Financial Crime World

Taiwan’s Financial Regulatory Framework: A Review of Equity-Related Payments, Anti-Money Laundering, Customer Due Diligence, Depositor Protection, and Bank Secrecy

In a bid to maintain transparency and ensure the stability of its financial system, Taiwan has put in place several regulatory frameworks that govern various aspects of banking operations. In this article, we will delve into five key areas: equity-related payments, anti-money laundering (AML) and combating financing of terrorism (CFT), customer due diligence, depositor protection, and bank secrecy.

Taiwan’s financial regulators have implemented strict guidelines for the disclosure of remuneration to directors, supervisors, general managers, vice general managers, chairpersons of the board, and rehired consultants. Banks are required to disclose aggregate remuneration information or individual names with corresponding amounts in their annual reports. Failure to comply may result in administrative fines ranging from NT$500,000 to NT$10 million.

Key Points:

  • Disclosure of remuneration information is mandatory
  • Aggregate remuneration information or individual names with corresponding amounts must be disclosed in annual reports
  • Failure to comply may result in administrative fines

Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT)

The Investigation Bureau under the Ministry of Justice (IBMOJ) and the Financial Supervisory Commission (FSC) are the primary regulators for AML/CFT in Taiwan. Banks must conduct risk-based customer due diligence, verify customer identities, and report suspicious transactions to the IBMOJ. The FSC has also issued regulations governing AML/CFT in the banking sector.

Key Points:

  • Risk-based customer due diligence is mandatory
  • Verification of customer identities is required
  • Reporting of suspicious transactions to the IBMOJ is necessary

Customer Due Diligence

Banks in Taiwan are required to conduct due diligence on both new and existing customers using a risk-based approach. This includes identifying and verifying customer identities, understanding business nature, equity structure, and controlling persons, as well as reporting large cash transactions and suspicious activities.

Key Points:

  • Risk-based due diligence is mandatory for all customers
  • Verification of customer identities is required
  • Reporting of large cash transactions and suspicious activities is necessary

Depositor Protection

Taiwan’s Depositor Protection Scheme is managed by the Central Deposit Insurance Corporation (CDIC). The scheme covers checking accounts, demand deposits, time deposits, and other approved deposits up to a limit of NT$3 million. CDIC is funded through share capital subscribed by the Ministry of Finance, CBC, and insured financial institutions.

Key Points:

  • Deposits are protected up to a limit of NT$3 million
  • The scheme covers checking accounts, demand deposits, time deposits, and other approved deposits

Bank Secrecy

The Banking Act requires banks in Taiwan to maintain confidentiality regarding customer information and transactions. Banks are prohibited from disclosing such information without the consent of the customer or as required by law.

Key Points:

  • Confidentiality of customer information and transactions is mandatory
  • Disclosure of such information is only permitted with customer consent or as required by law

Conclusion

Taiwan’s financial regulatory framework is designed to promote transparency, stability, and security in its banking system. By implementing strict guidelines for equity-related payments, AML/CFT, customer due diligence, depositor protection, and bank secrecy, the government aims to protect the interests of depositors, customers, and the financial industry as a whole.

Sources:

  • Taiwan’s Financial Supervisory Commission
  • Central Deposit Insurance Corporation
  • Investigation Bureau under the Ministry of Justice
  • Banking Act
  • Regulations Governing Anti-Money Laundering of Financial Institutions
  • Regulations Governing Internal Audit and Internal Control System of Anti-Money Laundering and Countering Terrorism Financing of Banking Business and Other Financial Institutions