Which businesses are required to comply with anti-money laundering regulations in Vietnam?

In fact, many businesses still think that anti-money laundering is the story of banks or financial institutions. It is this awareness that makes many businesses only focus on business activities without paying enough attention to building a compliance system. It is not until they are inspected or sanctioned that businesses realize that their obligations do not depend on whether they participate in money laundering or not, but on whether the law defines them as subjects who must take preventive measures or not.

The important question that many businesses need to ask today is not how to do anti-corruption, but whether their businesses are in the group that must comply with anti-corruption regulations or not.

Two gold trading enterprises have just been handled by the management agency for violating regulations on anti-corruption[1]. It is worth noting that these businesses were not determined to have committed money laundering, but were handled for failing to fully fulfill preventive obligations as prescribed by law such as building internal processes, identifying customers, retaining information and implementing the reporting regime. The case shows a noteworthy fact: the law on anti-corruption not only aims to punish money laundering acts but also imposes a proactive preventive responsibility for many businesses operating in sectors at risk of being taken advantage of to hide the origin of illegal assets.

Who must comply with anti-money laundering regulations?

The important question that many businesses need to ask today is not how to do anti-corruption, but whether their businesses are in the group that must comply with anti-corruption regulations or not.

The Law on Anti-money Laundering in 2022 does not apply to the entire business community. Instead, the law defines a special group of subjects known as reporting subjects. These are organizations and businesses operating in fields where cash flows, assets or transactions are at risk of being taken advantage of to legalize illegal funds. It is these entities that must establish a governance and control system to detect, prevent and report suspicious transactions.

The first group of subjects and also accounts for the largest proportion is financial institutions. In addition to commercial banks, the law also includes financial companies, financial leasing companies, life insurance enterprises, securities companies, fund management companies, payment intermediaries, e-wallet service providers, foreign exchange businesses and many other organizations with the function of providing financial services. This is the group with the highest level of risk due to the frequent receipt, circulation and management of customers' cash flows.

However, the scope of regulation of the Law on Anti-money Laundering does not stop at the financial sector. One of the notable business groups is real estate businesses when participating in brokerage or real estate purchase and sale transactions for customers. The large transaction value, the ability to use multiple payment methods and the fact that it is not always easy to identify the source of cash flows have long made this sector considered by international organizations to be at risk of being exploited for money laundering.

Another area that has just attracted public attention is the trading of gold, silver and gemstones. The recent case of two gold enterprises being dealt with is a clear demonstration that the regulator has begun to strengthen the inspection of the implementation of anti-money laundering obligations for this group of enterprises. In fact, gold and precious metals are highly valuable, easy to store, easy to transfer, and can be used to convert illicit assets into legal assets. Therefore, the law requires businesses in this field to identify customers, keep records and report transactions that are subject to reporting, instead of focusing only on pure business activities.

Businesses dealing in casinos, prize-winning electronic games, betting, lotteries and other types of prize-winning games are also subject to reporting. The common point of these sectors is that cash flows are often converted through many forms such as buying chips, redeeming rewards or electronic payments, creating conditions to hide the origin of assets if there is no appropriate control mechanism.

Less noticeable but also significant are the group of businesses that provide legal, accounting and auditing services. Not all practice activities are governed by the Law on Anti-money Laundering. The obligation only arises when these practice organizations participate in performing or assisting in the execution of transactions on behalf of the client such as the purchase and sale of businesses, the establishment of legal entities, asset management, account management, real estate purchase and sale or high-value financial transactions. At that time, the service provider is no longer just a consulting unit but becomes a link that can be taken advantage of in the process of legalizing assets.

This has special implications for commercial law firms, accounting firms, and auditing firms. In many M&A deals, corporate restructuring or cross-border investment, the consultant not only performs legal work but also has to assess anti-money laundering risks, identify beneficial owners, verify customers and fulfill reporting obligations as required by law.

In addition to the above areas, the law also regulates enterprises that provide business formation services, provide nominee directors or shareholders, company secretarial services, trust services or other legal entity management services. These are all services that can be exploited to hide the true owner or create complex ownership structures to serve money laundering.

The more important responsibility is to build a risk management system that is suitable for the scale and nature of its operations.

What must enterprises subject to adjustment do?

Being in the reporting group does not mean that businesses must report all transactions that arise. The more important responsibility is to build a risk management system that is suitable for the scale and nature of its operations.

First of all, enterprises must develop internal regulations on anti-money laundering, clearly define the responsibilities of each department, the process of identifying customers, the mechanism for keeping records, and the process of detecting and handling suspicious transactions. This is not a formal document but a platform for businesses to demonstrate compliance when inspected or audited.

Next is the obligation to recognize customers. Businesses must collect and verify customer information, identify beneficiary owners when necessary, and apply enhanced measures to customers or transactions with a high level of risk. In many cases, identifying the right beneficiary owner is much more important than just verifying the person named on the record.

Along with that is the obligation to monitor transactions, keep records and report transactions that are subject to reporting or have suspicious signs. It is worth noting that businesses do not have to prove that money laundering has occurred to be reported. As long as there are reasonable grounds to suspect, the enterprise has the responsibility to perform its obligations as prescribed.

In the context of businesses increasingly promoting digital transformation and expanding cross-border activities, the anti-corruption obligation is also no longer separate from the requirements of corporate governance, personal data protection, electronic customer identification and risk management. Many multinational corporations have now integrated the anti-money laundering program into their overall compliance management system instead of treating it as an independent legal requirement.

For Vietnamese businesses, compliance pressure is also increasing from many sides. Not only state management agencies strengthen inspection and handling of violations, banks, investment funds, international financial institutions and foreign partners also increasingly consider the anti-corruption program as an important criterion when evaluating partners. A business that does not build the right control system may have difficulty opening bank accounts, accessing capital, participating in M&A transactions or establishing partnerships with international partners, even if the business has never violated the law.

The case of two gold trading enterprises being handled for violating regulations on anti-money laundering is therefore beyond the scope of an administrative sanction. This is a signal that the regulator is shifting sharply from perfecting the legal framework to strengthening the supervision of implementation. At the same time, the incident also reflects the trend of management in line with the recommendations of the Financial Action Task Force (FATF), according to which enterprises in the risk group must actually operate the anti-money laundering system, not just issue regulations to meet the requirements on paper.

It can be seen that not all businesses in Vietnam have to fully fulfill their obligations on anti-corruption. However, for businesses operating in areas that are defined by law as reporting subjects, compliance is no longer a mere administrative procedure but has become a core requirement of modern corporate governance. In the context of increasingly drastic inspection activities and the increasing importance of international compliance standards, determining whether your business is subject to reporting or not is the first step to building an effective risk management system  protect corporate reputation and enhance the ability to participate in domestic and international transactions.