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How is commercial fraud fined?

Commercial fraud is a relatively common behavior in society. For business benefits and profits, some individuals and businesses have taken advantage of legal loopholes to engage in fraudulent activities. So, what exactly is commercial fraud? How is it dealt with under the law? Let’s explore this topic with NPLaw through the article below.

What is commercial fraud?

Commercial fraud refers to deceptive acts, schemes, or manipulations conducted in the field of commerce through activities such as purchasing, selling, trading, or importing and exporting goods and services, with the intent to obtain illicit gains. The parties involved in commercial fraud may include buyers, sellers, or both, with the fraudulent acts centered around goods and services.

Common forms of commercial fraud

At present, commercial fraud occurs frequently across the country in various regions and sectors.Fraudster use increasingly sophisticated methods to evade the control of regulatory authorities.

Common forms of commercial fraud include:

- Tax evasion; illegal printing, issuing, and trading of invoices or documents related to state budget contributions;

- Producing and trading counterfeit goods; hoarding; and manipulating the stock market;

- Corporate violations such as underreporting value-added tax (VAT) on goods or services;

- Incorrectly calculating deductions for personal and family circumstances when declaring personal income tax.

Legal sanctions for commercial fraud

Individuals or organizations engaged in commercial fraud may be subject to administrative fines or criminal prosecution depending on the nature and severity of the violation.

Administrative Sanctions

On August 26th, 2020, the Government issued Decree No. 98/2020/ND-CP on administrative fines in commercial activities, production, trading of counterfeit and banned goods, and consumer protection. Violations subject to fines include:

- Violations of business operations under the License as defined by legal regulations (unless otherwise covered by separate decrees on other areas of State management);

- Violations of trading services in prohibited sectors; production and trading of counterfeit and banned goods;

- Violations of trading smuggled goods; domestic goods subject to emergency measures; expired goods; unknown original goods or with other violations;

- Violations of trading tobacco;

- Violations of trading alcohol;

- Hoarding and stockpiling of goods;

- Violations in trade promotion activities;

- Violations in the export and import of goods and related services;

- Violations of consumer protection regulations;

- Violations in e-commerce activities;

- Violations regarding the establishment and operation of foreign traders and individuals doing business in Vietnam;

- Other commercial-related violations.

According to the Decree, violators may face warnings or fines. Notably, the Government also issued Decree No. 17/2022/ND-CP, amending Decree 98/2022/ND-CP, which adjusts fine levels as follows:

- The maximum fine for commerce is 100,000,000VND (for individuals) and 200, 000,000 VND (for organizations);

- The maximum fine for production and trade of counterfeit goods and prohibited goods, and protection of consumer rights is 200,000,000 VND (for individuals) and 400,000,000 VND (for organizations).

These above regulations increase in fines for consumer protection violations shows a heightened legal focus on protecting consumer rights when increasing infringements in practice.

Additional sanctions may include:

- Suspension of business licenses or professional certificates from 1 to 24 months;

- Temporary suspension of operations for 1 to 24 months;

- Confiscation of violating goods and means used in administrative violations.

Remedial measures may include:

- Forced to leave of the territory of the Socialist Republic of Vietnam or re-export goods, items, and means;

- Forced to destroy of harmful goods, including those affecting health, livestock, crops and the environment, and cultural products with toxic content;

- Forced to correct false or misleading information;

- Forced to remove violating elements from product labels, packaging, means of trade;

- Forced to recall substandard goods or products;

- Forced to return illicit profits or equivalent value of disposed/consumed illegal goods;

- Forced to recall defective products;

- Forced to cancel the results of the prize draw and re-organizing the prize draw for the lucky promotion program;

- Forced to revoke the ".vn" domain name of the e-commerce website or the mobile application on the application stores or on the provided addresses;

- Forced to return the business license that has been erased or modified to change the content of the agency or competent entity that issued the license.

Criminal prosecution

A significant feature of the Criminal Code 2015 is its regulations of criminal liability for commercial legal entities involved in certain offenses, including those that disrupt the economic management order. Unlike in the past, where commercial fraud was typically handled administratively, the current law allows legal entities to be criminally prosecuted for offenses such as:

- Smuggling (Article 188);

- Illegal transporting goods or currency across borders (Article 189);

- Producing and trading in prohibited goods (Article 190);

- Storing or transporting prohibited goods (Article 191);

- Producing or trading counterfeit goods (Article 192);

- Producing or trading counterfeit goods such as food, foodstuffs, food additives (Article 193);

- Producing or trading counterfeit goods such as medicine for treatment and prevention of diseases (Article 194);

- Producing or trading counterfeit goods such as animal feed, fertilizers, veterinary drugs, pesticides, seeds, etc. (Article 195);

- Hoarding (Article 196);

- Tax evasion (Article 200);

- Illegal printing, issuing, or trading invoices/documents (Article 203);

- Deliberate disclosing or concealing false information in securities (Article 209);

- Using inside information to buy and sell securities (Article 210);

- Manipulating the securities market (Article 211);

- Insurance fraud (Article 213);

- Evading payment of social insurance, health insurance, unemployment insurance contributions (Article 216);

- Violating competition regulations (Article 217);

- Infringing copyright and related rights (Article 225);

- Infringing industrial property rights (Article 226).

Depending on the nature and danger posed to society, these violations may carry different fines, including remedies provided under the Penal Code.

The above content is provided by NPLaw as legal consultation regarding commercial fraud. For more information and in-depth legal advice on this issue, please contact NPLaw at the following details: