POLITICAL RISKS AT A GLANCE

ABN Amro pays 4.5 million $ for losses incured by a Vietnamese state bank

In November 2006, ABN Amro paid US$4.5m for losses incurred by one of Vietnam’s top state owned banks; Industrial and Commercial Bank of Vietnam (INCOMBANK). Between 2003 and 2006 the deputy head of finance at INCOMBANK’s Haiphong branch suffered US$ 5.4m in losses in over 500 currency deals brokered by the Dutch bank. In order to recoup the losses, the state bank brought a criminal and a civil suit against ABN Amro, citing a 1999 regulation requiring all currency traders to be registered with the central bank; something the deputy head of finance at INCOMBANK was not. To ABN Amro’s surprise, this made the trading between 2003-2005 illegal and even more surprising since the regulation had not been enforced for any trader for over seven years. In February 2006, the police had four ABN Amro employees arrested, adding pressure for the firm to pay for the losses. It was portrayed in the state controlled media as a strong "anti-corruption measure" against “rouge traders”. In November 2006, ABN Amro paid out US$4.5m, citing no wrong doing but concern for their imprisoned staff. With weak courts, and power primarily centered within the Communist party, state owned companies in Vietnam can use their influence over state resources, such as the police, to recoup losses.