Banks in Vietnam have implemented tighter measures for Russian companies to facilitate payments
In the heart of Asia, financial institutions in Vietnam have been requesting a package of documents on transactions to find evidence of a connection to the national economy. This move comes as a response to the complex transit schemes involving the country, which has led to a shift in businesses seeking alternatives in other Asian jurisdictions.
The complexity of calculations in transactions passing through Vietnam has increased throughout 2024, making it a challenge for businesses dealing with goods from the region. However, companies dealing with goods from Vietnam do not encounter problems, as these complex transit schemes have not affected them directly.
The complex transit schemes, however, have caused concerns for Vietnamese banks, particularly the threat of secondary U.S. sanctions. To ensure compliance with these potential sanctions, banks are imposing additional conditions on payments by Russian businesses. These conditions include the physical delivery of goods to Vietnam or the presence of a Vietnamese citizen among the founders of the contracting company. Banks now demand a full set of supporting documents—contracts, invoices, transport, and customs papers—that prove the transaction's legitimate connection to Vietnam’s economy.
This move reflects Vietnam’s careful balancing act: maintaining trade relations with Russia while adhering to international sanctions regimes and protecting its banking sector from the risk of financial penalties under secondary sanctions. It also aligns with Vietnam’s broader effort to digitalize and enhance transparency in its banking system, which may improve monitoring of cross-border payments.
For Russian companies genuinely engaged in importing or processing goods in Vietnam, the impact is minimal since they meet the new documentation requirements easily. However, for Russian firms using Vietnam as a transit hub or engaging in indirect or transit schemes, the conditions have become very restrictive. These businesses face delays or blocked payments and are increasingly exploring alternative routes through other Asian jurisdictions.
The tighter banking controls add compliance costs, slow transaction times, and reduce the attractiveness of Vietnam as a financial intermediary for some Russian companies. As a result, alternative jurisdictions in Asia are being sought by businesses due to the complicated transit schemes involving Vietnam. Vietnamese banks are now working with Russia only if there is an obvious "local economic benefit," such as the delivery of goods or services to the country or a connection with its jurisdiction.
In conclusion, the complex transit schemes involving Vietnam have led to a shift in businesses seeking alternatives in other Asian jurisdictions. This move by Vietnamese banks is aimed at ensuring compliance with potential secondary U.S. sanctions and maintaining the integrity of their banking sector.
The complex transit schemes have led to increased challenges for businesses dealing with goods from Vietnam, as they now need to provide a full set of supporting documents to banks to prove the transaction's legitimate connection to Vietnam's economy. Due to these restrictions, some Russian businesses are increasingly exploring alternative routes through other Asian jurisdictions, where the financial industry and business environment may be more favorable.
