Intent Declared Summary
According to a 2009 report by the U.S. Department of State (DoS), Chinese Taipei’s (Taiwan) position as a center for international trade coupled with its developed financial sector, make it vulnerable to money laundering and other transnational crimes. Taiwan is not a member of many of the major international organizations such as the United Nations, the International Monetary Fund, and the World Bank. The country is therefore at a disadvantage as it cannot be a party to international conventions relating to anti-money laundering (AML) and combating the financing of terrorism (CFT). Taiwan, however, is a founding member of the Asia/Pacific Group on Money Laundering (APG), which released its second mutual evaluation of Taiwan compliance with the Financial Action Task Force's (FATF) 40+9 recommendations and special recommendations on AML/CFT in 2007. Per the findings of the 2007 mutual evaluation, although Taiwan has some elements of a functioning AML/CFT regime, it still lacks significant laws and procedures that will allow it to fully comply with the FATF's requirements on AML/CFT. The evaluation found that Taiwan was fully or largely compliant with 25 of the FATF's 40 recommendations (R) and 9 special recommendations (SR). Nevertheless, none of these included any of the FATF’s core recommendations. However, as noted by Taiwan’s Ministry of Justice Investigation Bureau’s Annual AML Report, several amendments were made to the Money Laundering Control Act in response to the findings of the APG evaluation. In addition to this, a Counter-Terrorism Action Law has been in the works since 2003, as reported in 2009 U.S. DoS report. If passed, it would explicitly designate the financing of terrorism as a major crime. This proposed law, per the 2009 U.S. DoS report, is expected to allow relevant law enforcement authorities to seize terrorist assets even without a criminal case in Taiwan. However, updated compliance levels are still yet to be assigned based on the developments that have taken place since the 2007 APG mutual evaluation. The FATF, in its 2008-2009 Annual Report, named Taiwan as one of the jurisdictions that have endorsed the FATF's 40+9 recommendations.
General Overview
In 2007, the Asia Pacific Group on Money Laundering (APG) released the findings of its mutual evaluation on Chinese Taipei's (Taiwan) observance of the Financial Action Task Force's (FATF) 40+9 recommendations and special recommendations on anti-money laundering (AML) and combating the financing of terrorism (CFT). The report observed that although Taiwan has in place some aspects of a functioning AML/CFT regime, it still lacks significant laws and procedures that will allow it to fully comply with the FATF's requirements on AML/CFT. Moreover, the country falls short of the 'largely compliant' or 'compliant' rating for many of the FATF's core recommendations and special recommendations. The FATF requires a largely compliant or above rating for recommendation (R) 1, R 5, R 10, R 13, SR II, and SR IV. Taiwan does not have a law criminalizing the financing of terrorism; it does not have proper rules to regulate Designated non-Financial Business and Professions (DNFBPs) from being used as conduits for money laundering and terrorist financing activities; and it does not have effective laws and procedures to confiscate and freeze terrorist funds or assets. According to the 2007 APG report (also referred to as the 2007 mutual evaluation), Taiwan falls short on the FATF requirements on legal person and legal arrangements and is not party to the major United Nations (UN) conventions dealing with money laundering and terrorist financing as Taiwan is not a member of the UN. According to a 2009 report by the U.S. Department of State (DoS), a Counter-Terrorism Action Law (CTAL) has been in the works since 2003 that would explicitly designate the financing of terrorism as a major crime.
The main law criminalizing money laundering in Taiwan is the Money Laundering Control Act (MLCA) which came into effect in 1997, and was amended in 2003, 2007 2008, and 2009. The Ministry of Justice Investigation Bureau’s (MJIB) Annual AML Report highlights that several of these amendments were made in response to the findings of the 2007 APG mutual evaluation. The 2009 U.S. DoS report states that the MLCA's " major provisions include a list of predicate offenses for money laundering, customer identification and record keeping requirements, disclosure of suspicious transactions, international cooperation, and the creation of a financial intelligence unit (FIU), the Money Laundering Prevention Center (MLPC)" (p. 285). Legal provisions that provide for the confiscation, freezing, and seizing of proceeds of crime can be found in several laws, including the MLCA, the Criminal Code, the Code of Criminal Procedure, the Statute for Narcotic Hazards Control, the Police Powers Act, and the Organized Crime Prevention Act. The MLPC is situated within the MJIB and investigates money laundering and terrorist financing cases. In this capacity it receives, analyzes, and disseminated suspicious transaction reports (STRs). According to the 2009 U.S. DoS report, in 2007, "the MLPC received 1,741 suspicious transaction reports and 31 of them resulted in prosecutions" (p. 486). The report further indicates that out of these 31 cases, 19 were related to financial crimes, four pertained to corruption, one to narcotics and seven to other crimes. Other agencies that supervise AML/CFT activities in Taiwan are: the Ministry of Transportation and Communication, the Financial Supervisory Commission (FSC), the Ministry of Economic Affairs, the National Police Administration, the Coast Guard, and Taiwan's Central Bank. The financial sector regulator in Taiwan is the FSC. It monitors and regulates the banking, securities, futures, and insurance industries.
