Southeast Asia (SEA), made up of 11 unique countries with diverse cultures and geopolitics, has steadily become an area of opportunity for businesses around the globe, serving as a key manufacturing center for items such as electronics and labor-intensive goods and a hub for global supply chains. With 10 of the 11 Southeast Asian nations considered economic powerhouses in the Association of Southeast Asian Nations (ASEAN), this region offers many opportunities to businesses that can successfully navigate the multitude of deeply entrenched compliance challenges.

Over the past year in Southeast Asia, numerous factors such as changes in political leadership, regulatory updates, and shifts in global priorities have led to the exacerbation of existing risks, as well as a multitude of new compliance challenges for both organizations operating in the region as well as those whose supply chains exist there. Let’s take a closer look at the evolution of compliance risks, problems in this key region and how businesses can manage those risks and meet compliance requirements.

Compliance Problems in Southeast Asia

From South Asia geopolitics to bribery and corruption, there are a wide range of problems in Southeast Asia.

Fraud and corruption

Fraud, bribery, and corruption are major areas of concern in the Southeast Asian market. In fact, 23 percent of SEA respondents to a PwC survey believe they lost a business opportunity due to a competitor paying a bribe, and another 17 percent had been asked to pay a bribe to alleviate supply chain disruption.

When it comes to corruption and fraud, Malaysia, Thailand, Indonesia, and the Philippines are considered especially high-risk countries, and sectors such as waste management, healthcare, and real estate experience high levels of corruption. In Vietnam, over the last few years, there has been significant movement from political leadership in the fight against corruption. The anti-corruption drive in Vietnam has acknowledged that there have been more than 11,000 cases of economic fraud and kickbacks which has brought focus on more than 1,400 suspects.

Risk in the Real World: In June, over 60 high-profile government officials were involved in a country-wide Covid test kit price-gouging scheme in Vietnam. Arrests were made at the highest levels of government with the Ministry of Health, the Ministry of Science and Technology, and the Military Medical Academy. Health Minister Nguyen Thanh Long and Hanoi Party Chairman and former Minister of Science and Technology Chu Ngoc Anh were both removed from their positions, expelled from the Communist Party of Vietnam, and charged. It is projected that the corruption case amounted to hundreds of millions of dollars expropriated.

Environmental, social, and governance (ESG) issues

ESG-related issues in Southeast Asia can cause headaches for maintaining compliance, especially considering climate goal deficits, and increasing international legislation. For the region, there remains a large emission gap of 2.6 to 3.2 gigatons vs. 2030 targets for the region, based on COP26 goals. Approximately 50 percent of SEA’s GDP is contributed by small-to-medium sized entities that need to be engaged in the green economy.

As more companies, including private equity, invest in ESG initiatives, it becomes challenging to understand what compliance looks like amid constantly evolving human rights, social, and sustainability legislation in the region. ASEAN-6 countries (Singapore, Malaysia, Thailand, Vietnam, Indonesia, and the Philippines) all require some form of ESG reporting for which the respective governments provide some direction. Even with some instruction, however, these disclosure initiatives are new within the last few years, so it remains difficult to understand what “good reporting” looks like and what enforcement mechanisms are in place. Other SEA countries, such as Brunei, Cambodia, Laos, and Myanmar, do not require any form of ESG reporting and are facing significant degradation of forests, destruction of the local environment, and exploitation of natural and human resources/capital.

Risk in the Real World: Nestlé has been widely accused of greenwashing in the Philippines to meet ESG compliance standards. The fourth greatest polluting company according to the most recent Global Brand Audit Report, Nestlé is claiming they will be “plastic neutral” by 2025, while the program actually burns plastic waste — creating toxins that harm local wildlife, people’s health, and the environment. As greenwashing practices become more prevalent worldwide and across multiple industries, it will become even more crucial for organizations to thoroughly vet business partners and vendors in order to ensure sound — and accurate — adherence to ESG and sustainability standards.

