Capital flows from China into Vietnam keep growing — and face growing scrutiny. Banks, as reporting entities under the Anti-Money Laundering Law 2022, perform KYC and risk assessment on every significant capital transaction. FDI enterprises receiving capital without preparing source-of-funds documentation risk delayed disbursement or even "frozen" transactions pending verification.
This article analyzes AML/KYC obligations and how to prepare.
Table of contents
- 1. Who are reporting entities? Where do FDI enterprises stand?
- 2. What the bank will ask: KYC and beneficial ownership
- 3. The lawful-source-of-funds dossier
- 4. Capital via intermediaries: Hong Kong, Singapore
- 5. Suspicious transaction red flags
- 6. Five-step internal KYC process
- Q&A
1. Who are reporting entities? Where do FDI enterprises stand? {#s1}
Under the Anti-Money Laundering Law 2022 (No. 14/2022/QH15, effective 01/3/2023), reporting entities include financial institutions and organizations/individuals in relevant non-financial businesses as prescribed.
FDI enterprises receiving investment capital are usually not directly reporting entities. But the bank — through which the capital flows — is a reporting entity with duties to:
- Identify customers (KYC);
- Assess money laundering risk;
- Report suspicious and large-value transactions to the State Bank.
In practice: the enterprise has no direct reporting duty but must cooperate — providing complete information and documents when the bank requests. Non-cooperation itself is treated as a risk signal.
2. What the bank will ask: KYC and beneficial ownership {#s2}
Under Article 9 of the AML Law 2022, customer identification includes: collecting, updating, and verifying customer identification information; verifying beneficial ownership information of institutional customers.
For Chinese investors, banks typically require:
- The investor's legal documents (business license, company charter);
- An ownership chart from the investor down to the ultimate controlling individual;
- Identification of the beneficial owner;
- The purpose and nature of the investment relationship.
Enterprises should prepare this dossier before the capital moves — don't wait for the bank's questions to start requesting documents from the Chinese side.
3. The lawful-source-of-funds dossier {#s3}
- [ ] The investor's legal documents (business license, charter);
- [ ] Ownership charts and beneficial owner information;
- [ ] The investor's outbound investment resolution/decision (China has ODI approval procedures for outbound investment);
- [ ] Capital contribution/share purchase contracts;
- [ ] Capital contribution/share purchase registration under the Investment Law 2025 (Article 21(3) — mandatory in 3 cases: market-access-conditional business lines; foreign investors holding above 50% of charter capital; organization holding land on islands/border/coastal/defense-sensitive areas; this form is not subject to IRC issuance — Article 26(2)(c));
- [ ] Fund transfer documents through investment capital accounts (the only lawful channel);
- [ ] The investor's financial statements proving financial capacity matching the capital amount.
Golden rule: every unit of capital must flow through investment capital accounts. "Roundabout" capital via personal accounts or cash is the highest AML risk signal.
4. Capital via intermediaries: Hong Kong, Singapore {#s4}
In principle, routing capital through intermediary companies in Hong Kong or Singapore is normal in international investment structures. But each intermediary "node" must be explainable:
- Does the intermediary have substantive operations (office, staff, financial reports)?
- Are fund flows through it fully documented?
- Does the structure have a clear economic purpose (tax optimization, regional management…)?
Multi-layer shell structures without clear economic purpose are risk signals banks scrutinize — and may refuse to process.
5. Suspicious transaction red flags {#s5}
Under Article 34 of the AML Law 2022, reporting entities must report suspicious transactions when grounds for suspicion exist. Common red flags in investment capital receipts:
- Transaction value inconsistent with the investor's scale and financial capacity;
- Capital via personal accounts instead of capital accounts;
- Splitting transactions to evade reporting thresholds;
- The investor cannot provide beneficial owner information;
- Multi-layer ownership without clear economic purpose;
- Refusing or delaying source-of-funds documentation.
6. Five-step internal KYC process {#s6}
FDI enterprises should build an internal KYC process before receiving capital:
- Identify the investor: collect legal documents and ownership charts;
- Verify the beneficial owner: trace to the ultimate individual;
- Assess risk: by country, sector, transaction structure, and value;
- Monitor transactions: reconcile actual fund flows with approved dossiers;
- Retain records: for the statutory minimum period; ready to cooperate with the bank and authorities when requested.
AML violations can attract administrative penalties in the monetary and banking field (Decree 88/2019/ND-CP, amended by Decree 143/2021/ND-CP) — KYC/AML compliance costs far less than fines and special supervision.
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Q&A {#faq}
Q: Is an FDI enterprise receiving capital from China a reporting entity under the Anti-Money Laundering Law?
A: Directly, usually not — reporting entities are mainly financial institutions and certain relevant non-financial businesses. But the bank handling the capital flow is a reporting entity and will perform KYC and risk assessment on the capital receipt. The enterprise must cooperate by providing information and documents proving lawful source of funds.
Q: What documents are needed to prove lawful source of funds?
A: The dossier includes: (1) the investor's legal documents (business license, charter); (2) ownership charts and beneficial owner information; (3) the investor's outbound investment resolution/decision; (4) capital contribution/share purchase contracts; (5) fund transfer documents through investment capital accounts; (6) the investor's financial statements proving financial capacity.
Q: Is there an issue with Chinese capital routed via Hong Kong or Singapore?
A: In principle, routing through intermediaries is normal in international investment structures. But each intermediary "node" must be explainable: does the intermediary have substantive operations, are fund flows fully documented? Multi-layer shell structures without clear economic purpose are AML risk signals banks will scrutinize.
Q: Which transactions are considered suspicious when receiving investment capital?
A: Red flags: transaction value inconsistent with the investor's scale and financial capacity; capital via personal accounts instead of capital accounts; multiple small transfers to evade reporting thresholds; the investor cannot provide beneficial owner information; multi-layer ownership without clear economic purpose.
Q: How should an enterprise build an internal KYC process?
A: Five steps: (1) identify the investor — collect legal documents and ownership charts; (2) verify the beneficial owner; (3) assess risk by country, sector, and transaction structure; (4) monitor transactions — reconcile actual fund flows with approved dossiers; (5) retain records for the statutory minimum period and cooperate with the bank when requested.
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This article is general legal information and does not replace legal advice for any specific matter.
Need a lawyer for AML/KYC compliance — investment capital structuring? Contact FLAT Law Firm — we help build KYC processes, review source of funds, and work with banks. Hotline: 0988424851.