Taiwan is a founding member of the APG and the MLPC is a member of the Egmont Group of FIUs. The 2007 mutual evaluation by the APG rates Taiwan as only partially compliant with recommendations relating to the UN Conventions, and non-complaint with recommendations relating to international co-operation. However, the 2009 U.S. DoS report notes that the MJIB has actively engaged in international cooperation. The report further notes that over the past several years the Taiwanese authorities have undertaken various measures to improve its AML/CFT regime, however, the lack of a law criminalizing the financing of terrorist and the shortcomings in Taiwan's confiscation and forfeiture regime are major holes in the AML/CFT framework in the country.
The Principles
NC1. Legal Systems and Related Institutional Measures
The 2007 mutual evaluation notes that Taiwan is only partially compliant with recommendation (R) 1 relating to the criminalization of money laundering. The money laundering offense, as described by Taiwanese law was found to lack some of the elements required by the Vienna and Palermo Conventions. The report further noted that the threshold for the definition of a serious offence is set too high. According to the 2007 MJIB annual report, the MLCA was amended in 2007 to include the offences of fraud and usury as described in the Taiwanese Code of Criminal Procedure. As to R 2 on the mental element and corporate liability of the money laundering offence, the 2007 mutual evaluation identifies Taiwan as being partially compliant. This was attributed to the fact that the law was observed to not allow for the intentional element of the money laundering offence to be inferred from objective evidence. Taiwan has not criminalized the financing of terrorism, and is therefore rated as non-compliant with special recommendation (SR) II in the mutual evaluation. Per the 2007 APG report "a draft Counter-Terrorism Bill has been prepared but has not yet been tabled with the Legislative Yuan" (p. 3). The 2009 MJIB report highlights that the MLCA was amended to criminalize the financing of terrorist organizations and activities. However, it was also noted that the amendment “still departs somewhat from the recommendations on terrorist financing made by the FATF” (p. 1).
Taiwan is largely compliant with R 3 on confiscation and provisional measures, per the 2007 APG report. The report notes that there is "no definition of property or property interests in the MLCA to ensure that the offence of [money laundering] extends to all types of property" (p. 198). Legal provisions that provide for the confiscation, freezing and seizing of proceeds of crime can be found in several laws, namely the MLCA, the Criminal Code, the Code of Criminal Procedure, the Statute for Narcotic Hazards Control, the Police Powers Act, and the Organized Crime Prevention Act. Taiwan, according to the APG report, is non-compliant with SR III, since it lacks effective laws and procedures to confiscate and freeze terrorist funds or assets of designated entities as stipulated in the UN Security Council Resolutions Nos.1267 and 1373. The 2009 DoS report points out that this amendments made to the MLCA contains a provision which authorizes officials to freeze and/or seize terrorist assets. It also notes that the Banking Bureau of the FSC circulates to financial institutions and government agencies, a list of individuals and entities designated by the UN Sanctions Committee 1267 as well as the U.S. Treasury.
R 26 relating to the FIU is rated by the 2007 APG report as compliant. Taiwan is largely complaint with R 30 on resources, integrity and training of the FIU staff, and on R 32 on statistics disseminated by the FIU. According to the mutual evaluation, "the FIU of Chinese Taipei is embodied in the Money Laundering Prevention Centre (MLPC), which presents as a mature, well functioning and effective FIU" (p. 4). Taiwan is largely compliant with R 27 on law enforcement authorities and complaint with R 28 on the powers of competent authorities. The APG rates Taiwan largely compliant with R 27, as there are currently some restrictions on the measures used for money laundering investigations. According to the APG's 2007 mutual evaluation, some of the law enforcement agencies have issues in terms of adequate staffing resources, and the reporting of statistics in certain instances suffer from significant discrepancies. The APG adds that Taiwan is partially compliant with SR IX on cash couriers as there is a lack of resources available to Customs Service in terms of enforcement and the sanctions regime for non-compliance is deficient. According to the 2009 U.S. DoS report, one of the amendments to the MLCA requires individuals to report currency transported into or out of Taiwan in excess of Taiwanese Dollar (NT$) 60,000, US $10,000 in foreign currency, or gold worth more than US $20,000.
