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Anti-money laundering
1. Draft Regulations Governing the Accounts, Accounts Suspension, Restrictions on Functions, or Closure at Discretion under Paragraph 6 of Article 15-2 of Money Laundering Control Act
On 28 September 2023, the Ministry of Justice announced the draft “Regulations Governing the Accounts, Accounts Suspension, Restrictions on Functions, or Closure at Discretion under Paragraph 6 of Article 15-2 of Money Laundering Control Act” (Regulation). We summarize below:
(1) The police agency shall establish an appropriate mechanism to provide information in relation to sanctions and warnings, within the necessary scope, to financial institutions, businesses engaging in virtual currency platforms and trading services and third-party payment service enterprises that comply with the anti-money laundering supervision and regulatory framework, or the personnel of the aforementioned institutions and businesses for their check and inquiry.
(2) Restrictions on accounts shall be valid from the date of warning for the violation for 5 years. The restriction period shall be extended for another violation during the said period.
(3) When a financial institution handles an application for opening a new financial account, for those with higher money laundering risk, the financial institution shall take enhanced preventive measures or refuse to establishing business relationships or transactions with such offender.
(4) Financial institutions shall limit the amount of use of offenders' financial accounts (including their electronic payment accounts) except for paying utilities expense, taxes, penalties, fines and late payment fees.
(5) Businesses engaging in virtual currency platforms and trading services shall impose certain restrictions on offenders' current virtual currency accounts and new accounts that the offenders intend to open.
(6) Financial institutions, businesses engaging in virtual currency platforms and trading services and third-party payment service enterprises shall deem offenders as high-risk customers and implement enhanced customer identity verification and ongoing review process. If a suspected money laundering activity or other illegal transaction is identified, such institutions may temporarily suspend the full or partial functionalities of such offenders' accounts during the verification period.
(7) For those accounts subject to closure as required, if such accounts have already been seized, perpetuated, prohibited, or subjected to similar actions in accordance with other laws or regulations, the measures under such laws or regulations shall prevail.
Reported by: Mike Lu / Angela Lin
Taxation
2. Draft Amendments to Regulations Governing Application of Accrued Income from Controlled Foreign Company for Profit-Seeking Enterprise
On 28 September 2023, the Ministry of Finance announced the draft amendments to "Regulations Governing Application of Accrued Income from Controlled Foreign Company for Profit-Seeking Enterprise". We summarize below:
(1) When the trust property under a trust relationship is shares or capital of an affiliated enterprise in an offshore low-tax burden region or country, the settlor, trustee or beneficiary of this trust relationship shall be the "related parties".
(2) The reference list announced by Ministry of Finance of the low-tax burden regions will not include the situations where each tax jurisdiction provides special tax rate or tax system for specific regions or specific type of enterprises.
(3) To amend the calculation method for the threshold to exempt from applying the provisions regarding controlled foreign companies; to amend the calculation method for the current-year earnings of controlled foreign companies, and to specify the conversion basis for exchange rate.
(4) Considering that the fair value of "financial instruments at fair value through profit or loss" (FVPL) fluctuates greatly in the short term and is beyond the control of the enterprise, it is stipulated that the profit-seeking enterprise may choose to add the relevant profits and losses back to the current-year earnings of controlled foreign company when the FVPL is disposed of or reclassified.
(5) To delete the requirement that the certificate of tax statements and related documents issued by the overseas tax authorities shall be authenticated by an embassy or consulate of the Republic of China, except when the income originates from Mainland China.
Reported by: Stacy Lo / Cleo Lu
Financial
3. Amendment to Regulations on Alignment of Collective Investment Trust Account of Non-professional Investors by Members of the Trust Association of R.O.C.
On 26 September 2023, the Trust Association of R.O.C. announced the amendment to the "Regulations on Alignment of Collective Investment Trust Account of Non-professional Investors by Members of the Trust Association of R.O.C.". We summarize as follows:
To add provisions applicable to "multi-asset accounts", including the scope of application, utilization restrictions, applicable net asset value, trust property return date, net asset value calculation unit and the announcement period for changes to the agreed-upon terms.
Reported by: Stacy Lo / Sunny Lan
4. Amendments to Principles of Telemarketing for Banks".
On 3 October 2023, the Bankers Association of the Republic of China announced the amendments to the Principles of Telemarketing for Banks. We summarize below:
(1) When a bank makes a call with its customer for marketing purposes for the first time, it shall proactively inform the customer of the source of the telephone number, such as receiving from their user information or random dialing.
(2) When a bank is having a call with its customers, it shall inquire the customer whether he/she is willing to accept telemarketing before starting. If the customer is not willing to accept it, the bank shall terminate immediately.
(3) When a customer expresses his/her intention to terminate receiving telemarketing, the bank shall inform the customer of the method for terminating telemarketing, such as through the customer service center or online banking. The methods for terminating telemarketing shall be continuously disclosed to customers in a clear, understandable and accessible way.
