Vietnam diamond market faces transparency crisis after smuggling scandal

The issue has come into sharper focus following the prosecution of the owners of three jewelry businesses – Kim Ly, Ngoc Chau Au, and Ngoc Tam – in connection with a transnational diamond smuggling network allegedly operated by Indian nationals from Hong Kong.

The investigative police agency of the Department of Public Security of Thanh Hoa Province in north-central Vietnam on Tuesday charged the owners of the three prominent jewelry businesses in Ho Chi Minh City.

Stores operating under those brands have since closed temporarily, with some suspending business for periods ranging from two weeks to a month.

The closures have left many customers unable to resell diamonds purchased from those retailers.

Several other diamond stores in Ho Chi Minh City have also reduced operations or temporarily shut their doors, further limiting options for consumers seeking liquidity.

Fragmented market with limited resale options

Unlike gold, which benefits from standardized pricing and broad market acceptance, diamonds present unique challenges in valuation.

Every stone differs in carat weight, color, clarity, and cut, making pricing far more subjective.

Tran Trong Duc, CEO of wealth management and financial advisory firm Virtus Prosperity, said that the diamond market is inherently fragmented.

“Diamonds are a fragmented physical commodity,” he said.

“Retail prices depend heavily on branding, individual business policies, and emotional factors.

“Buyback prices are typically much lower because there is no centralized secondary market."

Most jewelers in Vietnam only agree to repurchase diamonds that they originally sold, provided customers can present original invoices and grading certificates.

Diamonds purchased from competing retailers are often rejected outright.

Recent allegations involving diamond smuggling and concerns over potentially fraudulent grading certificates have further undermined market transparency, making independent valuation and resale even more difficult.

Consumer protection remains limited

Legal experts note that consumers have few legal protections when it comes to resale.

Lawyer Truong Thanh Duc, director of ANVI Law Firm, said there is no legal requirement obligating retailers to buy back products sold by competitors.

“Many jewelry stores only repurchase items they originally sold. This has long been common practice,” the lawyer said.

While retailers may purchase products from other brands during periods of strong demand, they generally do so at significantly discounted prices, he noted.

As a result, diamond transactions in Vietnam have traditionally relied on the reputation of individual businesses rather than legally enforceable guarantees.

That leaves customers exposed if a retailer encounters financial difficulties, suspends operations, or shuts down following legal troubles.

Price gaps, liquidity challenges

Experienced diamond investors say pricing varies considerably across brands, even for stones with identical specifications.

Differences in retail prices are influenced not only by a diamond's intrinsic quality but also by brand reputation, warranty policies, after-sales service, and buyback commitments.

Large diamonds face even greater resale challenges.

Stones measuring some 10 millimeters, roughly equivalent to three carats, or larger are often difficult to sell because of their high value, limited buyer pool, and lengthy appraisal process.

Diamond investor N.D. said that natural diamonds certified by internationally recognized grading organizations such as the Gemological Institute of America (GIA) or the International Gemological Institute (IGI), particularly those meeting high standards under the internationally recognized 4Cs grading system – carat, color, clarity, and cut – generally retain value more effectively.

Smaller diamonds, especially laboratory-grown stones, have come under growing price pressure.

Some sellers are forced to accept losses of up to 50 percent of the original purchase price, she shared.

Even then, payment is often delayed while the stone undergoes verification before funds are released.

Calls for stronger regulation

Financial experts argue that the recent controversy reflects long-standing regulatory shortcomings rather than an isolated crisis.

Nguyen Thi Thu Huong, financial adviser at FIDT, said Vietnam lacks a unified regulatory framework governing diamond certification, information disclosure, and traceability.

She identified three major issues.

First, Vietnam's legal framework remains incomplete.

Unlike gold, which is subject to relatively comprehensive oversight by the State Bank of Vietnam and quality measurement regulations, diamonds are regulated only through separate areas such as import procedures, customs administration, and anti-smuggling enforcement.

Second, current regulations do not require grading laboratories to operate independently from retailers.

As such, businesses can run their own gemological laboratories, potentially creating conflicts of interest because the seller and the certifier may belong to the same corporate group.

Many international markets consider independent certification essential, much like independent auditing in the financial sector.

Third, consumers ultimately shoulder the financial risk.

Even when retailers promise to repurchase diamonds, widespread selling during periods of declining market confidence can strain a company's liquidity, potentially limiting its ability to honor those commitments.

In such cases, buyers' interests depend largely on the retailer's financial strength.

Experts argue that meaningful reform should include a stronger legal framework, independent certification standards, improved traceability, and greater transparency throughout the diamond supply chain.