NC2. Preventive Measures - Financial Institutions
The 2007 APG report states that the "Chinese Taipei [Taiwan] has implemented a system of generally comprehensive AML/CFT measures for financial institutions" (p. 4). However, the report notes that, in contrast to the FATF requirement stipulating the enactment of laws and regulations in applying and enforcing AML/CFT measures in the financial sector, Taiwan's regime instead provides guidelines to financial institutes. The APG report notes that Taiwan is partially compliant with R 5 on customer due diligence (CDD); non-compliant with R 6 on politically exposed persons; largely compliant with R 7 on correspondent banking; and largely compliant with R 8 on new technologies and face-to-face business. The report adds that the threshold for obligations on CDD is too high and financial institutions lack a clear requirement on identification of beneficial owners. Taiwan is compliant with R 4 and R 9 on financial institution secrecy, and third parties and introduced business, respectively. The 2009 U.S. DoS report notes that, in response to the findings of the APG evaluation, “the threshold for occasional cash transactions that triggers a CDD obligation and cash transaction report (CTR) obligation was lowered from NT$1 million (approximately $29,600) to NT$500,000 (approximately $14,800)” (pp. 486-487).
According to the APG 2007 report, Taiwan is only partially compliant with R 9 on record-keeping since "record-keeping requirements are inadequate in areas including records for non-cash transactions, records for cash transactions below NT$1 million ...and no requirement to keep account files or business correspondence" (p. 4). As noted by the 2009 U.S. DoS report however, the FSC, since August 2006, has required that banks maintain records on cash transactions above NT $30,000 (approximately $890). The 2007 APG report adds that Taiwan is largely compliant with SR VII relating to wire transfer rules. According to the report, Taiwan is partially complaint with R 11 regarding unusual transactions, since "with the exception of the banking sector, there are no specific obligations on financial institutions to monitor and keep record of complex, unusual large transactions, or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose" (p. 4). The APG notes that Taiwan is non-compliant with R 21 on monitoring and paying special attention to higher risk countries.
According to the 2007 APG report, Taiwan is partially compliant with R 13 relating to suspicious transaction reporting, because there is no law "that requires a financial institution to report attempted transactions that are suspicious in nature" (p. 200). Taiwan is compliant with R 14 on protection and no tipping off, and R 19 on other forms of reporting. The APG adds that there is no clear establishment of guidelines under the MLCA, therefore rating Taiwan as partially compliant with R 25. Taiwan does not comply with the requirements of SR IV on suspicious transaction reporting relating to terrorist financing. In response to the APG’s 2007 mutual evaluation recommendations, the FSC, according to its 2008 annual report, promulgated the ‘Regulations Governing Cash Transaction Reports and Suspicious Transaction Reports by Financial Institutions’ in December 2008, which went into force in March 2009. Per the same report, the threshold for occasional cash transactions that trigger CDD obligation and require a cash transaction report, lowered to $15,000 (NT$ 500,000) from $30,000 (NT$1 million). The report was optimistic that with the implementation of these regulations, the AML/CFT regulatory regime will be tightened. According to the 2009 U.S. DoS report, in 2007, "the MLPC received 1,741 suspicious transaction reports and 31 of them resulted in prosecutions." The report further indicates that out of these 31 cases, 19 were related to financial crimes, four pertained to corruption, one to narcotics, and seven to other crimes.
The APG's 2007 mutual evaluation indicates that Taiwan is largely complaint with R 15 on internal controls and R 22 on the monitoring of financial institutes foreign branches and subsidiaries. According to the same report, financial institutions in Taiwan have in place comprehensive internal control, compliance and audit systems; however, the report notes that requirements in the securities sector do not cover the independent audit function fully. Taiwan does not have any explicit law on the prevention of the establishment and operation of shell banks, prompting the APG report to rate Taiwan as being only partially compliant with this R 18. However, the report also notes that there are restrictions on the operation of shell banks in Taiwan. A more recent report, the 2009 U.S. DoS report emphasizes that Taiwan should abolish all shell companies as well as prohibit new ones from being established.
