What is the FATF? Influence of their standards on AML in Vietnam

Vietnam’s economy has been expanding at one of the fastest rates in Asia, making the country a rising destination for foreign direct investment. This momentum brings significant opportunities, but it also highlights the need for businesses to navigate a regulatory landscape that continues to mature. One of the most critical areas is anti-money laundering and counter-terrorism financing, where compliance plays a central role in building trust with regulators, partners, and investors.

For new entrants, the challenge lies not only in understanding international benchmarks such as those set by the Financial Action Task Force (FATF) but also in applying them within Vietnam’s local legal and operational context. In today’s article, we offer a roadmap to bridge that gap. Let’s begin by looking into what is the FATF and its purpose.

Looking into the FATF 40 Recommendations

As the world’s financial system becomes increasingly interconnected, no country can operate in isolation when it comes to preventing money laundering and terrorism financing. Vietnam is no exception. Therefore, Vietnam’s anti-money laundering framework is also built on the global standards of the Financial Action Task Force (FATF).

What is the FATF in AML?

The Financial Action Task Force (FATF) is the global standard-setter for combating money laundering and terrorism financing. Created in 1989 by the G7, it develops policies that protect the global financial system from abuse.

What is the purpose of the FATF? Although FATF does not issue binding laws, its guidance shapes the legislative structures of countries worldwide. Those that fall short risk being placed under increased monitoring, a status that can damage credibility and limit access to global markets.

What happens when a country is blacklisted by FATF?

A country is placed on the FATF blacklist when it has significant strategic deficiencies in its AML/CFT (and proliferation financing) regime and shows insufficient progress in addressing them. These jurisdictions are known as High-Risk Jurisdictions Subject to a Call for Action. For instance, the countries on this list are North Korea (DPRK), Iran, and Myanmar.

When a country is blacklisted:

• Enhanced due diligence and counter-measures: All FATF member jurisdictions are urged to apply enhanced due diligence to transactions involving blacklisted jurisdictions. In the most serious cases, countermeasures are called for to protect the integrity of the international financial system.
• Severe financial isolation: Blacklisted countries often face difficulties with correspondent banking relationships, access to trade finance, and the ability of their banks to transact internationally.
• Damage to reputation: Being blacklisted signals systemic AML/CFT failures and triggers sanctions, loss of investor confidence, higher borrowing costs, and reduced transaction volume.

To be removed from the blacklist, a country generally must commit to and deliver upon an action plan to strengthen AML/CFT laws, ratify major conventions (e.g., Palermo Convention, Terrorist Financing Conventions), and show effective implementation. Iran, for example, has been working on these points while remaining on the blacklist.

What happens when a country is on the greylist of FATF?

Greylisting is less severe than blacklisting. The status is for jurisdictions that have strategic deficiencies but have made a commitment to address them through an action plan. Notable countries on the grey list include Algeria, Angola, Vietnam, Nigeria, South Africa, Lebanon, etc.

Impacts of being greylisted are:

• Increased monitoring: FATF and FATF-style regional bodies observe the country’s progress in remedying AML/CFT weaknesses. The country must meet deadlines, enact policy or legal reforms, and demonstrate effectiveness in enforcement.
• Enhanced scrutiny by banks and investors: Institutionally, foreign banks and investors apply more rigorous checks (EDD), possibly rejecting customers or transactions as higher risk.
• Reduced capital inflows: Empirical studies (e.g., IMF) show that greylisting is associated with a statistically significant drop in capital inflow, with estimates of around 7.6% of GDP decline in capital inflows for developing/ emerging economies(1).
• Trade and remittance challenges: Payments (remittances, trade settlement) may slow, get more costly, or encounter more resistance. Correspondent banking relationships may be more cautious.
• Reputational cost: Even though the country is not being sanctioned broadly, greylisting signals risk, which can increase risk premiums, reduce foreign direct investment (FDI), and raise borrowing costs.

If the country effectively implements its action plan, passes mutual evaluations, and remedies its deficiencies, it may be removed from the grey list. Example: Croatia, Mali, and Tanzania were removed in recent FATF updates. Vietnam is also aiming for removal from the list.

The 40 Recommendations 

Central to FATF’s mission are the 40 Recommendations, which provide a flexible standardized system for countries to adapt to their own legal and financial environments. Rather than dictating exact rules, the recommendations establish principles that allow consistency across jurisdictions while giving room for local application.

In the cases of businesses entering markets like Vietnam, these standards are particularly relevant because they influence every step of client onboarding and compliance.

