The Financial Supervisory Commission imposes a fine of 500,000 NT dollars on Hong Han Creative for non-compliance with anti-money laundering regulations, marking the first case of enforcement.
The Financial Supervisory Commission (FSC) of Taiwan has issued multiple statements warning that businesses engaged in virtual currency operations without passing the anti-money laundering (AML) declaration are considered illegal. On January 3rd, the FSC imposed its first penalty and fined Honghan Creative Company NT$500,000 for continuing to operate its virtual currency business without completing the AML compliance declaration.
The FSC’s Securities and Futures Bureau announced on January 3rd that Honghan Creative Company was engaged in virtual currency platform operations but had not completed the AML compliance declaration. After an investigation by the Investigation Bureau and the Tainan City Police Department, the company was fined NT$500,000.
The FSC had previously sent a letter to the company in October of last year requesting a declaration, but Honghan Creative Company did not submit the necessary documents. After imposing the penalty, the FSC also required the company to complete the AML compliance declaration within 1 to 2 months, or it may face further penalties.
According to the virtual currency platform AML regulations, individuals engaged in virtual currency activities (i.e., general individuals) should complete business registration and tax registration and comply with relevant AML regulations. Any business engaged in virtual currency activities without completing the AML compliance declaration is considered illegal (limited to those registered domestically).
Prior to the implementation of the AML compliance declaration system, many existing currency businesses (OTC, over-the-counter trading businesses) in Taiwan did not fully comply with or pass the AML declaration. However, the FSC’s Securities and Futures Bureau, responsible for reviewing applications, has reduced the number of approvals in recent years, with only exchange operators being approved. Many currency businesses that have not yet passed are still waiting.
Xiao Huizong, convener of the preparatory group of the Virtual Asset Service Providers (VASP) Association, suggested the following: Firstly, the industry regulation is still in its early stages, and both the regulatory authorities and businesses are still in the early stages of cooperation. The association is still awaiting approval from the Ministry of the Interior, and self-regulation by businesses has yet to be completed. From the perspective of the regulatory authorities, it is understandable to prioritize steady development over rapid progress.
It is important to note that there is currently a wide variety of VASP businesses in Taiwan, both in terms of scale and operations. However, the guidelines published by the FSC on September 26, 2023, mainly focus on exchange businesses. Therefore, the challenge that can be anticipated is that even qualified businesses that have passed the AML compliance declaration may not fully meet the requirements of the guidelines. Therefore, businesses eager to pass the review should understand that the AML declaration is not a license, and passing the review does not mean they are fully compliant and legal.
Based on the public statements of the regulatory authorities, VASP businesses that have passed the AML compliance declaration are considered “qualified” and will undergo subsequent inspections, while businesses that have not passed are considered “illegal”.
The preparatory group of the VASP Association advises businesses to fully understand the guidelines and the draft of the association’s articles of incorporation while waiting for the AML compliance declaration review. These are publicly available information. At the same time, they can cooperate with qualified businesses that have passed the AML compliance declaration to avoid business interruption. Through cooperation with these qualified businesses, they can gain a deeper understanding of the actual regulations, not only preparing for future approvals but also considering how to adjust their business activities within the existing regulatory framework to continue operations in line with the expectations and requirements of the regulatory authorities.
Additionally, the preparatory group of the association reminds businesses that if there is a transfer of operating rights or a change in business content, they need to notify the FSC in advance. Currently, some qualified businesses have transferred their operating rights without following these necessary steps. For other businesses, the preparatory group advises prioritizing the completion of the AML compliance declaration, as this is the first requirement under the current regulatory framework in Taiwan.
