Taiwan’s New Anti-Money Laundering Regulations for Crypto Businesses
Introduction to Enhanced AML Regulations
Taiwan is poised to implement new Anti-Money Laundering (AML) regulations specifically designed for cryptocurrency businesses. This initiative follows recent fines imposed on two local exchanges due to compliance violations. The Financial Supervisory Commission (FSC) announced a revised timeline for mandatory AML registration for virtual asset service providers (VASPs), moving the deadline from January 1, 2025, to November 30, 2024.
Mandatory Registration for Crypto Service Providers
Under the new AML measures, all cryptocurrency service providers—both existing and new—must register in accordance with these updated requirements. This includes fulfilling specific compliance obligations that aim to curtail illicit activities within the crypto market.
Consequences of Non-Compliance
Failure to comply with these new regulations could result in significant penalties. Violators may face fines up to $155,900 (5 million New Taiwan dollars) or even imprisonment for up to two years. Despite the FSC having approved 26 crypto providers to operate, none have yet completed the necessary AML registration, indicating a crucial need for adherence to these regulations.
Monitoring and Surveillance Protocols
To aid exchanges in meeting compliance expectations, the FSC has provided a comprehensive checklist for identifying suspicious activities. This includes scrutinizing customers’ names, bank account information, IP addresses, and trading behaviors. Exchanges are expected to be vigilant in tracking unusual patterns, such as fund splitting, multiple accounts linked to the same IP, and frequent asset transfers, to mitigate the risk of money laundering.
Regulatory Actions and Focus on Compliance
The urgency of these measures was underscored by recent fines imposed on MaiCoin and BitoPro, two prominent exchanges, for failing to meet customer due diligence (CDD), transaction monitoring, record-keeping, and suspicious activity reporting standards. These penalties signal the FSC’s commitment to bolstering Taiwan’s AML compliance framework, reinforcing the importance of adherence to regulatory standards.
Requirements for Crypto Service Providers
To comply with the new regulations, crypto service providers must submit a registration form that outlines their business operations. Any modifications to this information must be communicated to the Securities Over-the-Counter (OTC) Trading Center within a stipulated five business days. Additionally, companies are required to establish a robust management system for financial auditing and accounting purposes.
Upcoming Trial for Crypto Custody Services
In conjunction with these new AML regulations, the FSC has revealed plans to initiate a trial for crypto custody services through local banks, expected to start accepting applications in the first quarter of 2025. Three private banks have already shown interest in participating in this pilot program, further indicating Taiwan’s proactive approach towards creating a comprehensive regulatory framework for cryptocurrency.
Taiwan’s Vision as a Global Crypto Hub
Taiwan is actively pursuing regulations to position itself as a global hub for cryptocurrency. The FSC plans to enforce restrictions on offshore cryptocurrency exchanges operating within its jurisdiction unless they fulfill the required registration processes. Last September, the FSC drafted ten guiding principles aimed at VASPs to foster self-regulation. These principles, anticipated to be officially released soon, emphasize the need for transparency, create review standards for virtual asset listing and delisting, and ensure the proper separation and custody of companies’ and customers’ assets.
With these developments, Taiwan is clearly focused on enhancing regulatory oversight in the crypto sector to promote a safer environment for all users and stakeholders involved in the digital asset ecosystem.