Taiwan Proposes AML Amendments, Seeks Jail Terms and Fines for Non-Compliant Crypto Service Providers

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Taiwan authorities announced on Thursday that they intend to punish cryptocurrency firms that fail to abide by its anti-money laundering (AML) laws.

In response to fraud and money laundering risks in the virtual asset landscape, Taiwan’s Ministry of Justice has proposed several amendments to the city’s existing AML laws, suggesting hefty fines and prison terms for non-compliant service providers.

Taiwan Proposes Stricter AML Regulations for Cryptocurrency Firms to Combat Money Laundering

The Ministry of Justice has introduced amendments that mandate domestic and overseas crypto firms operating in Taiwan to register for AML compliance. Failure to comply could result in imprisonment for up to two years and fines reaching $1.5 million.

Key components of the proposed amendments include regulations targeting fraud prevention, money laundering prevention, technology investigation and security, and communications security and supervision.

Notably, a major change in the new money laundering prevention law targeting VASPs outlines harsher penalties for noncompliance. The revised law introduces stricter registration requirements and limitations for domestic and international currency dealers.

Under the proposed amendments, VASPs risk imprisonment if they provide services without proper registration. Additionally, a new legal category has been introduced addressing money laundering offenses related to third-party payment accounts and virtual asset accounts.

According to the draft plan, overseas crypto platforms must establish local entities and apply for AML registration to avoid criminal penalties.

Additionally, the proposed amendments will include cryptocurrency within existing AML laws. Offenders using cryptocurrency for money laundering could face prison terms ranging from six months to five years, alongside fines of up to NT$50 million ($1.5 million).

The Legislative Yuan, Taiwan’s national parliament, will review the proposed amendments.

Deputy Minister of Justice Huang Mou-hsin highlighted that while current regulations allow for administrative penalties on non-compliant crypto firms, the proposed amendments would elevate such violations to criminal offenses, potentially resulting in imprisonment.

Taiwan Takes Steps Towards Crypto Regulation and Industry Self-Regulation

Taiwan initiated anti-money laundering rules for cryptocurrency service providers in July 2021 under the Financial Supervisory Commission. The crypto industry primarily operates without extensive regulation, however.

The latest proposal follows the announcement on March 4 that Taiwan’s Financial Supervisory Commission (FSC) had announced plans to introduce new laws for digital assets by September 2024.

In parallel, Taiwan’s crypto sector is moving towards establishing an industry association, with the Ministry of the Interior approving its application in March.

The association’s formation, initiated on September 26, 2023, will foster collaboration with regulatory authorities. Its deadline for establishment is the end of June. Key players such as BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, and Shangbito have joined forces to strengthen the crypto industry and enhance cooperation with regulatory bodies.

Subsequently, on November 9, 2023, the Financial Supervisory Commission (FSC) granted Taiwan’s inaugural security token offering license to Cathay Securities. This milestone authorization empowered Cathay Securities to issue tokenized green bonds valued at $930,000 every six months.

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