The financial sector regulator in Taiwan is the FSC, which monitors and regulates the banking, securities, futures, and insurance industries. The 2007 APG report found Taiwan largely compliant with R 17 on the FSC's sanctions provisions; R 23 on the FSC's monitoring, regulatory and supervisory functions; and R 29 on the FSC's powers and resources. On R 23, the report notes that insurance agents and brokers are exempt from AML/CFT requirements; and on R 17 the report indicates that there are inadequacies in the type of sanctions imposed by the FSC for non-compliance with AML/CFT requirements by banks. The report found Taiwan largely complaint with R 30 and R 32, and some law enforcement agencies have issues in terms of adequate staffing resources. The reporting of statistics in certain instances suffer from significant discrepancies. The 2007 APG report adds that Taiwan is largely compliant with SR VI relating to AML requirements for money or value transfer services.
NC3. Preventive Measures - Designated non-Financial Business and Professions
The 2007 APG evaluation states that "dealers in precious metal and stones are the only category of the DNFBP sector covered under MLCA Act and there are currently no specific AML/CFT requirements imposed on lawyers, notaries, real estate agents, accountants, or trust and company services providers" (p. 5). Therefore, Taiwan is rated as being non-compliant with: R 12 on CDD and record keeping; R 16 on suspicious transaction reporting; R 20 on other non-financial businesses and professions; and R 24 on the regulation, supervision and monitoring of DNFBP. The 2007 APG evaluation notes that there is no clear establishment of guidelines under the MLCA, rating Taiwan as only partially compliant with R 25.
NC4. Legal Person and Arrangements & Non-Profit Organizations
Taiwan is partially compliant with R 33, per the APG 2007 mutual evaluation, which states that "there is no obligation to maintain and make available beneficial ownership information for legal persons" (p. 204). However, the report states that Taiwan uses central registration systems to maintain transparency of legal persons. The APG evaluation adds that Taiwan is also only partially compliant with R 34 regarding legal arrangements. The competent authorities have little powers to obtain timely and accurate information on beneficial ownership in the case of trusts. Taiwan is largely compliant with SR VII on monitoring and regulating AML/CFT activities in non-profit organizations. According to the 2009 U.S. DoS report, non-profit organizations are required to register with the government and, like any other individual or corporate entity, are checked against list of names designated by the UN. The Ministry of Interior is in charge of supervising foundations and charities. The DoS report adds that the local authorities do not believe that non-profit organizations in Taiwan are being used as a front for terrorist financing activities.
NC5. National and International Co-operation
According to the APG 2007 mutual evaluation, Taiwan is largely compliant with R 31 on national co-operation. The report notes that there is extensive cooperation between national supervisory agencies, but shortcomings remain in terms of the dissemination of CFT measures between domestic agencies. Per the evaluation, Taiwan is largely complaint with R 32, as the reporting of statistics in certain instances suffer from significant discrepancies. Taiwan is rated partially compliant with R 35 on international conventions and non-compliant with SR I on the implementation of UN instruments. As Taiwan is not a member of the UN, it cannot be party to the Vienna, Palermo, Terrorist Financing or Drug Conventions. With regard to SR I, the APG mutual evaluation notes that Taiwan does not have the appropriate laws and procedures in place to implement UN Security Council Resolutions Nos.1267 and 1373. However, according to a subsequent MJIB annual report, one of the 2007 amendments to the MLCA included additional provisions on terrorist financing in order to implement rules consistent with the Palermo Convention, and UN Security Council Resolution No.1373. The 2009 DoS report notes that Taiwan has also implemented laws which comply with the 1988 UN Drug Convention.
The APG report also notes that Taiwan is compliant with R 37 on dual criminality, and largely compliant with R 36 and R 38 on mutual legal assistance (MLA) and MLA on confiscation and freezing, respectively. The report states that "for jurisdictions with no MLAA [mutual legal assistance agreement] with Chinese Taipei, they can only receive Mutual Legal Assistance (MLA) through court order or letters rogatory" (p. 6). However the MJIB annual report mentions that the MLCA was amended to include provisions which would allow authorities to “engage in international cooperation of freezing, confiscating and sharing the proceeds of crime based on the principle of reciprocity” (p. 17). Taiwan is non-complaint with SR V on international co-operation, per the APG report, and it is largely compliant with R 39 relating to extradition. The report states that "Chinese Taipei has no law or processes that requires it to cooperate with a requesting jurisdiction when it comes to prosecuting its own nationals under Article 4 paragraph 2 of the Extradition Law" (p. 7). Taiwan is partially compliant with R 40 on other forms of co-operation, because Taiwanese authorities have at their disposal a number of formal and informal arrangements to receive and disseminate information relating to money laundering and terrorist financing.