Supply chain risks

Not only is it challenging to ensure regulatory compliance within your own company operations, but businesses also need to be aware of compliance issues among supply chain partners. According to PwC, 32 percent of SEA respondents reported instances of supply chain misconduct, and another 26 percent reported instances of third-party misconduct with bribery being the primary form. Companies with supply chain partners throughout Southeast Asia need to be constantly monitoring for potential supply chain risks to ensure they are compliant with third-party reporting throughout the region. Companies around the world with noncompliant supply chains not only in Southeast Asia but also throughout Asia can owe a duty of care or damages to those affected and possibly extensive fines.

Risk in the Real World: In Southeast Asian countries, modern slavery, child labor, and occupational health and safety hazards are all found to have intensified over the past five years within the manufacturing industry. The risk of forced labor in Myanmar, Vietnam, and Cambodia – all identified as key sourcing countries for manufactured goods – has been upgraded from “high” to “extreme,” and companies are not following through to enforce human rights standards in their supply chain factories. For example, a May 2022 report found that 9 out of 12 Cambodian H&M garment manufacturing factories surveyed reported experiencing sexual harassment in the workplace, and 11 out of 12 reported witnessing or experiencing termination of employment during pregnancy.


Asia as a whole is particularly exposed to cybercrime because of its large populations, relatively low awareness of cyber threats, absence of disclosure regulation, and outdated and unlicensed technology. In fact, 25 percent of SEA respondents experienced an increase in cybercrime after COVID-19. As cyber legislation continues to take shape worldwide, businesses operating in or partnering with third parties in Southeast Asia will need to comply with evolving cybersecurity requirements. The emergence of cryptocurrency and the non-fungible token (NFT) market, a sector within which SEA countries are taking up considerable space, has opened the door to an even greater surge of cybercrime. As NFT and cryptocurrency popularity is still new, compliance legislation is still taking shape, making cyber compliance challenging and evolutionary.

Risk in the Real World: The growing industry of NFT will be targeted by cybercriminals, according to industry experts, due in large part to countries in Southeast Asia leading in terms of NFT ownership. In Thailand, alone, nearly 40,000 people were scammed last year through cyber-attacks on their bank accounts and credit cards. Scammers last year also used fake bank websites to steal banking details of Malaysians and impersonated top e-commerce platforms in Vietnam to trick users into sending money.

Fraudsters based in SEA countries have also caught the attention of enforcement agencies worldwide, including the United States Federal Bureau of Investigation (FBI). In June 2022, the FBI said that investment fraudsters based in Southeast Asia posed a “significant threat” to the online social media platform LinkedIn, as well as its users, due to rampant cryptocurrency fraud schemes. As these scammers become more sophisticated and continue to go unpunished by local authorities, companies and other larger investors are likely to become targets.

Practical Steps to Manage Southeast Asian Risks

Ask questions about the ultimate beneficial owners (UBOs)

Whether they are joint venture partners, main subsidiaries, or top principals, the first step in improving transparency and protecting your business from serious regulatory issues is to ask for as much information as possible about the UBO. Then conduct appropriate due diligence on the UBOs to include at a minimum a “red flag” type review – global sanctions and adverse media/Internet checks – looking for any obvious issues for concern.

Verify staff and partners

Conduct thorough research into third-party vendors and new employees to identify red flags, such as sanctions exposure and politically exposed individuals. Internal or external due diligence and employee screening form the backbone of a compliance program.

Conduct supply chain ethical audits

Taking an analytical approach to your ESG risks with ethical audits helps identify issues of concern, including how an entity treats its employees, resource risks, and labor rights abuses. Human rights due diligence might be essential and required if you have manufacturing operations in the region or employ large numbers.

Perform constant monitoring of compliance legislation development

In a frequently evolving region with 11 unique countries and many jurisdictions, it’s essential to be aware of changing compliance legislation and related initiatives to ensure that you are always one step ahead of compliance requirements.

Overcome Compliance Problems in Southeast Asia

Maintaining business compliance throughout Southeast Asia can be immensely challenging without a full spectrum due diligence solution. The advanced due diligence platform at IntegrityRisk integrates seamlessly to constantly monitor internal and external compliance risks. To learn more about compliance risks and solutions in Southeast Asia, get in touch with the experts at IntegrityRisk today.