Money laundering is a mutual concern for governments around the world. The leaked April 2016 Panama Papers (巴拿馬文) revealed to the international public how pervasive money laundering, corruption, embezzlement, tax evasion, and smuggling are around the world. The Taiwan government is no exception in the struggle against such criminal activities. Indeed, Taiwan was implicated in the leaks, and in September 2016 the New York Department of Financial Services (NYDFS) imposed a fine on the Taiwanese bank Mega ICBC’s New York Branch (兆豐銀行紐約分行). Citing the Suspicious Transactions Report (SAR) (可疑交易的通報), Mega Bank was charged for legal non-compliance—breaching the US Bank Secrecy Act (BSA), to be specific. The Mega Bank case is an example of the vital role that the Taiwan banking system could play in countering money laundering.
In recent years, countries around the world have devoted greater attention to combating money laundering. Firstly, this is because it has become more important to ensure the transparency of money flows in order to impede terrorism financing. Secondly, it is necessary for governments to reduce money laundering in order to combat corruption and lower the possibility of embezzlement, which prevents wealth disparity and facilitates social progress. Thirdly, preventing money laundering allows economic activity to proceed normally; when present, money laundering enables crimes such as fraud, tax evasion (逃漏稅), and tax avoidance (避稅).
According to statistics provided by international organizations, the amount of money laundered globally in one year is $800 billion, or $2 trillion in current US dollars, which is 2-5 percent of global GDP. Such a large sum of lost money makes it necessary for countries around the world to work together to seek common solutions. It is critical that Taiwan comply with the increasingly strict financial rules and regulations promulgated in the United States for overseas finance, given that the United States is a major trading partner for Taiwan, North America is the largest market in the world, and the US dollar is the main currency used in transnational transactions. The Asia/Pacific Group on Money Laundering (APG), an independent international organization, will conduct the third evaluation of Taiwan in 2018. Failing the evaluation will mean that the normal operations of financial institutions in Taiwan will be negatively affected, and overseas financial business and operations will be restricted to some degree or even banned. The government of Taiwan, therefore, has been making increasingly greater efforts to intensify legislation on the legal level and implement anti-money laundering measures on the administrative level. These efforts include:
On the legal level, the Financial Supervisory Commission (FSC, 金融監督管理委員會) has revised the Precautions for Banks in terms of Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) (銀行業防制洗錢及打擊資助恐怖主義注意事項). Apart from referring to international legislation promulgated by the United States, New Zealand, and Hong Kong, and re-examining the 40 suggestions given by the Financial Action Task Force on Money Laundering, the revision of the Money Laundering Control Act (洗錢防制法) has also been completed and will likely be implemented in June 2017. The formulation and updates of rules and regulations will help shape the financial system, and contribute to the establishment of a sound banking system through the collective discipline mechanism (集體自律機制), autonomous shaping (自主的型塑), and stronger legal compliance culture(法遵文化).
Anti-money laundering measures focus on four prongs: first, strengthening the rules and regulations concerning anti-money laundering and counter-terrorism (健全防制洗錢及打擊資恐法制); second, providing supervision of financial institutions in the implementation and execution of these rules and regulations (督導金融機構落實執行); third, enhancing the capacity of financial institutions for anti-money laundering and counter-terrorist actions (提升金融機構防制洗錢及打擊資恐能力), and fourth, intensifying training and promotion (加強訓練與宣導).
The FSC, for example, has sorted through the various cases and created categories of 20 “suspected money laundering situations” (「疑似洗錢」態樣) for the Banking Association (銀行公會), demanding that bankers make greater prevention efforts. The FSC also demanded that special anti-money laundering divisions be established inside financial institutions by April 2017, that an Anti-money Laundering Office (洗錢防制辦公室) be established in the Executive Yuan, that banks confirm the information of the ultimate beneficiary when a corporate client intends to make a cross-border transfer higher than 30,000 NTD (US $950), and other measures.
Meanwhile, in order to prevent money laundering, the government has committed to making more efforts to confiscate the illegal benefits obtained in malfeasant economic activities. Jeweler’s shops, accountants, lawyers, land administration agents, and people from other non-financial industries will be obligated to report acts of money laundering. Efforts shall also be made to track the money flows of politically prominent persons, their relatives and trusted aides. These efforts will require more intensive anti-money laundering training within financial institutions, cultivation of professional anti-money laundering talents, the institution of exams to obtain anti-money laundering certificates, and so on. International anti-money laundering symposiums are also on the agenda, like the Symposium on the Developments in US Bank Secrecy Act and Money Laundering Control Act (美國銀行保密法與洗錢防制法之發展趨勢研討會) held jointly by China Trust and the Taiwan Academy of Banking and Finance in December 2016, and the Seminar for Overseas Managers, Legal Compliance Officers and Internal Auditors (海外分區經理人、法遵人員暨內稽內控研討會), held in New York by The Bankers Association of the ROC in January 2017, and so on.
As the providers of all kinds of convenient financial services, financial institutions are often exploited by criminals as the channels for their money laundering or financial terrorist activities. That is why the outcomes of anti-money laundering efforts and efforts to combat terrorist financial activites made by governments around the world are also dependent on the implementation of various prevention and control measures in financial institutions.
As a founding member of APG and a member of the international community, Taiwan stands ready to join the fight against money laundering and terrorist financial activites. Moreover, given that the business risks for the banking industry are far higher, it is now necessary for regulatory authorities to gradually move from a passive approach of identifying and correcting past errors toward a regulatory mechanism oriented toward risk management and active prevention. Even after the establishment of a proper legal compliance system, results will depend on whether the system is implemented and executed in practice.
The main point: The Panama Papers, released in April 2016, shed light into the dark recesses of the illicit global financial market, which fuels illegal money laundering and international terrorism. Taiwan’s banking industry was implicated in the papers and the government of Taiwan has been increasing its efforts to intensify legislation on the legal level and implement anti-money laundering measures on the administrative level.