Remittance ‘grey market’ thrives towards year-end
Remittance ‘grey market’ thrives towards year-end
Remittances are pouring into Vietnam towards the year’s end, but most of this money is bypassing the official banking sector.
Agents including gold shops and foreign exchange counters, which are not allowed to trade foreign currencies, are some of the most popular routes for money to pour into the country. There are also illegal groups which transfer remittances from South Korea, Japan or the US to Vietnam by air.
Earlier this year, the Japanese police arrested Tran Xuan Chin for money laundering. Chin was suspected to have transferred more than 500 million yen ($4.2 million) into Vietnam. In June 2014, the Binh Minh gold shop in Ho Chi Minh City was also fined $1,400 for illegal foreign exchange trading.
According to Decree 202/2004/ND-CP, organisations that trade remittances illegally can be fined from $2,100 to $3,200. Nguyen Hoang Minh, deputy CEO of the Ho Chi Minh City branch of the State Bank of Vietnam, says that very few gold jewellery shops were on the list of organisations permitted to exchange currency.
Despite these facts, a slew of unlicensed gold shops and individuals are still engaged in transferring remittances. Customers are lured by the attractive exchange rates, low handling fees and fast procedures offered by the grey market. They are also not required to provide official reasons for transferring money, which is compulsory in banks.
“It is highly risky to trade remittances on the grey market. That said, as long as Vietnam continues to have a cash economy, these unauthorised agents will still prosper,” Basico law firm employee Truong Thanh Duc told VIR.
In an effort to attract more customers, banks in Vietnam have recently introduced a series of promotions. Those receiving overseas remittances from Vietcombank between December and January 2015 will have a chance to win prizes. Meanwhile, remittance customers at Sacombank will receive money as a year-end gift from the bank.
Money from overseas family members has long been an important source of income for the economy. The World Bank reports that Vietnam is ranked ninth for the highest inbound remittances worldwide. According to VietinBank CEO Le Duc Tho, Vietnam is expected to receive $12.1 billion in remittances in 2014 alone.
Vietnam received total remittances of $96.66 billion between 1993 and 2014, equivalent to 6.8 per cent of the country's GDP. Annual growth in remittances has surged to 22.4 per cent.
“For the past few years, overseas remittances have seen substantial growth. This is the result of more transparent and welcoming laws, as well as Vietnam’s macroeconomic stability and low inflation rate. Moreover, banks in the country have also pushed their promotions and services, which has encouraged more overseas Vietnamese to send money home,” said Nguyen Duc Kien from the Economic Commission of the National Assembly.
