A sweeping police investigation into an alleged Indian-linked diamond smuggling network has triggered one of the biggest crises in Vietnam’s jewellery industry, exposing weaknesses in gemstone certification, rattling consumer confidence and prompting nationwide regulatory inspections.
The investigation began in 2024, when Vietnamese authorities arrested Indian national Shaileshkumar Hareshbhai Prajapati at Ho Chi Minh City’s Tan Son Nhat International Airport after finding 715 undeclared diamonds worth about 6.8 billion Vietnamese dong (US$268,000, or Rs 543 crore) concealed in his luggage.
Investigators now believe the seizure was only the first clue in a much larger operation. On July 2, the Thanh Hoa Province Investigation Police Agency announced it had dismantled an alleged transnational smuggling network operating since 2024. Police said they had prosecuted 22 suspects following coordinated raids at 20 locations, and alleged that the syndicate had carried more than 28,000 diamonds into Vietnam across 141 trips, routing the stones from India via Hong Kong before concealing them in luggage, shoes and clothing to evade customs checks.
Less than two weeks later, on July 14, Vietnam’s Ministry of Public Security disclosed that the investigation had expanded further, with authorities examining the roles of jewellery traders, gemstone-certification laboratories and retailers to determine how allegedly smuggled diamonds had entered the country’s legitimate retail market. The case has since widened considerably, with police detaining dozens of suspects while continuing to investigate the movement of diamonds estimated to be worth more than 1.5 trillion Vietnamese dong (about US$57 million, or Rs 500 crore).
Certification under scrutiny
According to investigators, the alleged operation extended well beyond smuggling. Police allege that after entering Vietnam, many diamonds were taken to gem-certification laboratories, where their original inscriptions from GIA were laser-removed and replaced with new markings, before fresh certificates overstating the stones’ quality were issued – allowing them to be sold through legitimate retail channels at significantly higher prices.
Authorities are now trying to establish whether certification procedures were deliberately manipulated, or whether weaknesses in oversight allowed the diamonds to enter the formal market unnoticed.
The investigation has placed PNJ Laboratory, the certification arm of Phu Nhuan Jewelry (PNJ), under intense scrutiny after police detained its former director. PNJ has stated that the allegations relate to an individual rather than the company, and maintains that no suspected smuggled diamonds entered its retail network. Chief executive Phan Quoc Cong has described the episode as a lesson in strengthening corporate governance, while saying the company is cooperating fully with investigators and reviewing its internal procedures.
The probe has also drawn attention to Saigon Jewelry Company (SJC), after police announced a separate investigation into another alleged smuggling network accused of supplying thousands of lower-grade diamonds to the retailer between 2022 and 2024. Authorities have not suggested that the two investigations are directly linked.
Loss of confidence
The investigation has rapidly evolved into a confidence crisis. Vietnamese consumers have long viewed diamonds, alongside gold, as a store of wealth – partly because decades of war, inflation and economic uncertainty encouraged investment in tangible assets. The latest allegations have challenged that perception.
Many jewellery owners have begun seeking independent verification of their diamonds, while retailers nationwide report increased enquiries about product origin, certification and buyback policies.
Financial expert Nguyen Tri Hieu has urged consumers to exercise caution, arguing that diamonds are considerably less liquid than gold and far harder for ordinary buyers to value independently. He has advised purchasers to rely only on reputable retailers and recognised certification systems.
Dr Huynh Thanh Dien, a lecturer at Nguyen Tat Thanh University, said the scandal exposed a fundamental weakness in the market: the biggest risk, he said, lies in the information gap between buyers and sellers, noting that consumers depend heavily on jewellers and grading certificates when assessing a diamond’s value.
The investigation has also unsettled investors. Shares in PNJ have fallen sharply since the probe became public, reflecting concerns over reputational damage and tighter regulatory oversight. According to Nguyen Tran Phuong Nga, an equity research analyst at SSI Research, any prolonged erosion of consumer confidence could weigh on jewellery sales even after the criminal investigation concludes.
Nationwide inspections
The fallout has prompted a broader regulatory response. Vietnam’s Ministry of Industry and Trade has launched nationwide inspections of businesses dealing in gemstones and precious metals, focusing on product origin, certification procedures and labelling practices. Officials say the exercise aims to strengthen consumer protection and improve traceability across the supply chain.
Industry groups are also calling for structural reform. Huynh Trung Khanh, vice-chairman of the Vietnam Gold Traders Association, has proposed establishing an independent national gemstone-certification authority, arguing that separating certification from commercial interests would improve transparency and help restore market confidence.
The timing is significant: Vietnam imported more than US$122 million (about 3.17 trillion Vietnamese dong, or Rs 1,060 crore) worth of diamonds in the first six months of 2026, with India remaining its largest supplier, followed by Belgium. The investigation has also raised concerns beyond the jewellery trade. “If people are smuggling diamonds, the likelihood is they’re smuggling other things as well,” said Kenneth Scarratt, vice-president of the World Jewellery Confederation (CIBJO), urging Vietnamese authorities to strengthen customs enforcement and improve oversight of the international gemstone trade.