Light touch called for on gold trade

May 14, 2024 | 11:37
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New measures to enforce stricter compliance and non-cash transactions in gold trading aim to increase transparency and regulatory oversight, but also raise concerns about their feasibility and potential disruption to traditional practices.
Light touch called for on gold trade
Under existing anti-money laundering regulations, transactions over a certain value must be reported, photo Le Toan

The State Bank of Vietnam’s (SBV) Ho Chi Minh City branch last week mandated that financial institutions and businesses involved in gold trading rigorously adhere to the invoicing regulations stipulated by the Ministry of Finance, ensuring compliance with anti-money laundering and counter-terrorism financing laws.

“Businesses must also monitor the buying and selling of gold bars and publicly post transaction prices at their venues,” a spokesperson for the SBV stressed.

In light of challenges related to gold bar transactions, the branch has requested that businesses promptly report back and offer suggestions for regulatory improvements. This directive is issued in response to frequent fragmented transactions in gold and silver, which often lack proper documentation, resulting in a transparency deficit and notable discrepancies between domestic and international gold prices.

The General Department of Taxation (GDT) has also been active, underscoring its recent initiatives to regulate electronic invoicing for gold transactions.

Earlier this month, the GDT also urged the SBV to help tighten monetary flows and consider enforcing mandatory non-cash payments for gold transactions. It also calls on local authorities to step up inspections and enforce compliance regarding invoice issuance.

Huynh Trung Khanh, an advisor to the World Gold Council in Vietnam, noted that a significant portion of the industry, comprising 5,835 gold and silver businesses accounting for up to 90 per cent of the market, has already adopted electronic invoicing. This development marks initial steps towards regulatory control over the sector.

Khanh, however, raised concerns about the feasibility of enforcing non-cash transactions across all gold sales.

“Mandating non-cash payments for gold transactions is not practical. Consumers, particularly the elderly who buy gold for savings, might be the first to react adversely, as not everyone has access to bank accounts or credit cards,” he stated.

He argued that while such a regulation could work for large transactions or for specific products like SJC gold bars, it would be impractical for smaller, everyday gold purchases.

“To date, no business sector has fully implemented a non-cash transaction rule. Imposing such a rule on the industry would be stricter than the regulations stipulated on gold trade management,” Khanh added.

Economist Ngo Tri Long also highlighted the deep-rooted preference for cash among Vietnamese consumers, particularly in rural areas, where gold is often bought as a small-scale investment or gift. “Imposing a cashless rule could significantly inconvenience these individuals, many of whom are not tech-savvy and lack the means for digital transactions,” Long pointed out.

He suggested that the proposal for non-cash payments should be limited to larger investment-grade purchases. “A policy requiring non-cash payments for transactions of one SJC gold bar or more would be more feasible and align better with the current economic landscape,” Long added.

Economist Vu Dinh Anh criticised the proposal as impractical. “The method of payment, whether for purchasing one thousand taels or just one tael of gold, should remain flexible, as it does not effectively regulate the market or deter gold purchases,” Anh remarked.

He further emphasised that banning cash transactions in the gold market would not address the disparities between domestic and global gold prices or the challenges in raw material imports, and could potentially worsen these issues.

There are experts who support the initiative. Nguyen Van Duoc, a member of the Vietnam Tax Consultancy Association and CEO of Trong Tin Accounting and Tax Consultancy, said, “Implementing non-cash payments would enhance management efficiency, facilitate tax collection, and streamline macroeconomic governance, resulting in a more transparent and efficient economy.”

Duoc pointed out a significant oversight in current practices. “We lack control over the amount of gold traded privately. Ideally, this initiative should have been enacted much earlier rather than being merely proposed now. It’s time for the SBV to intervene. Proper legal frameworks need to be established to appropriately regulate these transactions,” he suggested.

Despite his support, Duoc voiced concerns about potential barriers, such as limited public understanding and inadequate infrastructure for non-cash payments, which could particularly affect gold transactions.

“While not everyone is familiar with electronic banking, especially among older and rural populations, these are the minority. Overlooking these few cases may be necessary to achieve broader economic benefits,” he remarked.

Nguyen Van Thuc, a senior tax and accounting expert, recommended a cautious approach. “A preliminary survey or pilot programme should be undertaken before wide-scale implementation. This would allow us to make necessary adjustments and avoid any major issues during the policy’s rollout,” Thuc said.

Under the existing anti-money laundering regulations, transactions valued over VND400 million ($16,650) require reporting to the SBV. Businesses dealing in gold, silver, and gemstones, as well as payment intermediaries, must undertake thorough customer due diligence. This includes collecting, updating, and verifying customer information to gauge money laundering risks and ascertain the origins of assets.

Additionally, as per rules governing the gold market, entities are required to adhere to established accounting regulations, ensure proper issuance and usage of invoices, and are responsible for publicly listing details such as the weight, purity, and pricing of gold products at transaction points, maintaining accountability for product quality.

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By Luu Huong

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