamiliar role of a protester, taking to the streets in rare public demonstrations against SCB – a testament to the depths of despair experienced by countless victims. “We have no other choice,” she declares resolutely.
Thuy’s plight echoes that of thousands of Vietnamese citizens who entrusted their hard-earned wealth to SCB, only to find themselves ensnared in a web of corruption that has laid bare the systemic graft pervading the nation’s institutions. As the trial unfolds, prosecutors have called for the death penalty for Lan, the alleged mastermind behind this colossal scheme that has outstripped even the infamous 1MDB scandal in Malaysia – a case that U.S. officials once branded the world’s largest kleptocracy incident.
“The scale of the case is shocking,” observes Linh Nguyen, an associate director at consulting firm Control Risks. “It has damaged the sentiment of not only foreign investors but also local investors in the stock market and the business community in general.” Indeed, the ripple effects of this scandal have reverberated far beyond the immediate victims, casting a pall over Vietnam’s hard-won reputation as an attractive investment destination amid escalating tensions between Washington and Beijing.
In recent years, Vietnam has emerged as a preferred hub for manufacturers seeking to diversify their operations away from China, evidenced by a record-high influx of $36.6 billion in foreign direct investment (FDI) last year – a nearly one-third increase from the previous year. However, the nation’s ongoing “blazing furnace” anti-corruption campaign, spearheaded by Communist Party leader Nguyen Phu Trong, has injected a sense of uncertainty that threatens to dampen investor confidence.
“Some of our clients are eager to make investments in Vietnam, but for now, they are holding back as they want to see what’s going to happen at the next party congress and whether this anti-corruption drive will continue,” Linh explains, underscoring the delicate balance Vietnam must strike between rooting out graft and maintaining a predictable business climate.
The alleged multibillion-dollar fraud at SCB, which has been under the central bank’s “special control” since Lan’s arrest in 2022, has precipitated a downturn in Vietnam’s property and corporate bond markets, further exacerbating concerns. Moreover, the broader anti-corruption crusade has claimed high-profile scalps, with Vietnam’s president and two deputy prime ministers resigning in 2023, and hundreds of high-ranking officials finding themselves behind bars over the years.
At the center of this maelstrom stands Truong My Lan, the 67-year-old scion of one of Vietnam’s wealthiest families, whose fortunes were largely amassed through real estate ventures. As the chairwoman of developer Van Thinh Phat, a company boasting some of Ho Chi Minh City’s most coveted hotels, luxury residences, and office buildings, Lan wielded considerable influence and resources.
According to charges detailed in Vietnamese state media, Lan allegedly exerted illicit control over more than 90 percent of SCB through proxies, appointed family members to senior positions to facilitate the embezzlement scheme, and even bribed state auditors who had uncovered the alleged fraud. Authorities further allege that SCB granted loans worth a staggering $44 billion to Van Thinh Phat and other Lan-controlled entities between 2012 and 2022, accounting for a whopping 93 percent of the bank’s total loan disbursements during that period.
In a defiant stance, Lan has denied owning a controlling stake in SCB, as well as the other charges leveled against her. The tycoon maintains that she was tasked by the central bank to oversee a merger of three banks that ultimately led to the establishment of SCB and that she had merely persuaded friends to purchase shares to stave off the bank’s potential bankruptcy, according to state media reports.
Lan’s legal team has remained tight-lipped, declining to comment on the case, while Vietnam’s Prime Minister Pham Minh Chinh has publicly censured the nation’s finance ministry, securities regulator, and central bank for their lack of oversight, as reported by state media. Requests for comment from the foreign ministry, which handles inquiries from international press, and Lan’s property firm Van Thinh Phat went unanswered.
In the wake of this far-reaching corruption crackdown, government officials have grown increasingly wary of approving projects, fearing potential future investigations – a phenomenon that Nguyen Khac Giang, a visiting fellow at Singapore’s Iseas-Yusof Ishak Institute, has dubbed “bureaucratic paralysis.”
Critics contend that Trong, the leader of Vietnam’s Communist Party, has exploited the anti-corruption campaign to target political rivals, further compounding the sense of unpredictability plaguing the nation’s business landscape. “The campaign that the government has undertaken is not simply to eradicate corruption,” asserts Darren Tay, head of Asia country risk at BMI, a unit of Fitch Solutions. “There is also a political element. Trong has taken the opportunity to highlight the wrongdoings of his political rivals.”
Yet, despite these challenges, Tay remains optimistic about Vietnam’s investment appeal, citing factors such as low interest rates, competitive wages, and government incentives that continue to attract foreign manufacturers and exporters. “Vietnam has ensured that it remains welcoming to foreign investors. The economy is set up to favor exporters and manufacturers,” he affirms.
For victims like Nguyen Thi Thanh Thuy, however, neither foreign investment figures nor courtroom verdicts hold much solace. Her singular focus remains the recovery of her life’s savings, a quest that has propelled her onto the streets in defiant protest. “I will take to the streets to protest until we recover our money,” Thuy vows, her determination unwavering in the face of a system that has shaken her trust to its core.
As Vietnam grapples with the far-reaching implications of this unprecedented fraud case, the nation finds itself at a crossroads. Will it emerge from this quagmire with renewed commitment to transparency and accountability, restoring the confidence of investors and citizens alike? Or will the erosion of trust and the specter of instability cast a long shadow over its economic aspirations? The answer lies not merely in legal proceedings or rhetoric but in the tangible actions taken to rebuild the foundations of integrity that underpin any thriving society.
