Anti-money Laundering/Combating Terrorism Financing

 

1.    Amendment to Counter-Terrorism Financing Act

 

On 7 November 2018, the President announced the amendment to the "Counter-Terrorism Financing Act".  We summarize the key points below:

 

(1)  The competent authority is not required to provide any individual, juristic person or entity any opportunities to state his/her/its opinion before including such party into the sanction list.

 

(2)  The competent authority may seek opinions from other central competent authorities in charge of relevant industries when granting any permission or taking any restrictive measurements.

 

(3)  Any third party mandated by a person in the sanction list or due to other reasons holding or managing the properties or financial benefits for such sanctioned person shall not make payments or transfer or dispose of such properties or financial benefits.

 

(4)  Any designated non-financial business or professionals (DNFBF) violating the targeted financial sanction requirements will be sanctioned and the inclusion of any persons in, and exclusion of any persons out of, the sanction list shall take effect from the announcement.

 

Reported by: Stacy Lo / Hsiyen Hsu

 

2.    Amendment to Money Laundering Control Act

 

On 7 November 2018, the President announced the amendment to the "Money Laundering Control Act".  We summarize the key points below:

 

(1)  The Money Laundering Control Act will apply to lawyers, notaries public and accountants only if they provide services in connection with the incorporation, operation or management of companies involve fund planning.

 

(2)  The DNFBF shall establish internal control and internal audit systems (ICS & IAS) and the competent authority is authorized to set forth the relevant regulations.  A financial institution failing to establish such ICS & IAS will be subject to a fine from NT$500,000 to NT$10 million (around US$16,666.6 to US$333,333) and in the case of DNFBF, it will be subject to a fine from NT$50,000 to NT$1 million (around US$1,666.6 to US$33,333).

 

(3)  Financial institutions and DNFBFs, and their responsible persons, directors, managers and staff are exempted from their confidential obligation when reporting the currency transactions reaching the designated threshold and suspicious money laundering transactions.

 

(4)  The central competent authorities in charge of the DNFBFs may also adopt relevant control measurements against countries or regions with high risks of money laundering or terrorist financing.

 

Reported by: Stacy Lo / Eliza Lee

 

3.    Amendment to Regulations Governing Anti-Money Laundering of Financial Institutions and Regulations Governing Reporting on the Properties or Property Interests and Locations of Designated Sanctioned Individuals or Entities by Financial Institutions

 

On 14 November 2018, the Financial Supervisory Commission (FSC) announced the amendment to the "Regulations Governing Anti-Money Laundering of Financial Institutions" and "Regulations Governing Reporting on the Properties or Property Interests and Locations of Designated Sanctioned Individuals or Entities by Financial Institutions ".  We summarize the key points as follows:

 

(1)  Financial institutions shall undertake customer due diligence when carrying out occasional transactions reaching certain amount (including domestic remittances, without limitation of currency transactions).

 

(2)  In order to not over rely on the database, financial institutions shall utilize the proper mechanism of risk management to verify whether a customer and its beneficial owner or senior managerial officer is a person who has a prominent political function.

 

(3)  Financial institutions shall check immediately whether or not the transactions falling within the types monitored are money laundering or terrorist financing activities.  For those suspicious activities, a financial institution shall file a report with the Investigation Bureau within two business days after being approved by the designated supervisor.

 

Reported by: Stacy Lo / Deborah Lee

 

Banking

 

4.    Amendment to Standards Governing Establishment of Commercial Banks and Regulations Governing Investments in Other Enterprises by Commercial Banks

 

On 14 November 2018, the FSC announced the amendment to the "Standards Governing the Establishment of Commercial Banks" and "Regulations Governing Investments in Other Enterprises by Commercial Banks".  The FSC also announced that in addition to the applicable business items under Article 71 of the Banking Act, the applicants may apply for the business of (1) monetary trust; (2) credit cards; and (3) electronic payment as well.  The window period for application for internet-only bank starts from 16 November 2018 to 15 February 2019.  We summarize the key points as follows:

 

(1)  In respect of the "Standards Governing the Establishment of Commercial Banks" (Standards):

 

(a)   In corresponding to the requirements for the suitability review of major shareholders under Article 25 of the Banking Act, the financial institution promoter(s) and the non-financial institution promoter(s) subscribing the shares of a certain percentage are required to submit certain documents.

