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Taiwan is an island country in East Asia. Its neighbouring countries include China, Japan and Philippines. Taiwan is also referred to as the Republic of China (ROC) or Chinese Taipei. People’s Republic of China (PRC) has always staked its sovereign claim over ROC, under its One China policy. However, Taiwan has asserted itself an independent state and participates in international forums under the name of “Chinese Taipei”.

Banking Industry

Taiwanese banking sector is predominantly state controlled. The Taiwanese economy is serviced by 39 banks. Of these, 8 major banks hold around 48 per cent of the total banking assets and are state controlled.

Domestic banks of Taiwan are in a strong position. Capital adequacy ratios are generally high and non-performing loan (NPL) ratio are quite low. The country has an unusually large number of banks as compared to the number of customers, which cuts down the profit margins. This is the reason the banks are expanding their presence in neighbouring countries.

Taiwan’s banks are voracious lenders to Chinese companies. According to a Bloomberg publication of December 2018, Chinese corporates constituted 54 per cent to the total book value of Taiwanese banks’ assets.

Category Value
Population 23.6 million (in 2018)
GDP Growth Rate 5.25% (in 2018)
Inflation 1.5% (in 2018)
Currency Taiwan New Dollar (TWD)
Currency Exchange Rate 1 USD = 30.84 TWD*
Basel AML Index 2018 Rank 73, out of 129 countries
World Bank Ease of Doing Business 2018 Rank 13, out of 190 countries
Transparency International’s Corruption Perception Index 2018 Rank 63, out of 180 countries
*Source: www.xe.com (On March 5, 2019)

Taiwan may also seek to establish its presence in South East Asia, which has been encouraged by its state under its “New Southbound policy”. Taiwan plans to target 18 countries in South East Asia, South Asia and Australasia. Taiwan is also an important player in the Asian Syndicated Loan Market.

The Central Bank of Taiwan is called “Central Bank of the Republic of China (Taiwan)”. It is primarily responsible for monetary policy and financial supervision.

AML Regime

Taiwan is a founding member of the Asia/Pacific Group on Money Laundering (APG). Taiwan is currently undergoing mutual evaluation by the APG.

Taiwan was placed on a “regular follow-up” list by the APG in 2007, requiring it to report back two years after the evaluation, but was demoted in 2011 on an “enhanced follow-up,” requiring it to report back one year after the evaluation. It was then placed on the “transitional follow-up list” in 2014 after making some improvements and was removed from that list on July 20, 2017.

The country received a big blow when their third largest bank, Mega International Commercial Bank Co. was fined $180 million in 2016 by authorities in New York for weak AML practices and procedures. Following this, a strong AML framework was implemented in 2017, which was then set for evaluation by APG.

Basel AML Index

The Basel AML Index, published by the Basel Institute on Governance, provides risk ratings based on the quality of a country’s framework for AML, CFT and related factors such as perceived levels of corruption, financial sector standards and public transparency. Out of 129, rank 1 denotes the highest risk of money laundering & terrorist financing in the country, while 129 would be the lowest risk. In 2018, Taiwan was ranked 73 on this index, making it amongst the top 10 countries that have significantly worsened their scores since 2017.

Money Laundering Control Act (MLCA)

The Money Laundering Control Act (MLCA) was drafted on October 23, 1996 and it took effect on April 23, 1997. It was last amended in 2016.  This Act is enacted to prevent money laundering activities and combat related crimes, bolster anti-money laundering systems, maintain financial stability, increase transparency in money flows and strengthen international cooperation.

The Anti-Money Laundering Division (AMLD)

The Anti-Money Laundering Division (AMLD), earlier known as the Money Laundering Prevention Centre (MLPC), is the Financial Intelligence Unit (FIU) of Taiwan. In 1997, in accordance with the MLCA, the Investigation Bureau, Ministry of Justice (MJIB) was assigned by the Executive Yuan (Cabinet) to establish the Money Laundering Prevention Centre (MLPC) to act as Taiwan’s FIU.