Chinese Taipei’s Financial System Under Scrutiny: Organised Crime, Terrorism Financing Concerns
Vulnerabilities in Money Laundering and Terrorist Financing
A recent report by the Asia Pacific Group on Money Laundering (APG) has identified Chinese Taipei’s financial system as vulnerable to money laundering and terrorist financing. The report highlights a range of predicate offences, including:
- Drug trafficking
- Fraud
- Corruption
These illegal activities generate significant proceeds, which are often linked to organized crime groups using complex methods to conceal their earnings.
Organized Crime Groups’ Methods
These methods include:
- Wire transfers to dummy accounts
- Cash couriers
- Underground remittance
- Shell companies
Informal Economy: A Risk Factor
The report notes that Chinese Taipei’s informal economy, estimated to be around 20% of the country’s GDP, increases the risk of illicit proceeds being channeled into the formal economy.
Terrorism Financing Concerns
Despite a low overall risk profile for terrorist financing, the APG report highlights concerns about the lack of prioritization in investigating and prosecuting these cases. The report notes that while authorities have well-developed investigation capacity, the number of TF investigations is low compared to other types of financial crimes.
Financial Intelligence Unit (FIU)
The FIU in Chinese Taipei has been found to be well-developed, with a strong analytical capability and excellent IT resources. However, it suffers from a lack of human resources, which can impact its ability to produce high-quality financial intelligence.
Confiscation and Asset Tracing
Chinese Taipei has made significant progress in pursuing confiscation as a policy objective, with approximately USD 457 million confiscated since 2014. Tax authorities have also recovered considerable funds using their powers.
However, the report notes that the extent of targeting threats posed by cash couriers has not been in keeping with the risk profile.
Recommendations
The APG report makes several recommendations to improve Chinese Taipei’s financial system, including:
- Strengthening its anti-money laundering and counter-terrorism financing framework
- Improving the prioritization of investigating and prosecuting money laundering cases
- Enhancing the capacity of law enforcement agencies to investigate and prosecute terrorist financing cases
- Increasing resources for the Financial Intelligence Unit
Conclusion
The report highlights the need for Chinese Taipei to strengthen its financial system and address concerns about organized crime and terrorism financing. Implementing these recommendations will help to improve the country’s anti-money laundering and counter-terrorism financing framework, reducing the risk of illicit proceeds entering the formal economy.