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Vietnam rocked by $12.4 billion banking corruption scandal — Southeast Asia's largest ever

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Vietnam is facing its largest banking scandal, with the recent arrest of real estate developer, Truong My Lan, accused of embezzling around 304 trillion dong (approximately $12.4 billion).

The embezzlement: On Nov. 17, Vietnam's Ministry of Public Security alleged that Truong, the 79-year-old chairwoman of Van Thinh Phat Group, embezzled from Saigon Commercial Bank (SCB), where she was a majority stakeholder. Over several years, Truong allegedly operated over 1,000 domestic and foreign subsidiaries and shell companies, securing more than $43 billion in loans from SCB, with approximately one-third of this sum misappropriated through the creation of "ghost companies" by Truong, her family and associates.

The scandal has exposed weaknesses in the banking system, with calls for improved professional training, tighter regulations and enhanced inspection mechanisms to prevent further abuse.

Others involved: The ruling Vietnamese Communist Party has been conducting an anti-corruption campaign since 2016, resulting in the removal of top officials. In the latest scandal, the ministry has recommended the prosecution of 85 individuals, including government officials and associates of Van Thinh Phat Group and SCB, while the Communist Party's Central Internal Affairs Committee called for investigations into 23 state officials, including 12 from the State Bank of Vietnam.

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Party General Secretary Nguyen Phu Trong emphasized the imperative for communist authorities to accelerate and enhance the anti-corruption efforts, saying, “We won't stop here, but will continue for the long term.”

The anti-corruption drive has been criticized as evolving into a tool to maintain the party's legitimacy in Vietnamese politics.

Expecting more arrests: The current scandal is reportedly the largest corruption case in Southeast Asian history, surpassing the 1MDB scandal in Malaysia, which involved the theft of $4.4 billion from the country's sovereign wealth fund.

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In light of the news, there are suggestions that more major scandals and arrests are expected, including of the former party boss of Ho Chi Minh City, Le Thanh Hai, who is seen by many in the country as a symbol of corruption.

Widespread fear: There are concerns that the anti-corruption process may possibly affect economic stability. According to reports, local government officials and civil servants have become hesitant to approve infrastructure investment deals due to fears of corruption accusations. Some experts believe that investigations into private sector corruption have a significant impact on business confidence in Vietnam, instilling widespread fear of investigations and scrutiny from the Communist Party.

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