Anti‐money laundering activities of financial institutions in Taiwan
| Pages | 178-185 |
| Date | 01 April 2005 |
| DOI | https://doi.org/10.1108/13685200510621172 |
| Published date | 01 April 2005 |
| Author | Ma Yu‐Feng |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control Ð Vol. 8 No. 2
Anti-Money Laundering Activities of Financial
Institutions in Taiwan
Ma Yu-Feng
INTRODUCTION
This study discusses the history, process and main
body of the Money Laundering Control Act
(MLCA) in Taiwan. Although the Act is seen as a
strong weapon in the battle against money laundering,
it does have some shortcomings, which may require
amendments. It also describes two case studies con-
cerning money laundering. The cases indicate how
®nancial institutions react to money laundering, and
suggest improvements that should be made.
Taiwan opened its ®nancial markets in 1980, and
capital began to ¯ow freely into the investment
market, which started to grow. This liberalisation,
however, also generated rivalries among ®nancial
institutions.
1
Additionally, Taiwanese culture is
cash-oriented, preferring the use of cash for exchange
over cheques, credit cards or other ®nancial instru-
ments. Even worse, the abuse of `dummy accounts'
in Taiwan has increased the diculty of detecting
money laundering. The public commonly fails to
understand that giving out their personal information
enables others to open bank accounts in their name or
to perform a range of unlawful activities.
2
This pre-
ference for cash and the giving out of personal
information help people to pro®t from laundering
money.
3
The legislature enacted the Money Laun-
dering Control Act (MLCA) on 3rd October, 1996
to prevent Taiwan from becoming a shelter for
laundered money. The MLCA is the ®rst speci®c legis-
lation of its type ever enacted by an Asian country.
Years after the implementation of the MLCA in
Taiwan, although its eects have become evident,
4
further improvement is required. The procedure for
stipulating the Act, the content of the Act and positive
and negative experiences serve as references for other
countries and their anti-money laundering eorts. In
addition to discussing the history of the MLCA, its
process and main body, this work presents two case
studies of money laundering in Taiwan. The cases
indicate how the ®nancial institutions reacted to the
laundering of money, and suggest improvements
that should be made. Finally, this work studies the
weaknesses of the MLCA in Taiwan and also oers
suggestions for improvement.
AGAINST MONEY LAUNDERING
IN TAIWAN
Taiwan ocially recognised the occurrence of money
laundering in 1990.
5
Taiwan's governmental regulat-
ory agency, the Ministry of Finance (MOF), ®rst
promulgated directions in 1990 that required ®nancial
institutions to check the names and ID documents
of customers who withdraw more than NT$1m
(included) (approximately US$38,000) in one trans-
action and to list their names for reference.
6
Since
1992, ®nancial institutions have been asked to review
new customer account information to combat econ-
omic crimes, by opening no dummy accounts, pro-
tecting depositors' rights, and regulating banks.
Financial institutions must ensure that the records of
transactions are complete and accurate. If they reveal
any violation of rules related to managing or engaging
of deposits, remittances and exchanges, they must
immediately inform law-enforcement institutions.
The ®rst stage of the prevention of money laundering
is the appropriate training of bank employees. On-
the-job training is organised by a training centre or
branches to increase the understanding of employees
about this problem.
7
An anti-money laundering law was not enacted
until 1995. Therefore, anyone who was involved in
money laundering before 1995 could only be con-
victed of stealing goods.
8
Additionally, to catch up
with international standards and prevent Taiwan
from becoming a shield for domestic and international
criminal organisations, endangering Taiwan's image
and security, as well as threatening the ®nancial
system, the Ministry of Justice (MOJ) considered
many international directives, conventions and state-
ments of principle that addressed this issue.
9
It also
considered the relevant regulations of other countries
in drafting the MLCA,
10
which was submitted to the
Executive Yuan. The Executive Yuan approved the
draft on 20th April, 1995 and passed it to the Legisla-
tive Yuan. After a review that lasted for over a year,
Taiwan's Legislative Yuan approved the Act, and its
legislature enacted it on 3rd October, 1996. It was
signed by the President on 23rd October. According
to Article 15 of the Act, which required six months
Page 178
Journalof Money Laundering Control
Vol.8, No. 2, 2004, pp. 178± 185
#HenryStewart Publications
ISSN1368-5201
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