On July 31, 2024, Taiwan’s Money Laundering Control Act (MLCA) was amended. Key modifications in these amendments include adjusted penalties and the establishment of a registration regime for virtual asset service providers (VASPs).
According to the announcement issued by the Legislative Yuan, these amendments were made in response to the recommendations outlined in the Asia Pacific Group on Anti-Money Laundering and Counter-Terrorist Financing Measures Mutual Evaluation Report (Mutual Evaluation Report) and are intended to regulate emerging money laundering methods encountered in practice.
Penalties Adjustment
In response to the ineffective money laundering sanctions highlighted in the Mutual Evaluation Report, the revised MLCA includes adjustments to certain penalties.
According to the explanation of the amendments issued by the Ministry of Justice, given the significant variation in operating scales among designated nonfinancial businesses or professionals, the previous maximum fines did not serve as a sufficient deterrent for those with larger operations. The revised MLCA has increased the maximum fines for these businesses or professionals in specific circumstances. For instance, failure to establish an internal control and audit system now carries a maximum fine of NT$2,500,000 (about US$78,296), which may be imposed for each occurrence of the offense under the revised MLCA. (MLCA article 7, para. 5.)
Additionally, penalties for money laundering offenses have been amended to better align with the severity of the cases. Under the revised article 19, those who engage in money laundering activities specified in article 2 of the MLCA face penalties based on the value of the laundering property or property interests. If the value exceeds NT$100 million (about US$3,131,850), they will receive longer prison sentences and a larger fine.
The liability for corporations or other legal persons is also increased when the offender is a representative, agent, or employee of a legal person that violates articles 19 to 22 of the MLCA. According to the revised article 23, paragraph 1, in addition to punishing the offender, the legal person shall be fined up to ten times the amount. However, to encourage the legal person to actively prevent violations, it stipulates that liability can be exempted when best efforts were made to prevent the violation.
VASP Registration
Newly added article 6 of the MLCA requires VASPs to complete anti-money laundering prevention and service capacity registration in accordance with the procedures designated by the Financial Supervisory Commission of Taiwan (FSC). VASPs that have not completed the registration are not allowed to provide virtual asset services. Violation of article 6 by natural persons will result in imprisonment to a maximum of two years or detention, and/or fines up to NT$5 million (about US$156,593). Legal persons shall be fined up to ten times the amount in addition to the punishment on the offender.
The registration requirement in article 6 was added in response to Recommendation 15 of the Financial Action Task Force’s (FATF’s) International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation. Recommendation 15 provides that countries should require VASPs to be licensed or registered in the jurisdiction where the legal person is incorporated or a natural person’s business is located, to enable competent authorities to prevent criminals from having a controlling interest or management function in them.
The amendment also applies to foreign VASPs. To conduct business in Taiwan, foreign VASPs will be required to incorporate the company or branch in accordance with the Company Act in Taiwan and complete anti-money laundering and service capability registration.
The revised article 6 has not yet taken effect. The FSC is currently establishing the registration process for VASPs in accordance with the revised MLCA. It has issued a notice for comments on draft of the “Regulations on the Registration of Money Laundering Prevention for Virtual Asset Service Providers” and a notice for comments on revisions to the “Regulations Governing Anti-Money Laundering and Countering the Financing of Terrorism for Enterprises Handling Virtual Currency Platform or Transaction.” These drafts were released on October 4, 2024, and are open to public feedback until November 4, 2024.
Prepared by Yu-Chen Tsai, Law Library Intern, under the supervision of Laney Zhang, Foreign Law Specialist.
November 18, 2024
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