VZCZCXRO1440
RR RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHHI #2995/01 3450926
ZNR UUUUU ZZH
R 110926Z DEC 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 4107
INFO RUEHHM/AMCONSUL HO CHI MINH 2222
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEHTC/AMEMBASSY THE HAGUE 0107

UNCLAS SECTION 01 OF 02 HANOI 002995 
 
SIPDIS 
 
STATE FOR EAP/MLS AND EAP/EP 
TREASURY FOR CAROL CARNES AND SUSAN CHUN 
STATE PASS USTR DAVID BISBEE 
TREASURY PASS FRB SAN FRANCISCO/TERESA CURRAN 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ETRD EINV VM
SUBJECT: ABN-AMRO Bank Pays Police USD 4.5 million 
 
REF: HANOI 2314 
 
HANOI 00002995  001.2 OF 002 
 
 
(U) This cable contains sensitive information and should not be 
placed on the internet. 
 
¶1. (SBU) Summary and Comment:  After months of investigation by the 
State Bank of Vietnam (SBV), Vietnam's central bank, and the police, 
the Dutch bank ABN-AMRO reportedly acquiesced with a police order to 
pay USD 4.5 million to settle a foreign exchange dispute with the 
state-owned Industrial and Commercial Bank of Vietnam (Incombank). 
The ABN-AMRO case has attracted much international attention as an 
example of lack of transparency, and of elite involvement in the 
legal system, on the eve of Vietnam's entry into the WTO.  End 
Summary and Comment. 
 
State Bank of Vietnam (SBV) backs police allegations 
--------------------------------------------- ------- 
 
¶2. (SBU) In August 2006, the state-owned Industrial and Commercial 
Bank of Vietnam (Incombank) filed a lawsuit against ABN AMRO 
demanding payment of USD 5.4 million it claimed was lost in 
unauthorized foreign exchange deals with the Dutch bank ABN AMRO. 
Following this legal action, the SBV conducted separate 
investigations at both Incombank and ABN AMRO.  The investigations 
finished at the end of September and the SBV's final report was 
signed in October, but has never been published.  Initially, 
observers expected that SBV's involvement was going to reduce 
tension in the case, and that the SBV report would be in favor of a 
settlement.  Instead, the case was handed over to the police, and 
the SBV's final report apparently backed police allegations that the 
Dutch bank ABN AMRO had committed criminal infractions (reftel). 
 
Police allegations 
------------------ 
 
¶3. (SBU) The police reportedly focused on what it considered to be 
504 speculative foreign exchange transactions made with Nguyen Thi 
Quynh Van, the suspected trader of the Incombank's branch in Hai 
Phong city.  The police nonetheless subsequently requested ABN AMRO 
pay back the money that was lost, alleging the bank should have 
known that it was dealing with an unlicensed trader from Incombank, 
and hence, had breached local banking regulations.  They cited a 
regulation on the books supposedly confirming wrongdoing by the 
Dutch bank, but which had not been routinely enforced to that point. 
 ABN-AMRO cried foul.  As widely reported in the local and foreign 
press, the case has raised concerns in the foreign business 
community about police strong-arm tactics in what many banking 
professionals would see as a routine banking practice. 
 
GVN Leadership Instructions 
--------------------------- 
 
¶4. (SBU) On October 30, Vietnam's Office of the Government issued 
Official Letter 6250/VPCP-V.I giving the Prime Minster (PM)'s 
instruction to the police, the prosecutors, the SBV and concerned 
agencies to bring the case to trial quickly.  The PM was quoted 
publicly telling concerned agencies to ensure transparency in the 
trial process, to minimize state loss, and to prevent any impacts on 
the investment climate.  The PM also asked the Ministry of Public 
Security (MPS) to coordinate with the Ministry of Foreign Affairs, 
the SBV and the People's Supreme Procuracy to directly inform the 
representative of ABN AMRO of the violations by its employees.  In 
addition, the PM highlighted the GVN's direction in settling this 
case that if the violators honestly confessed their faults and 
compensated for the loss to recover the consequences, they might be 
considered for a reduction or exemption of criminal liability 
according to laws. 
 
¶5. (SBU) Official Letter 6250/VPCP-V.I also asked the SBV to 
investigate foreign exchange transactions between the state-owned 
Bank for Agriculture and Rural Development and ABN AMRO and other 
foreign banks, and to report back to him.  In addition, the PM 
requested the SBV to rectify and strengthen supervision of foreign 
exchange business at commercial banks. 
 
ABN-AMRO's Decision 
------------------- 
 
¶6. (SBU) ABN AMRO had consistently denied any wrongdoings. It 
believed that its foreign exchange trades with Incombank were in 
accordance with common market practice, as well as the legal and 
 
HANOI 00002995  002.2 OF 002 
 
 
regulatory framework being enforced by the relevant authorities at 
the time.  ABN AMRO Asia's Chief Executive Officer recently said the 
bank was working with relevant authorities to try and find a 
solution to the dispute.  On November 25, however, the press 
reported that ABN AMRO has acquiesced with the police order and paid 
a total of USD 3.8 million and VND 12 billion (equivalent to a total 
of USD 4.5 million) to the temporary seizing account of the MPS's 
Investigation Office held at the Hanoi State Treasury. 
 
¶7. (SBU) When Incombank filed the lawsuit against ABN AMRO, it was 
reported that there would be a trial.   The trial was postponed, 
however, pending investigations into the case.  Now with ABN AMRO 
reportedly agreed to pay according to the police order, some think 
there may not be a trial.  Some speculate ABN AMRO may have simply 
decided that its reputation is worth more than USD 4.5 million so it 
decided to swallow the loss to prevent further damages to its image 
and further harassment. 
 
Comment 
------- 
 
¶8. (SBU) The ABN AMRO case highlights one of the major problems of 
doing business in Vietnam: lack of transparency.  Many here firmly 
believe that the reason the finger of blame was pointed at the 
foreign bank, and that (at the same time) there was no trial, is 
that Incombank's Nguyen Thi Quynh Van is under the direct protection 
of a very senior political or security sector leader.  By "paying 
the bill," the Dutch allow that political system here to sweep the 
actions of the protected person under the rug.  Financial players 
wonder how they can operate effectively when the regulatory 
situation is so unclear and subject to manipulation. 
 
¶9. (SBU) Why did they do it?  ABN AMRO officials earlier vigorously 
asserted their lack of wrongdoing and maintained they operated in 
accordance with the law.  The abrupt turnaround and reported payment 
to settle suggest doubts about the bank's confidence that it could 
get a fair shake in the legal system.  It has been very difficult to 
get straight factual information from the Vietnamese government on 
this case.  SBV declined to provide a copy of the PM's letter.  Even 
a request in writing for information, as the SBV recommended, has 
remained unanswered. Thus, observers have had to rely heavily on 
whatever has been published by the state-controlled press.  Overall, 
the handling of the ABN AMRO case sends a negative signal to 
potential investors, particularly in the financial sector, at a time 
when the country is working to attract foreign investment.  End 
comment. 
 
MARINE 
 
 
 
 
 
4