Hanoi (VNA) – The Hanoi People’s Court on January 14 handed down sentences to 18 defendants in the fake milk case involving the Z Holding Company, convicting them of producing and trading in counterfeit goods being food, foodstuffs, or food additives (Article 193 of the Penal Code), violating accounting regulations causing serious consequences (Article 221), and laundering money (Article 324).
During the trial, the jury found numerous institutional and regulatory loopholes in the management of food products, corporate accounting and finance, and cash-flow supervision. On that basis, the first-instance verdict issued a series of comprehensive and direct recommendations aimed at thoroughly addressing these shortcomings.
Regulatory shortcomings laid bare
According to the verdict, the case at Z Holding was particularly serious, large in scale, complex in nature and prolonged over time. Hoang Quang Thinh, Chairman and General Director of Z Holding, together with accomplices, organised the production and distribution of counterfeit nutritional and dietary food products (HIUP powdered milk), generating illegal revenues amounting to trillions of VND and causing significant harm to consumers.
The defendants employed various tactics to conceal corporate revenues, resulting in especially large losses to the state budget and severely undermining public trust in food safety management and fair business practices. The case attracted widespread public attention.
Through the adjudication process, the court identified multiple loopholes in institutional frameworks and regulatory practices. These included lax quality management, licensing and post-market inspections, with the testing, appraisal and supervision of functional foods largely relying on dossiers provided by enterprises, in the absence of independent verification and regular inspections. Coordination and information sharing among State management agencies were found to be inadequate, as no unified data-sharing mechanism exists, resulting in delayed detection of violations – only after serious consequences had occurred.
The court also pointed to weaknesses in corporate accounting and finance monitoring, as reflected in the large-scale use of dual bookkeeping and revenue falsification for tax evasion. In addition, controls over advertising and product communications were deemed insufficient, enabling enterprises to exploit social media platforms and celebrities to promote misleading claims, while regulatory tools and sanctions remained weak. Notably, gaps in the legal framework on anti-money laundering were identified, allowing illicit proceeds to be legitimised through multiple accounts and shell companies amid ineffective monitoring of suspicious transactions.
Comprehensive, targeted recommendations
The first-instance verdict devoted a separate section to broad and direct recommendations aimed at “sealing institutional and regulatory gaps” revealed by the case.
It called on competent authorities to review and refine the legal framework on food quality and safety, including amendments to the 2010 Law on Food Safety and Government Decree No. 15/2018/ND-CP, towards tighter control of all food products and preventive and curative medicines that directly affect public health.
The court stressed the need to strengthen post-market inspections, introduce mandatory periodic checks for self-declared products, and require batch-based sampling procedures. At the same time, market surveillance should be intensified, particularly for food products, to tighten control over counterfeit and substandard goods, alongside the development of a national goods database to support traceability, anti-smuggling and anti-counterfeiting efforts.
Regarding corporate finance and accounting, the court underscored the necessity of enhanced inspection and supervision mechanisms to ensure early detection of violations, coupled with stringent penalties for dual bookkeeping, tax evasion and accounting fraud.
The verdict also recommended that relevant agencies improve coordination and data sharing by establishing an interlinked national database among product licensing authorities, tax agencies, customs, police, market surveillance and health bodies. It urged tighter supervision of advertising and e-commerce activities, clearer regulations on the legal liability of advertisers, KOLs and social media platforms when promoting health-related products, and mandatory product verification via identification codes, electronic labels or online traceability systems.
To prevent future money laundering, the court called for stronger mechanisms to control illicit financial flows and suspicious transactions.
In terms of State management, the first-instance court recommended that competent authorities tighten supervision of the production and trade of food and foodstuffs, promptly prevent violations, and ensure that such illegal acts do not harm the economy, public health or consumer rights.
The jury also urged investigation agencies and procuracies to continue resolute action and strict handling of crimes in this field, contributing to stronger deterrence and more effective law enforcement./.
