Foreign currency transactions are banned but still popular in Vietnam

In order to avoid dollarization of the economy and difficulty in controlling transactions, the use of foreign currency in Vietnam has been tightened after the 2005 Foreign Exchange Ordinance took effect.

Accordingly, with foreign currency in cash, individuals only have the right to keep, carry, give, donate, inherit, and sell to licensed credit institutions. In addition to the above contents, all transactions, payments, listings, and advertisements are not allowed to be made in foreign currency, but in reality these activities still take place openly.

Buying and selling foreign currency on the 'black market'

Buying and selling foreign currency on the black market is a prohibited act but is one of the most common violations today.

With remittances flowing into Vietnam of about 13 billion USD, along with a large number of tourists each year, owning foreign currency with small value through giving and receiving is normal. Even in some big cities, giving lucky money with 2 USD has become a habit during the Lunar New Year. According to the Foreign Exchange Ordinance, individuals with foreign currency cash are entitled to keep and carry it with them. However, if they want to exchange it into Vietnamese Dong or use it for transactions, the sale of foreign currency must be done at a bank or paid through an intermediary including collection, entrustment, or agency.

The case of an individual in Can Tho who was recently fined VND90 million after receiving USD100 from a relative and exchanging it at a gold shop is a fairly common violation. According to lawyer Nguyen Van Hau, Vice President of the Ho Chi Minh City Bar Association, this type of violation occurs quite often because it is difficult for people to identify a licensed foreign currency purchasing location. "They simply look for the nearest location where this transaction can be carried out," said Mr. Hau.

List prices in foreign currency

Another form of violation that still occurs frequently is listing in foreign currency. Article 4, Circular 32/2013 of the State Bank stipulates that there are only 7 cases allowed to list prices in foreign currency, which can be divided into 4 main groups: authorized units at international border gates; licensed banks and foreign exchange trading organizations; units operating in the fields of aviation, hotels, tourism and diplomatic agencies and consular agencies.

However, in tourist cities or even large cities, foreign currency listing still occurs frequently and is difficult to control.

It is not difficult to find a price sign completely in USD or CNY in Nha Trang, Quang Ninh or even in District 1, Ho Chi Minh City.

In late March 2017, a souvenir shop in Ha Long City, Quang Ninh Province, was fined VND400 million by authorities for listing product prices in USD. In 2016, a business specializing in selling goods to Chinese customers in the city was also fined VND500 million for listing product prices in USD and Chinese Yuan.

Advertising in foreign currency

Advertising in foreign currency is also a common form of violation, especially in the tourism sector. According to the regulations of the State Bank, organizations providing air transport, hotels, and tourism services are allowed to list and advertise prices of goods and services in Vietnamese Dong and equivalent foreign currencies on websites and specialized publications using only foreign languages ​​(excluding menus and service price lists).

However, there are many cases where units only list prices directly in foreign currency, ignoring the equivalent in Vietnamese currency, or advertise in foreign currency on unauthorized information.

More than a month ago, a gemstone trading company in Da Nang was fined 450 million VND for using only USD in its product introduction. In the real estate sector, the rental price of apartments in expensive locations is mostly listed in USD, instead of VND. For example, a 30-40 m2 apartment around Hoan Kiem Lake, Hanoi has an average rental price of 500 USD to more than 1,000 USD per month.

Among the above cases, the use of foreign currency in payment and exchange is the most "accidental" case. Many violations are simply the exchange of foreign currency due to being given or receiving gifts. However, in the remaining cases, there is no shortage of violations originating from "intentional" errors. However, the current penalty framework for this behavior does not clearly distinguish each form or level of violation.

According to the Vice President of the Ho Chi Minh City Bar Association, the regulatory agency needs to make adjustments to the legal framework for foreign exchange transactions for cases like the individual who was recently fined in Can Tho.

"It is necessary to develop sanctions and penalty frameworks for each specific behavior and transaction scale instead of lumping them all together in one administrative penalty regulation," said lawyer Nguyen Van Hau, adding that it would be unfair for those who are punished, while the market is not lacking in larger-scale violations.