FATF’s latest follow up review of Vietnam reveals a system that is steadily strengthening its defences yet still carrying structural weaknesses that affect how banks, intermediaries and gatekeepers manage money laundering and terrorism financing risk. The assessment highlights visible improvements, but also confirms that several technical gaps continue to hinder Vietnam’s alignment with global AML expectations.
Vietnam’s second enhanced review focuses on the most sensitive pillars of its framework, including the national risk based model, the money laundering offence, targeted financial sanctions for terrorism and proliferation financing, and suspicious transaction reporting. These areas form the core of an effective regime, and their condition explains why Vietnam remains under an expedited follow up process rather than moving into a more routine monitoring cycle.
The overall picture is one of steady progress paired with weaknesses that remain operationally significant. Updated national risk assessments for money laundering and terrorism financing have become more sophisticated and now influence real policy decisions. At the same time, serious deficiencies persist in the criminalisation of money laundering, the enforceability of sanctions, and the breadth of suspicious transaction reporting obligations. These remaining gaps continue to expose institutions to heightened financial crime risk.
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Vietnam FATF assessment puts risk based improvements at the forefront
Vietnam now records sixteen recommendations rated compliant or largely compliant, while more than twenty remain only partially compliant and a smallnumber are still non compliant. Compared with earlier evaluations, this marks an improvement, yet the overall balance shows that the majority of standards still require technical strengthening.
The most notable upgrades appear in the national risk based architecture. Vietnam has completed updated national risk assessments covering 2018 to 2022 for both money laundering and terrorism financing. These assessments examine vulnerabilities linked to legal entities and arrangements, beneficial ownership, cross border movement of funds and goods, and high risk predicate offences such as online gambling, tax evasion and fraud. They use a more structured evidence base including law enforcement statistics, reporting entity questionnaires and analytical reports from the financial intelligence unit.
The terrorism financing component similarly evaluates domestic and external threats, vulnerabilities within the non profit sector and potential misuse of virtual assets and service providers. One shortcoming remains: the terrorism financing risk of commercial legal entities has not yet been fully evaluated. Given the importance of companies and partnerships in cross border business, this gap leaves room for terrorism networks to exploit corporate structures.
A key difference from earlier years is that Vietnam now uses these assessments to drive action plans. The government has approved a post assessment strategy for terrorism financing with short, medium and long term phases. The central bank has issued its own plans focused on risk mitigation, and major ministries have released detailed operational guidance translating the national findings into reforms, inspections and coordination measures.
Reporting entities must now align their internal risk assessments with national conclusions. The anti money laundering law adopted in 2022 explicitly requires private sector participants to consider national findings in their customer classification and risk controls. Supporting circulars provide detailed criteria for assigning customer risk ratings based on behaviour, products, channels and location. Some microfinance institutions and people’s credit funds identified as low risk may apply simplified measures under controlled conditions, which aligns with international practice.
Despite these improvements, deficiencies remain. Internal AML policies and controls are not always required to receive formal approval from senior management. This weakens governance and can create inconsistencies in how institutions implement risk based procedures. Internal control and audit expectations do not fully apply to extra small enterprises and natural persons who qualify as reporting entities, leaving pockets of the market with lighter oversight.
Criminalisation gaps continue to affect Vietnam’s FATF rating
The money laundering offence remains one of the most important unresolved issues. Although Vietnam has made progress, the provision still does not fully match global standards.
The first problem is that the core offence does not clearly cover all forms of transfer and conversion of criminal proceeds. While the civil code recognises a wider set of concepts, those definitions are not integrated into the criminal provision. Without explicit language, it becomes harder to prosecute complex layering and value movement schemes that criminals use to obscure origins and distance themselves from illegal funds.
Another significant issue involves predicate offences when committed by legal persons. Vietnam’s law does not fully extend corporate criminal liability to all categories of serious offences such as corruption, drug trafficking, arms trafficking and certain forms of fraud. When these acts are committed by corporate entities or by certain non commercial legal persons, there may be no prosecutable predicate. Consequently, the related proceeds may fall outside the scope of the money laundering offence.
A third gap relates to indirect proceeds. Although the anti money laundering law defines proceeds as assets obtained directly or indirectly through illegal activity, that definition is not directly linked to the criminal offence itself. This absence makes confiscation of transformed, substituted or reinvested assets more difficult and creates potential loopholes during investigation and prosecution.
The follow up review also highlights that penalties for natural persons convicted of money laundering are not yet sufficiently proportionate or dissuasive. Corporate liability still does not extend to all relevant forms of legal persons. These weaknesses contribute strongly to the decision to maintain the money laundering offence at partially compliant.