 

(b)   The term "internet-only bank" is defined.  In addition to the requirements under the Standards, an internet-only bank also needs to comply with the following upon applying for incorporation:

 

(A) It shall apply to become a public reporting company within one year after incorporation.

 

(B) The promoters of an internet-only bank shall subscribe for all the shares upon incorporation.

 

(C) The total shares subscribed by financial institution promoters and shareholders shall reach 40% or more of the paid-in capital, and at least one bank or financial holding company shall subscribe for more than 25% shares .

 

(D) A foreign financial institution can be the promoter of the internet-only bank and shall provide the consent issued by the competent authority in its home jurisdiction agreeing its incorporation of an internet-only bank in Taiwan.

 

(E) A non-financial institution promoter may subscribe more than 10% shares if it has professions in financial technology, e-commerce or telecommunication business and can provide the business model.

 

(F) A majority of the directors shall have specialty in banking and financial technology, e-commerce or telecommunications business, and at least one of them shall have specialty in financial technology, e-commerce or telecommunications business.

 

(G) The business plan shall set forth the customer identification mechanism, IT system and security management, and market exit plan.

 

(H) Other than the head office and customer service center, an internet-only bank shall not establish any branch.

 

(2)  In respect of the "Regulations Governing Investments in Other Enterprises by Commercial Banks (Regulations)":

 

(a)   To encourage consolidation of financial institutions, the Regulations provide that, other than the investment in internet-only bank or where the competent authority provides otherwise, the first investment in a financial holding company, bank, insurance company, and securities firm by a commercial bank shall exceed 10% of the total number of shares.  Unless certain conditions are satisfied, the investment by a commercial bank shall either obtain, the no-objection resolution of the board of directors of the invested enterprise, or sign relevant contract or agreement with the insiders or related parties of the invested enterprise with respect to the share acquisition.

 

(b)   A commercial bank and its invested enterprises shall adopt internal rules to prevent conflicts of interest.

 

(c)   In corresponding to the qualification requirements for the internet-only bank promoters, if a commercial bank invests in an internet-only bank, the requirement for ceasing the operation of the same type of business shall not apply.

 

Reported by: Stacy Lo / Evelyn Shih

 

Public Companies

 

5.    Amendment to Regulations Governing the Acquisition and Disposal of Assets by Public Companies

 

On 6 November 2018, the FSC announced the amendment to the "Regulations Governing Acquisition and Disposal of Assets by Public Companies".  We summarize the key points below:

 

(1)  Relevant requirements are amended to accommodate the application of International Financial Reporting Standards. 

 

(2)  Disclosure for certain tradings by a professional investor is not required. 

 

(3)  Threshold for information disclosure for construction industry is relaxed that no disclosure is required for a transaction of NT$ 1 billion or less conducted by a company with paid-in capital of 10 billion (or more) for the transaction less than NT$ 1 billion. 

 

(4)  Negative qualifications for external experts, and relevant matters in relation to issuance of evaluation report, audit and declaration by the external expert are specified.

 

(5)  Financial institutions, insurance companies, securities firms and futures enterprises are exempted from application requirements for derivatives transactions under these Regulations.  

 

(6)  A public company is not required to establish the handling procedures for derivatives transactions if its board of doctors has resolved not to conduct such transactions.  

 

(7)  For a public company having established an audit committee under the Securities Exchange Act, the duties and authority of a supervisor shall be executed by the audit committee or the member of independent directors in the audit committee. 

 

(8)  For a public company having established independent directors under the Securities Exchange Act, a written notice shall be given to the independent directors when there is any material violation in respect of a derivatives transaction.

 

Reported by: Mike Lu / Will Chen

 

Insurance

 

6.    Restriction on Convening a Shareholders' Meeting to Elect Directors or Supervisors

 

On 12 November 2018, the FSC issued a interpretation ruling that an insurance company shall not participate in shareholders who convene a shareholders meeting under Article 173-1 if such meeting will elect directors or supervisors.  

 

 

Reported by: Mike Lu / Evelyn Shih