Core principles relevant to onboarding

Among the 40 Recommendations, several stand out as the foundation for effective onboarding:

• Risk-Based Approach (RBA): Institutions must assess risk according to customer type, geography, and service. Higher-risk clients require stronger controls, while lower-risk relationships can be handled with simplified measures.
• Customer Due Diligence (CDD): CDD involves identifying and verifying the customer, understanding the purpose of the relationship, and monitoring activity over time. It is not a one-off check but a continuous process of vigilance.
• Record-keeping: Financial institutions are expected to retain customer data and transaction records for several years, typically five. This makes it possible for regulators and investigators to trace funds and review activities if concerns arise.
• Suspicious Transaction Reporting: What activities is the FATF responsible for? When unusual or potentially illicit activity is detected, institutions must alert their financial intelligence unit. These reports serve as a critical link between the private sector and enforcement authorities.

These principles form the backbone of global AML and CTF efforts. As Vietnam’s own legal regulations draw heavily from FATF’s recommendations, they are adapting them to both local realities and international best practice.

Vietnam anti-money laundering laws and compliance requirements

The Vietnam AML legal management system is anchored by the Law on Prevention and Control of Money Laundering 2022 (Law No. 14/2022/QH15), supported by Decree 19/2023/ND-CP and Circular 09/2023/TT-NHNN.

Together, these instruments define the legal obligations, implementing measures, and technical procedures that financial and non-financial institutions must follow.

Law on Prevention and Control of Money Laundering 2022

Law No. 14/2022/QH15(2), effective July 1, 2023, serves as the cornerstone of Vietnam’s AML regime. In particular, key requirements under the law include:

• Vietnam-operated institutions must classify customers, products, and transactions into risk categories and apply proportional controls.
• Banks, insurers, securities firms, real estate companies, notaries, and lawyers involved in financial transactions now fall under AML obligations.
• Entities must verify identity, understand the purpose of accounts or transactions, and reassess when there are doubts about prior information.
• Institutions are required to retain documents and transaction data for at least five years after a business relationship ends.
• Any unusual or unexplained transaction, regardless of amount, must be reported to the Financial Intelligence Unit (FIU) under the State Bank of Vietnam.

By setting these broad duties, the Law on Prevention and Control of Money Laundering 2022 provides the legal foundation for day-to-day compliance in Vietnam.

Decree 19/2023/ND-CP

Issued in March 2023, Decree 19/2023/ND-CP(3) clarifies how the law should be applied in practice. It provides operational details that financial institutions and regulators rely on for consistency.

Core elements are as follows:

• Division of responsibilities: The decree specifies how ministries, supervisory bodies, and the State Bank of Vietnam coordinate to monitor compliance.
• Ongoing monitoring: Entities must track customer transactions over time so that every activity aligns with the stated business profile.
• Threshold reporting: The decree introduces reporting requirements for cash transactions and electronic transfers above certain values, even when not suspicious, to improve transparency.
• Beneficial ownership: Institutions must identify and verify the individuals who ultimately control or benefit from a legal entity. This closes loopholes often exploited to hide illicit funds.
• Information-sharing: Mechanisms are established to strengthen cooperation between regulators, law enforcement, and reporting institutions, which is critical to tracing and disrupting money laundering activities.

The decree thus operationalizes the law, bridging the gap between legal principles and enforceable compliance standards.

Circular 09/2023/TT-NHNN

At the technical level, the State Bank of Vietnam issued Circular 09/2023/TT-NHNN(4), which provides detailed instructions for financial institutions. It aims to standardize AML practices across the sector.

Notable requirements encompass:

• Onboarding procedures: Clear documentation standards are defined, including mandatory identity documents for individuals and corporate records for businesses.
• Enhanced due diligence (EDD): Institutions must apply stricter checks for high-risk categories such as politically exposed persons (PEPs), clients from jurisdictions with weaker AML regimes, or transactions involving complex ownership structures.
• Ongoing risk assessment: Customer risk levels must be regularly reviewed and updated, especially when new information or unusual transactions arise.
• Reporting formats: The circular provides templates and timelines for STRs and threshold transaction reports, ensuring consistency across institutions.
• Training obligations: Financial institutions must train staff regularly on AML rules and procedures to maintain vigilance and awareness.

Comparing Vietnam with Singapore and Hong Kong

Looking at Vietnam’s AML onboarding rules in isolation gives only part of the picture. When placed alongside Singapore and Hong Kong, two of Asia’s most mature financial hubs, the differences in maturity, approach, and enforcement become more visible.

Singapore: MAS and a prescriptive model

Singapore has developed one of the region’s most advanced AML regimes(5) under the Monetary Authority of Singapore (MAS). The model is prescriptive, with detailed circulars and notices guiding institutions step by step. Onboarding is highly digitized, with electronic KYC checks, national identity database integrations, and widespread use of regtech platforms. The reliance on technology shortens processing times and increases monitoring accuracy.

Vietnam’s system, by contrast, still leans on paper-based documentation and in-person verification. Although the 2022 AML law established the risk-based approach, regulatory guidance continues to evolve, and institutions often need local interpretation to apply requirements consistently.

