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Anti-money laundering trends

The ECCT's Luxury Goods committee hosted a lunch on the topic "Recent international AML trends - Taiwan's AML status, challenges and future prospects. The lunch featured presentations by guest speakers Dr Tsai Pei-ling, Chief, Policy Unit, Anti-Money Laundering Office, Executive Yuan & Prosecutor, Department of Prosecutorial Affairs, Ministry of Justice and Dr Hsiao Hsing-chin, Corporate Governance Programmme Head, Department of Commerce, Ministry of Economic Affairs.

The speakers gave an overview of Taiwan’s legal framework following the revisions to the Anti-Money Laundering Act (AMLA), the Counter-Terrorism Financing Act (CTFA) and related laws, and to prepare for a 2018 mutual evaluation review by the Asia Pacific Group on Money Laundering (APG).

In her presentation, Dr Tsai Pei-ling noted that the Megabank scandal in 2016 served as a wake-up call. In that case, the Taiwanese bank was fined by US authorities for failure to conduct customer due diligence (CDD) and follow Suspicious Transaction Report (STR) guidelines. This happened a couple of years before Taiwan was due for an AGP mutual evaluation. Tsai reported that even though Taiwan had been a member of the AGP for 20 years, only 19 AML cases had been successfully prosecuted over this time, indicating a lack of effectiveness in Taiwan’s system. Since then, and in order to prepare for the APG evaluation, a lot of steps have been taken to strengthen Taiwan’s regulatory system and compliance procedures.

This started with the setting up of the AML Office, under the Executive Yuan and the Financial Intelligence Unit (FIU) under the Ministry of Justice (MOJ). Setting up the AML office directly under the EY showed the high level support of the government for addressing AML. Next, there was a large-scale revision of over 100 laws and regulations. Besides the AMLA and CTFA, changes were made to the Cooperation Act in Criminal Matters and the Company Act, among others. Following this, a National Risk Assessment Report was prepared and 37 government agencies and 31 private sector players cooperated in AML activities, such as training and simulated exercises. According to Tsai, 4,000 people participated. In addition, authorities have been raising public awareness about money laundering, through, for example, media campaigns.

Dirty money is usually laundered through financial institutions or designated non-financial business persons (such as lawyers or jewellers). Previously, authorities had focused most of their efforts on going after criminals but now there is a much stronger focus on prevention. In this regard, businesses are required to: 1) Conduct CDD, 2) Keep records and 3) Report suspicious transactions to the FIU, which then follows up and, in relevant cases, takes action, in conjunction with other law enforcement agencies. According to Tsai, the CTFA has real teeth because it allows authorities to cut off financing to suspicious actors.

Another requirement under revised laws that has been successful is the requirement for shareholders owning stakes of more than 10% of companies to disclose their names and relevant information, making them easier to trace.

In addition, changes to the Foundation Act have helped to increase the transparency of financial flows.

In her presentation, Dr Hsiao Hsing-chin spoke about regulations and operating procedures governing jewellers. The jewellery sector is vulnerable to money laundering given the fact that Taiwan’s market is fairly open and unregulated, has a large number of medium and very small traders, the high unit price and small size of items.

Following amendments to the AMLA and CTFA, vendors are now required to check and verify customers’ identities and status, keep records of transactions and report cash transactions over a value of NT$500,000 or other suspicious trading activities, such as repeated instances of large cash transactions to the FIU. In addition, jewellery businesses are required to establish internal control and auditing systems based on their risks and business scale.

New regulations also subject financial institutions to annual inspections by the MOEA of their internal control and auditing systems and to hold or participate in training to prevent money laundering and combat terrorism. Regulations also stipulate penalties for non-compliance.