(4) The bank shall complete the internal work of terminating the use of customer information for telemarketing within ten working days after the customer expresses his/her intention to terminate telemarketing.
(5) Banking personnel engaging in telemarketing shall receive training education before performing business and during their employment.
(6) Banks shall establish operating procedures for handling telemarketing problems and disputes, regularly review the implementation of the procedures, and conduct reviews and adjustments in accordance with the analysis.
Reported by: Stacy Lo / Linda Chu
SITE/SICE
5. Transformation of Offshore Fund Substantial Review Principle into Formal Ruling
On 3 October 2023, the Financial Supervisory Commission (FSC) announced a ruling based on Sub-paragraph 9, Paragraph 1, Article 23 of the Regulations Governing Offshore Funds to transform the content of the offshore fund substantial review principle into a formal ruling (Ruling).
The Ruling stipulates the investment restrictions for six types of offshore funds, including equity fund, fixed-income fund, high yield bond fund, emerging market bond fund, balanced fund and money market fund. We summarize the major changes below:
(1) Fixed-income fund: Unless otherwise provided by laws and regulations, a fixed-income fund may not invest in stocks and equity type securities;
(2) Restriction on investment in Rule 144A bonds:The said restriction shall apply to fixed-income fund, high yield bond fund, emerging market bond fund and balanced fund;
(3) Money market fund: To remove the exception that the investment or deposit may be increased up to 20% of the Fund’s NAV if the company or the financial institution meets the credit rating requirements prescribed by the FSC. Which means that the percentage can only be 10% .
The Ruling took effect form October 3 and only applicable to the fund registration filed/reported afterwards.
The FSC also published another ruling that for offshore funds that have been already approved for offering in Taiwan before 3 October and invested 30%-59% or 60% or more of NAV in Rule 144A securities, the fund should disclose to its investors the ratio of NAV invested in Rule 144A securities and include a disclaimer to warn the investors of the possible risk accordingly.
Reported by: Jeffrey Liu / Amy Su
6. Draft Supplementary Explanation for Paragraph 1 of Article 3 of 'Securities Investment Trust and Consulting Act' and Article 54 of 'Regulations Governing Securities Investment Trust Funds'
On 26 September 2023, the FSC announced the draft Supplementary Explanation for Paragraph 1 of Article 3 of 'Securities Investment Trust and Consulting Act' and Article 54 of Regulations Governing Securities Investment Trust Funds, which expands the scope for Securities Investment Trust Enterprises (SITEs) to invest in private equity funds offshore funds not registered un Taiwan through their privately placed funds. The draft also includes, among other things, the eligibility for funds being invested by privately placed funds, requirements for trust agreements, details regarding investor brochures and their covers, constraints on specific investments, matters to be included in the control system.
Reported by: Jeffrey Liu / Jason Su
Securities
7. Amendment to regulation for securities firms to manage private equity funds under mandate.
On 6 October 2023, the FSC announced a ruling to stipulate that where securities firms are mandated to manage private equity funds, they are advisable to assist the investee companies in sustainable development and promotion of the related policies under the principle of stewardship, and report the implement results to the board periodically.
Reported by: Jeffrey Liu / Lia Wang
Insurance
8. Amendment to Directions for Insurance Enterprises Conducting Electronic Commerce
On 4 October 2023, the FSC announced to amend the "Directions for Insurance Enterprises Conducting Electronic Commerce". We summarize below:
(1) To allow insurance enterprises to collaborate with other industries with financial technology expertise in big data analysis, interface design, software research and development, Internet of Things, wireless communication services, etc. to transact innovative insurance products, and apply for trial operation in accordance with the Key Points for Insurance Enterprises Applying for Trial Operation. In addition, the scope of innovative insurance products include innovations in the content or process of goods or services.
(2) To refer to the recommendations of the Non-Life Insurance Association of the Republic of China and the Life Insurance Association of the Republic of China and consider that the mountaineering comprehensive insurance and the marine activity comprehensive insurance have shorter coverage days and difficulty in conducting telephone interviews in practice, these insurances are added as categories exempted from telephone interviews.
Reported by: David Tsai / Sean Tsai
9. Amendment to Directions for Insurance Agents and Insurance Brokers in the Insurance Business on Cross-Industry Cooperation to Promote Auxiliary Insurance Products with its name amended to Directions on Cross-Industry Cooperation to Promote Insurance Business
On 4 October 2023, the FSC announced the amendment to the “Directions for Insurance Agents and Insurance Brokers in the Insurance Business on Cross-Industry Cooperation to Promote Auxiliary Insurance Products” with its name amended to the “Directions on Cross-Industry Cooperation to Promote Insurance Business”. We summarize below:
(1) The promotion for innovative insurance products through cross-industry cooperation by insurance business is included in this Direction.
(2) To add the "insurance business directly cooperates with other industries with financial technology expertise to manage innovative insurance products" as one of the models of cross-industry cooperation for insurance business.
Reported by: David Tsai / Hazel Wei
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2023-10-20
