Distinguishing money laundering, terrorist financing and proliferation financing
Unofficial translation from the Vietnamese original.
In the international financial security system and under the standards of the Financial Action Task Force (FATF), money laundering (ML), terrorist financing (TF) and the financing of the proliferation of weapons of mass destruction (PF) represent three core risk pillars. States, supervisory authorities, financial institutions, and relevant designated non-financial businesses and professions all bear legal responsibilities and obligations to counter these three types of conduct. Although they are often grouped together under the AML/CFT/CPF legal framework, each has clearly distinct characteristics in terms of its nature, motives and modus operandi.
In terms of the legal basis in Vietnam, these concepts have been institutionalised in very specific terms. Under the Law on Anti-Money Laundering of 2022, money laundering is defined as conduct by an organisation or individual aimed at legitimising the origin of assets derived from crime. Meanwhile, the Law on Counter-Terrorism of 2013 defines terrorist financing as raising or providing money or assets in any form to terrorist organisations or individuals. As regards proliferation financing, Government Decree No. 81/2019/ND-CP on countering the proliferation of weapons of mass destruction defines it as providing money or assets, or supporting the provision of money or assets, to state or non-state actors for the proliferation of weapons of mass destruction.
In terms of similarities, all three activities are serious violations of the law that directly infringe upon and threaten the integrity of the global financial system, national security and world peace and order. To achieve their aims, perpetrators constantly seek to fully exploit loopholes in banking, money transfer services, international trade, shell companies or virtual crypto-assets. They all use sophisticated concealment techniques to break the trail of funds and conceal the identity of beneficial owners and the true purpose of transactions. Consequently, all three types of conduct are subject to the stringent standards of the FATF and to United Nations Security Council resolutions.
However, the fundamental differences between these three risk pillars lie in their motives, sources of funds and the way funds move. Money laundering focuses on turning “dirty money” derived from crime into “clean money” to be enjoyed or reinvested. Laundered funds are usually large in scale, move through complex networks of shell and front companies and ultimately return to the very party that generated them. Monitoring of money laundering therefore centres on detecting suspicious transactions based on unusual volume and frequency.
Terrorist financing and proliferation financing do not focus on whether the original source of the money is dirty or clean, but on its end use. The funds serving these two types of conduct may come from criminal activities or from entirely legitimate donations and charitable sources. In terrorist financing, funds are often split into amounts below monitoring thresholds to finance extremist individuals or non-governmental organisations, and are moved through the banking system, informal value transfer channels or smuggling. Screening for this risk relies heavily on blacklists.
In proliferation financing, financial activities are usually moderate in scale but extremely complex in nature, and are directly linked to international trade. Transactions are often disguised as ordinary business to support designated entities and individuals or to procure dual-use items for the development of weapons of mass destruction. Those behind these flows of funds are often states, state entities or sophisticated procurement networks. Consequently, the key to PF monitoring is screening transactions involving dual-use goods, high-risk countries and designated lists.
A clear distinction between these three types of financial crime is the foundation on which competent authorities, financial institutions, and relevant designated non-financial businesses and professions can build flexible and effective defence strategies. This is fully consistent with the spirit of the FATF Recommendations and affirms Vietnam's determination to fulfil its international commitments, as exemplified by Decision No. 1139/QD-TTg of 26 June 2026 of the Prime Minister promulgating the National Action Plan to fulfil the commitments of the Government of Vietnam on anti-money laundering, counter-terrorist financing and counter-proliferation financing. As high-tech crime becomes increasingly sophisticated, stepping up international cooperation, raising compliance awareness and fully applying the risk-based approach are the golden keys to protecting national financial security, while preventing organisations and individuals from unwittingly becoming links in the chain of illicit financial flows.
Vu Quang Dai – Centre 81