Hong Kong: HKMA and a risk-based framework

Hong Kong, overseen by the Hong Kong Monetary Authority (HKMA), applies a mature yet flexible risk-based model(6). Institutions are expected to assess risk profiles and calibrate their onboarding procedures accordingly. The city’s role as a bridge between mainland China and global capital flows has driven rules that prioritize transparency in company structures and beneficial ownership.

Compared with Vietnam, onboarding in Hong Kong can sometimes involve fewer administrative hurdles, particularly for established corporate structures. Yet standards remain stringent, with significant penalties for non-compliance and ongoing supervision.

Vietnam: A developing distinctiveness

In short, Vietnam’s AML system is still maturing. Therefore, institutions must collect and verify documentation manually, apply enhanced checks for high-risk clients, and maintain extensive records. Unlike Singapore and Hong Kong, where digitization drives efficiency, Vietnam’s reliance on traditional processes often extends onboarding timelines.

These differences underscore Vietnam’s distinct position: not yet as streamlined as its regional peers, but steadily advancing toward international best practice.

The FDI imperative and why localized solutions are non-negotiable

Vietnam has become one of Asia’s most attractive destinations for foreign direct investment, yet the compliance environment remains complex. Knowing the laws in theory is not enough. What matters is how they are applied.

For instance, the IMF and World Bank emphasize that while Vietnam has made significant progress in strengthening its anti-money laundering system(7), practical enforcement can be less predictable than in Singapore or Hong Kong.

Language and cultural nuances

All official regulations, decrees, and circulars are issued in Vietnamese. Translation alone rarely captures the subtleties that influence regulatory expectations. The Asian Development Bank has highlighted that foreign institutions often underestimate these nuances, which frequently lead to avoidable onboarding delays.

To avoid unfavorable consequences, engaging with local professionals like BBCIncorp shall ensure that your business obligations are not only understood but also executed in line with supervisory practice.

Documentation and data discrepancies

Corporate and identification records from abroad often do not correspond neatly with Vietnamese standards. Differences in notarization, legalization, or registry extracts can result in repeated submissions or additional verification steps. The Financial Action Task Force has pointed to such mismatches as a recurring source of friction in emerging markets. For investors, the effect is slower onboarding and higher costs at the initial stage of market entry.

The evolving regulatory landscape

Vietnam continues to refine its anti-money laundering rules, most recently with new requirements on beneficial ownership disclosure under Decree 168/2025, effective July 2025(8). At the same time, a draft circular was released in 2025 to amend Circular 09/2023(9).

Regarding similar changes, the World Bank highlights that in developing economies, constant regulatory change is among the greatest risks facing foreign investors. As a result, businesses that rely on static global policies without adjusting to these changes often find themselves misaligned with the latest compliance obligations.

Why localized solutions matter

Addressing these realities requires more than generic compliance models. Specifically, localized solutions offered by professional services providers allow investors to align documents with domestic standards, anticipate new requirements, and manage dialogue with authorities effectively. The approach shall reduce costly delays, minimize exposure to penalties, and build trust with regulators.

To conclude

Vietnam’s rapid economic growth is matched by a steady evolution in its anti-money laundering regime. To understand the adoption of FATF recommendations, it is essential to know what is the FATF, as well as the introduction of laws such as the 2022 AML Law, Decree 19/2023, Circular 09/2023, and, most recently, Decree 168/2025, which demonstrate the country’s commitment to aligning with international standards while adapting them to local realities. The opportunity is clear for foreign entrepreneurs, but so is the complexity.

Onboarding clients or partners in Vietnam will require more than a general knowledge of global compliance principles. It calls for localized expertise to navigate language, documentation, and regulatory shifts with precision.

If you are looking for timely updates and expert guidance on Vietnam’s evolving regulatory landscape, please visit BBCIncorp’s resource site or email service@bbcincorp.com.

References:

(1) https://www.imf.org/en/Publications/WP/Issues/2021/05/27/The-Impact-of-Gray-Listing-on-Capital-Flows-An-Analysis-Using-Machine-Learning-50289

(2) https://chinhphu.vn/?pageid=27160&docid=207710&classid=1&typegroupid=3

(3) https://chinhphu.vn/?pageid=27160&docid=207830

(4) https://vanban.chinhphu.vn/?pageid=27160&docid=208451&classid=1&orggroupid=4

(5) https://www.mas.gov.sg/regulation/anti-money-laundering

(6) https://www.hkma.gov.hk/eng/key-functions/banking/anti-money-laundering-and-counter-financing-of-terrorism/

(7) https://www.elibrary.imf.org/view/journals/002/2024/306/article-A001-en.xml

(8) https://vanban.chinhphu.vn/?pageid=27160&docid=214334

(9) https://www.sbv.gov.vn/vi/web/sbv_portal/w/sbv626098

Share this article