Several weeks ago, staff at ANZ Royal Bank noticed a peculiar customer at one of their ATMs in Phnom Penh.
With a male companion looking on behind her, the woman inserted a card issued by Vietnam’s Techcombank and withdrew the maximum allowable amount of cash, US$2,000. Then, taking out a new Techcombank card for each transaction, she repeated the task 11 times in succession.
The woman is one of a growing number of Vietnamese nationals who bankers say have been cleaning out the Kingdom’s ATMs, taking advantage of the unusually large gap between Vietnam’s official and unofficial exchange rates to earn thousands of dollars in profits.
ANZ CEO Stephen Higgins said yesterday that Techcombank cardholders had withdrawn roughly $12 million in cash from his bank’s ATMs since mid-December, with the bulk coming in the past two weeks. They took roughly $5 million from ACLEDA Bank machines from the beginning of the month until yesterday, ACLEDA Executive Vice President So Phonnary said.
All told, Techcombank users have withdrawn “at least $20 million” in cash from Cambodian ATMs in the past few weeks in a scheme that has also stretched to Singapore and China, Higgins said.
“It’s very smart what they’re doing,” he said. “It’s one of those things where one person figures out this is an easy way to make money, tells a few people who tell a few more people, and suddenly you get busloads of people coming across the border to try and do it.”
The Vietnamese government has pegged the country’s official exchange rate at roughly 19,500 dong to the dollar, though the black market rate – also used legally by money changers in Cambodia – is closer to 21,000 dong to the dollar, a difference of about 8 percent.
The Vietnamese who have been travelling to the Kingdom have taken advantage of this disjunction.
At Cambodian ATMs, they receive US dollars that have been converted from the dong in their home accounts at the official exchange rate.
They can then trade these dollars for dong from Cambodian money changers or money changers in Vietnam who use the black market rate, earning the difference with the official rate.
ATM transaction fees eat into these profits, but even accounting for such costs, Higgins said the Techcombank users were likely earning about $20,000 for every $1 million in cash withdrawn.
Techcombank, he added, is uniquely exposed to the scheme. While most Vietnamese banks charge international transaction fees to make up for the difference between the dong’s official and unofficial rates, Techombank’s fees are unusually low. As a consequence, it has likely lost “about $1.5 million” from transactions in Cambodia in recent weeks, Higgins said.
An executive at another large bank who asked to remain anonymous said his institution had also seen a marked increase in ATM transactions recently, particularly near the Vietnamese border. Charles Vann, deputy general manager of Canadia Bank, said he, too, had noticed “a throng of Vietnamese” making withdrawals in recent weeks.
“I don’t think there is any problem for us, as long as they’re genuine and they’re not frauds,” he said.
Although Cambodian banks are not losing any money from the process, the Vietnamese cardholders are creating a nuisance for regular customers who are increasingly likely to find their ATMs out of cash, So Phonnary said. To combat the problem, ACLEDA appealed this week for intervention from international credit card firm Visa.
“We sent the information to Visa in order to get assistance,” So Phonnary said. “They replied to us, they said there is not any fraud. [Those making the withdrawals] are really cardholders and the cards are actual cards, not counterfeit.”
Despite the lack of response from Visa, ACLEDA moved on Wednesday to block Techcombank cardholders from using its machines, she said.
Higgins said ANZ had conferred with Visa and had concluded that blocking the users unilaterally would violate the companies’ agreement. The bank decided simply to lower its maximum daily withdrawal from $2,000 to $500, and to instruct security guards at its ATMs to be on the lookout for users wielding multiple cards.
“We have taken steps to prevent Techcombank users from accessing our ATMs, and where any of them are found in possession of multiple cards not in their own name, we will be seeking police intervention,” he said. Two men were arrested yesterday at an ANZ ATM in Dangkor district for holding the cards of other people, he added.
“I think any time that someone is there with 12 different ATM cards, it’s not a legitimate transaction,” he said.
Officials at the Vietnamese Embassy could not be reached for comment, nor could those at the National Bank of Cambodia. Khuoy Kry, head of the Bavet International Border Checkpoint in Svay Rieng province, said travellers were permitted to carry up to $10,000 cash across the border, and that ATM use was “out of our control”.
ANZ has counted more than 500 Techcombank users whose cards have been employed in the practice, though the actual number of people performing the transactions is likely lower, Higgins said. So Phonnary said she was unsure how many had performed the transactions with ACLEDA.
Jayant Menon, a currency specialist with the Asian Development Bank, said in an email that Vietnam had long grappled with the gap between its official and black market exchange rates.
“When exchange rate policy is used to substitute for monetary policy in trying to achieve objectives such as inflation control, the gap between official and unofficial rates can grow over time,” he said.
For those taking advantage at Cambodian ATMs in the meantime, however, it appears the music is about to stop; Higgins said Techcombank was working with Visa to institute new fees for international transactions by next month that would close off the arbitrage opportunity.
“While there’s that big gap between the official rate and the unofficial rate, it’s natural that people are going to try and exploit it,” he said. “I just think more and more people have cottoned on.”