Extraordinary Vietnam fraud case exposes the inherent vulnerabilities of banks
On April 11 2024, a businesswoman
- On April 11 2024, a businesswoman
in Vietnam was sentenced to death for taking out US$44 billion (£35bn) in fraudulent loans from one of the country’s biggest banks. - By using hundreds of shell companies (among other methods) she ended up owning more than 90% of the bank.
- But on a basic level, this extraordinary case of fraud exposes the inherent vulnerabilities of banks, which use deposits to fund loans.
- The scale of fraud and corruption that took place at SCB highlights the devastating impact that a corrupt environment can have on the financial sector.
- This idea is backed up by research which suggests that corruption is not always economically destructive, but can in fact play a supportive role.
Corrupting influences
In some cases then, corruption can lead to businesses and institutions functioning more efficiently. Projects get started, jobs are created, contracts are awarded. Things get done.
- While financial regulation which targets corruption may be effective, when authorities have too much regulatory power, this can breed corrupting practises.
- Research suggests that it brings about opportunities to receive payment for regulatory favours, subsidies and government contracts.
- As a result, an extreme case such as the one observed in Vietnam is unlikely to unfold in the west.
George Kladakis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.