In 1996, Taiwan became the first country in Asia to pass a law dedicated to combating money laundering activities. The following year, Taiwan also became a founding member of the Asia/Pacific Group on Money Laundering (APG), and for the effectiveness of its dedicated law, received positive reviews in the first round of mutual evaluations conducted by APG members in 2001.
Since then, however, Taiwan's money laundering regulatory systems have failed to keep up with the changing times. The nation was placed on a regular follow-up watchlist after the second round of APG evaluations in 2007, and further relegated to an enhanced follow-up watchlist in 2011. Taiwan will undergo the third round of mutual evaluations in late 2018, the results of which could have a profound impact on its ability to conduct financial business worldwide.
As to judicial practice, Taiwan's enforcement of these regulations has also lacked effectiveness as evidenced by persistent increase in cross-border telecom fraud cases (including the use of fake accounts and money mules), illegal solicitation of capital, and smuggling of cash. These trends reflect the difficulty law enforcement agencies have had in shoring up the borders from financial criminals.
To address these issues, the government recently pushed a raft of legislation to bolster the nation's anti-money laundering regime, reestablish orderly money flows, and bring Taiwan's system into conformity with international standards. These include amendments to the Criminal Code and the Code of Criminal Procedure to expand authority on confiscation and preservation of evidence, the passage of a terrorist financing prevention act, and amendments to the all-important Money Laundering Control Act, which came into effect June 28, 2017.
The Executive Yuan also established an Anti-Money Laundering Office on March 16, 2017 as the coordinator of national anti-money laundering efforts. As well as readying Taiwan for the next round of APG evaluations, the office will endeavor to transform Taiwan into a world-class, orderly financial hub, and build its reputation as an effective model against money laundering in the Asia-Pacific.
II. Key amendments to the Money Laundering Control Act
A. Make money laundering offenses more prosecutable
Several amendments were made to expand the scope of confiscations, lower the threshold for predicate offenses to money laundering, widen the definition of money laundering activities, and include new provisions on special money laundering crimes. Also, a suspect need not be convicted of a predicate offense to establish the commission of a money laundering crime. Providing one's bank account for use by another person, or serving as a money mule, may also constitute money laundering crimes that carry a minimum imprisonment sentence of six months.
B. Promote transparency in the flow of funds
Along with financial institutions and jewelry retail businesses, the latest amendments brought other designated nonfinancial businesses or professions (real estate agencies, land administration agents, lawyers, accountants and notaries) into the money laundering prevention system. All of these institutions and businesses are now required to undertake customer due diligence measures, maintain records on transactions, report high-value or suspicious transactions, and conduct enhanced customer due diligence for politically exposed persons.
To strengthen control of money flows at the border, travelers entering or leaving Taiwan are now required to declare the following items at customs: cash in New Taiwan dollars of more than NT$100,000, Chinese yuan (renminbi) of more than RMB$20,000, or foreign currencies or currencies issued by Hong Kong or Macau valued at more than US$10,000; negotiable securities with face value totaling more than US$10,000; gold valued at more than US$20,000; and diamonds, precious stones and platinum not intended for personal use and valued at more than NT$500,000 total. Non-declaration or false declaration of any of these controlled items will result in confiscation of the item or a fine equivalent to the undeclared amount. The same rules apply to these items delivered as general cargo, express consignments or postal parcels.
C. Strengthen Taiwan's anti-money laundering system
Institutions governed by the Money Laundering Control Act must establish internal control procedures and participate in on-the-job training against money laundering. The government will also set up a fund to combat money laundering activities.
D. Step up international collaboration
International money laundering countermeasures have been included in the Money Laundering Control Act and the terrorist financing prevention act. Other provisions include the return or sharing of confiscated proceeds with the countries harmed, and encourage stronger collaboration with foreign governments, institutions or international organizations.
III. New system to be implemented on three fronts
To promote the new money laundering control system, the Executive Yuan's Anti-Money Laundering Office is publicizing the new measures, overseeing the progress of implementation, and preparing government agencies for the next round of APG evaluations:
A. Raise public awareness of money laundering activities
Using a variety of publicity tools, the office will strengthen awareness of money laundering prevention among citizens, dispel public concerns about Taiwan's anti-money laundering efforts, and implement the new act through more effective means.
B. Improve compliance by industries
1. Promote comprehensive regulations: Supervise government agencies in drafting secondary legislation and complementary measures as early as possible. Assist them in crafting guidelines or templates of standard operating procedures for each sector so that businesses can carry out the new measures.
2. Align with international practice: Finish translating into Chinese sector-specific supervision and enforcement guidelines provided by the Financial Action Task Force (FATF), the world's main anti-money laundering cooperative organization. Provide these documents to local regulators and businesses as reference in implementing the anti-money laundering system.
3. Provide training and guidance: After secondary legislation is promulgated, organize seminars to strengthen guidance and communication with businesses governed by the regulations, and help industries improve their business operational quality and risk management capabilities.
C. Prepare for the next round of APG evaluations
1. Conduct national risk assessment: Organize forums inviting members of the public and private sectors to help identify, assess and understand the money laundering and terrorist financing risks that Taiwan is exposed to. Compile a national risk assessment report, and formulate a nationwide action plan for combating money laundering and terrorist financing.
2. Improve assessment capabilities: Learn the methodology for assessing the effectiveness of Taiwan's system and its technical compliance with the FATF 40 Recommendations. Where there are regulatory shortcomings, convene the agencies involved to improve communications, and help them set up mechanisms and secondary legislation that align with international norms. Conduct simulations of the APG mutual evaluations to familiarize the assessed departments with the process.
Signaling its full commitment to fighting financial and money laundering crimes, the government has implemented the new anti-money laundering regime with the aims of improving the effectiveness of Taiwan's overall financial system, protecting citizens from the harms of such crimes, and helping Taiwan succeed in the third round of APG mutual evaluations. Going forward, the government will continue to deepen the public's awareness of money laundering prevention concepts in everyday life, and build a healthier, more transparent, and more orderly financial environment that will enable Taiwan to connect with other countries and expand the scope of its financial activities.