Money laundering via telecommunications scratch cards: Due to lax management?

The Ministry of Public Security stated that in the multi-billion dollar gambling ring led by Phan Sào Nam and Nguyễn Văn Dương, up to 97% of the total gambling money went through intermediary payment gateways.Of that amount, top-ups from telecommunication and game cards accounted for 97%, and telecommunication companies (Viettel, Vinaphone, Mobifone) received 15.5 - 16.3% of that, equivalent to approximately 1,402 billion VND.

So, are there any loopholes in the management of the authorities that allow money from telecommunications cards to become a means of payment for gambling, and for telecommunications companies to earn trillions of dong as the Ministry of Public Security reported?

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The police agency stated, "The benefits for telecommunications companies in providing services for this gambling activity are significant. The lax management of the issuance and use of telecommunications scratch cards makes these cards easily become a means of payment for non-telecommunications services, creating opportunities for individuals to exploit them to build payment systems for online gambling."

The investigating agency also stated that payment gateways play a crucial role in organizing online gambling activities, but their management is very lax, allowing intermediary payment businesses such as VNPT EPAY, Ngan Luong, Home Direct, and Giai Tri So to easily provide services to the Rikvip/Tip.club online gambling game, enabling gamblers to participate in gambling for extended periods.

Investigations reveal that large-scale online gambling operations like Rikvip would be impossible without intermediary payment gateways and scratch cards. Money gambled through these intermediary payment gateways accounts for 97% of the total gambling activity.

Mr. Vu Hoang Lien, Chairman of the Vietnam Internet Association, stated that currently, scratch cards are only considered a means of payment for services. However, this is only true if used to pay for phone bills. If used to pay fees to other service providers and purchase other goods, then scratch cards should be considered a financial instrument (a form of virtual currency) and managed as such.

"Due to a lack of proper assessment of the role, there has been no management of the entire process from issuance to consumption of scratch cards or virtual currencies through intermediaries. This is a loophole that allows individuals to exploit it for malicious purposes," Mr. Vu Hoang Lien assessed.

In Vietnam, a number of e-wallets have recently emerged, operating on a financial model that allows users to top up their wallets with prepaid phone cards (such as those from Viettel, Vinaphone, and Mobifone), with a discount of approximately 20% (for example, topping up 1 million VND with a prepaid card yields 800,000 VND). This can be considered a crucial factor in creating an "illegal financial ecosystem" for illicit activities such as money laundering, tax evasion, and online gambling. The reason is that when electronic transactions are encrypted, they become a method of exchanging electronic goods, unregulated by any financial institution.

Both the issuance and use of scratch cards need to be strictly managed.

According to Mr. Vu Hoang Lien, from the banking and financial sector's perspective, management is needed right from the issuance of scratch cards and game cards (a form of virtual currency), and the flow of value exchange from issuance to consumers. Especially in the paid gaming sector, it's necessary to clearly identify which types of games allow individuals to own value on the system but are not managed like individuals owning money on the system, leading to tax evasion.

Regarding the Ministry of Information and Communications (MIC), Mr. Vu Hoang Lien suggested that "a technological system is needed to control this type of virtual currency from its issuance to its final transfer and consumption, especially to manage the users."

"The Ministry of Information and Communications needs to impose sanctions to ensure that telecommunications companies, including Viettel, Vinaphone, and Mobifone, are held accountable. First and foremost, they must be accountable to consumers to prevent their money from being misused. With their partners, these companies must be responsible for acting in accordance with the law, in a healthy manner, and in a way that benefits society. The Ministry of Information and Communications not only needs to manage but also needs a better verification process from the issuance to the consumption of scratch cards. If this is achieved, it will greatly assist tax authorities and the state in preventing individuals from engaging in illicit activities," Mr. Vu Hoang Lien emphasized.

Many experts believe that, to ensure the soundness of electronic payment operations and combat money laundering, authorities need to coordinate inspections of intermediary payment units (e-wallets) that accept top-up via scratch cards. If this model continues to exist unchecked, it will create dangerous consequences and provide loopholes for various types of money laundering..