Although the Central Bank of Taiwan and the Financial Supervisory Commission (the “FSC”) has characterized Bitcoin as highly speculative virtual “goods” rather than legal currency in 2013, the legislator has amended the Money Laundering Control Act (the “MLCA”) on November 7, 2017, which stipulates that virtual currency platforms and trading businesses must comply with the anti-money laundering (AML) regulations applicable to financial institutions. In addition, the Executive Yuan has issued a ruling on April 7 this year (2021) designating that any entity which operates the following businesses should fall within the scope of the MLCA:
- Exchange between virtual currency and New Taiwan Dollar, foreign currency and currencies issued in mainland China, Hong Kong or Macau.
- Exchange between virtual currencies.
- Transfer of virtual currencies.
- Safekeeping and administration of virtual currency or providing related management tools.
- Participation in or provision of financial service related to the issuance or sale of the virtual currency.
According to the MLCA, the FSC has issued the Regulation Governing Anti-Money Laundering and Counter-Terrorism Financing for Virtual Currency platform and Transaction Businesses (the “Regulation”). This Regulation has become effective from July 1 this year except for Article 7, which will be given a separate effective date.
In order to comply with the Regulations, any entity that is involved in one or more of the above businesses should establish the following mechanisms including:
- Conducting customer due diligence (CDD)
The obliged entities should conduct relevant CDD processes under circumstances prescribed, and obtain the relevant information based on the types of the legal entity. For example, if the customer is a natural person, obliged entities should at least collect the customer’s name, national identifier number, date of birth, nationality and physical address. Additionally, the obliged entities should evaluate the money laundering and terrorist financing (ML/TF) risks of the customers and determine the intensity of CDD processes based on the level of risk.
- Maintaining relevant records
The obliged entities should maintain all records of customers and transactions for at least 5 years.
- Reporting suspicious transactions
For cash transactions over 500,000 New Taiwan Dollars or suspicious transactions that involve ML/TF risks, the obliged entities should report to the Investigation Bureau, Ministry of Justice within the specified time limit.
- Setting up internal control and audit system against money laundering
Such a system must include the operation procedures against ML/TF, the assessment systems on ML/TF risks, and the audit procedures on the effectiveness of AML/CTF policies, etc. The obliged entities should also appoint an AML/CTF compliance officer at the management level responsible for supervising the implementation of the system.
With regard to the implementation of the above measures by the obliged entities, the FSC has the right to conduct inspections in person or by entrusting appropriate agencies to do the same at any time. If any virtual currency business violates such regulations, such virtual currency business can be fined between NT$500,000 and NT$10 million pursuant to the MLCA.
In addition, Article 7 of the Regulation stipulates that obliged entities should obtain both originator and beneficiary information, and submit the above information to the beneficiary platforms when conducting virtual currencies transfers. However, due to the difficulty in identifying transaction counterparties at this stage, it is set out in Article 18 that the effective date of Article 7 will be postponed to a later date and that the effective date will be announced in the future depending on how the international practice develops.