For financial institutions, these legislative gaps carry practical consequences. When certain crimes or corporate structures are not clearly covered, it becomes more challenging to map typologies, escalate concerns and support law enforcement. Criminals may deliberately exploit areas where prosecutorial reach is uncertain, and compliance teams must compensate by applying additional scrutiny even if not explicitly required by national law.
Improving terrorism financing sanctions but progress remains uneven
Targeted financial sanctions for terrorism financing have seen meaningful improvements. A revised decree now makes freezing obligations applicable to all natural and legal persons, requires freezing without delay and without prior notice, and provides sanctions for entities that fail to comply. Domestic designation powers have been expanded to include entities owned or controlled by designated persons or those acting on their behalf.
Despite this, several technical issues remain unresolved. The evidentiary standard for making a designation proposal has not been clearly defined. Authorities have not demonstrated how they provide identifying information to other countries when requesting foreign designations. Public guidance to reporting entities on freezing, unfreezing and dealing with potential false positives remains thin, and some core operational instructions have not been published.
Communication of designations and updates has improved, but the absence of detailed guidance can leave institutions uncertain about how to interpret directives, especially when assets of designated persons are held in complex arrangements or mixed accounts. Without clearer supervisory expectations, responses to matches may vary significantly from one institution to another.
Proliferation financing controls remain further behind. Vietnam has structured its framework around relevant UN Security Council resolutions and uses the defence ministry as the central publication hub. A dedicated website lists designations and provides automated alerts, which has increased transparency.
However, freezing obligations linked to proliferation lists are not yet fully enforceable. Penalties for non compliance are weak or absent, and prohibitions on providing funds or other assets are not directly binding on all relevant persons and entities. This reduces the practical impact of proliferation related sanctions. Reporting obligations also lack strong enforceability, leaving supervisors with fewer tools to drive full compliance.
These weaknesses matter because sanctions implementation sits at the intersection of screening technology, operational procedures and regulatory clarity. Lack of enforceability can encourage a box ticking approach rather than a genuine protective mechanism. Institutions operating in Vietnam must therefore maintain stronger internal processes than those minimally required by law to ensure alignment with global correspondent banking expectations.
Suspicious transaction reporting remains a critical structural gap
Suspicious transaction reporting is one of the areas with the clearest need for improvement. Under the current framework, reporting entities must submit a report in two main circumstances. One is when a transaction is conducted at the request of a suspect, defendant or convicted person and property is suspected to be owned or controlled by that individual. The other is when the transaction triggers one of the specific indicators listed in the AML law and its implementing circulars.
These conditions are narrower than the requirement to report whenever there are reasonable grounds to suspect that funds are the proceeds of criminal activity or linked to terrorism financing. Relying on predefined indicators can limit reporting of unusual behaviours that fall outside existing templates but would nevertheless raise concern. This rigid approach increases the risk of underreporting and creates blind spots around new or evolving typologies.
Terrorism financing reporting obligations are even more fragmented. Some provisions require reports to go to the central bank’s anti money laundering department, while others direct reports to the ministry of public security. A new decree introduces a duty to report suspected terrorism related assets within twenty four hours, but the interplay between these different obligations is not fully clarified. Without unified channels, reporting entities may be uncertain about where to send information or may duplicate submissions.
The legal basis for the financial intelligence unit also requires updating. Although the anti money laundering department continues to operate as the de facto FIU, the regulation that originally established it has expired, and the replacement legal instrument did not take effect during the review period. This ambiguity could expose the intelligence cycle to legal challenge and may complicate cooperation with foreign counterparts.
Attempted transactions are subject to reporting, and reports have no minimum value threshold, which aligns with international practice. However, because the core scope of reportable suspicion remains narrow, these strengths cannot compensate for the structural limits.
From the perspective of banks and other reporting entities, the safest approach is to define internal suspicion triggers more broadly than the domestic rules. Institutions should train analysts to identify behavioural and transactional indicators that align with global best practice rather than rely exclusively on domestic typology lists. This is particularly important for terrorism financing, where early detection often depends on weak patterns that do not match standardised indicators.
Related Links
- Vietnam Anti Money Laundering Law 2022
- Decree 93 2024 on terrorism related freezing measures
- Decree 143 2021 on administrative sanctions in the banking sector
- Overview of AML and CFT regulatory framework in Vietnam
- United Nations resources on targeted financial sanctions
Other FinCrime Central Articles About Vietnam
- Vietnam’s Costly Battle to Escape the FATF Grey List
- Vietnam Reforms its Beneficial Ownership
- Vietnam Dismantles $80 Million Transnational Money Laundering Network
Source: FATF – Mutual Evaluation of Vietnam (PDF)
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