This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 TAIPEI 000115 
 
SIPDIS 
 
STATE PASS TO AIT/W 
 
STATE ALSO FOR EAP/RSP/TC 
 
JUSTICE FOR OIA AND AFMLS 
 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: KCRM PTER KSEP SNAR KTFN TW
SUBJECT: TAIWAN: 2004-2005 INTERNATIONAL NARCOTICS 
CONTROL STRATEGY REPORT (INSCR) PART II, MONEY 
LAUNDERING AND FINANCIAL CRIMES 
 
REF: 2004 STATE 254401 
 
¶1.  AIT 2004-2005 PART II INCSR Responses follow: 
 
¶2. Taiwan is not considered an important regional or 
offshore financial center.  Money laundering in Taiwan is 
not generally related to narcotics trafficking.   Most 
illegal or unregulated financial activities are done to 
avoid taxes or conceal financial flows to and from third 
countries.  There is no indication that local drug 
trafficking organizations or terrorist groups control money- 
laundering proceeds. 
 
¶3. In 2004 Taiwan experienced an increase in financial 
crimes involving graft by some company executives in high- 
tech industries.  There is no indication that contraband 
smuggling generates funds laundered through the banking 
system.  There has been no indication of Taiwan policy, 
official encouragement, or facilitation of laundering 
proceeds from illegal drug transactions or terrorist 
financing.  It is unlikely that Taiwan's legal financial 
institutions would engage in currency transactions involving 
international narcotics trafficking proceeds. 
 
Money Laundering/Terrorist Financing Laws and Regulations 
--------------------------------------------- ------------ 
 
¶4. Money laundering is a criminal offense under Taiwan's 
Money Laundering Prevention Law (MLPL).  MLPL covers 
counterfeit securities, counterfeit credit cards, fraud and 
usury, underground banking, bankruptcy fraud, embezzlement 
from banking institutions, corrupt government contracting 
and procurement, insider trading, and manipulation of 
securities trading, trafficking of children, abduction, 
weapons manufacture and sale, smuggling, and drug 
trafficking.  Banks and other financial institutions are 
required to record and report the identity of customers 
engaging in transactions of NT$ 1 million (about US$30 
thousand) or more.  Financial agencies are required to keep 
records of all significant transactions for five years. 
 
¶5. According to Taiwan's Financial Supervisory Commission 
(FSC), financial institutions are required to report all 
cash transactions of at least NT$ 1 million and any cases 
where there are indications of money laundering to the Money 
Laundering Prevention Center (MLPC).  Such reports are 
confidential and protected by specific provisions in the 
 
SIPDIS 
MLPL.  MLPC officials are authorized to require domestic and 
offshore financial entities to disclose client and ownership 
information.  Individual bankers can be fined NT$ 200,000- 
NT$ 1 million (about US$ 6,000-30,000) for not following the 
MLPL. 
 
¶6. The money laundering controls also apply to trust and 
investment companies, credit cooperative associations, 
credit departments of farmers' and fishermen's associations, 
postal savings systems, insurance companies, securities 
firms, and consulting companies, futures brokers, jewelry 
stores, casinos, automobile dealers, aircraft dealers, 
merchant ship dealers and real estate brokers. 
 
Crime Statistics 
---------------- 
 
¶7. From January-September 2004 (the most recent figures 
available), Taiwan investigated 505 cases of possible money 
laundering.   Among these cases, 442 were economic crimes, 
seven involved government corruption, and seven were 
narcotics-related crimes.  Total money laundering January- 
September amounted to NT$ 1,244 million (about US$ 38 
million).  Of the 505 cases investigated, 287 cases involved 
money laundering via bank transactions, 213 cases via postal 
remittances and savings banks, and one case via a credit 
union.  Taiwan's financial institutes and banker 
associations, political parties, and other affected 
organization have not expressed any objection to the money 
laundering prevention laws. 
 
¶8. Taiwan's draft "Counter-Terrorism Action Law" (CTAL), 
which designates terrorism financing as a major crime is 
still pending legislative approval.  Under CTAL provisions, 
the National Police Administration, the Ministry of Justice 
Investigation Bureau (MJIB), and the Coast Guard are able to 
seize the suspected terrorist assets even before criminal 
charges are made.  In emergency situations, law enforcement 
agencies would be able to freeze assets for three days 
without a court order.  Assets and income obtained from 
committing terrorist crimes could be confiscated permanently 
unless such assets and income can be identified as belonging 
to the victims of the crimes.  Taiwan officials have the 
authority to freeze and/or seize terrorist-related financial 
assets. 
 
¶9. The Bureau of Monetary Affairs (BOMA) of the FSC has 
circulated lists of individuals and entities identified by 
the UN 1267 Sanction Committee and provided by the U.S. to 
domestic and foreign financial institutions in Taiwan. 
Taiwan and the U.S. have established procedures to exchange 
records concerning suspicious terrorist financial 
activities.   After receiving financial terrorist lists from 
AIT, BOMA conveys the list to relevant financial 
institutions. 
 
¶10. Domestic and international financial information 
including terrorist and money laundering lists are available 
on the MLPL internet website.  Banks are required to file a 
report on cash remittances of at least NT$ 1 million or if 
the remittor/remittee is on a terrorist list.  Foreign labor 
brokers are authorized to remit income earned by foreign 
workers via banks to their home countries.  These 
remittances are not regulated or reported, and money- 
laundering regulations are not imposed on these foreign 
labor brokers.  At present, there are no plans to probe 
charitable or non-profit entities to see if they serve as 
conduits for financing of terrorism.  These entities must 
register with official agencies. 
 
¶11. Taiwan is not a party to the 1999 International 
Convention for the Suppression of the Financing of 
Terrorism, but complies with its provisions. 
 
Offshore Financial Centers 
-------------------------- 
 
¶12. All foreign financial institutions and offshore banking 
units follow the same regulations as domestic financial 
entities.  All offshore banks, international business 
companies, and shell companies need to comply with the 
disclosure regulations from Taiwan's Central Bank of China 
(CBC), BOMA, and MLPC.  These supervisory agencies will 
conduct background checks on applicants for banking and 
business licenses.  Offshore casinos or internet gambling 
sites are illegal. 
 
Free-Trade-Zones 
---------------- 
 
¶13. Taiwan's only free trade zone began operation in Keelung 
on October 1, 2004.  Entities wanting to operate in the free 
trade zones must submit applications to the port 
authorities.  Entities can conduct simple processing of 
commodities in the zone and re-export them without 
inspection by customs.  There is no indication that the zone 
is used in money-laundering schemes or by financers of 
terrorism.  Keelung port authority has a panel composed of 
members from various enforcement agencies to conduct checks 
of commodities, transportation, and accounting.  According 
to Taiwan's Banking Law and Securities Trading Law, in order 
for financial institutions to conduct foreign currency 
operations Taiwan's Central Bank must first approve the 
institution to conduct foreign-currency operations.  The 
financial institutions must then submit an application to 
port authorities to establish an offshore banking unit in 
the free trade zone. 
 
International Cooperation 
------------------------- 
 
¶14. Taiwan is not a member of the United Nations and 
therefore cannot be a party to the UN International 
Convention against Illicit Traffic in Narcotic Drugs and 
Psychotropic Substances or other UN agreements and 
conventions.  However, Taiwan abides by the provisions of 
those conventions.  Taiwan is a member of the Egmont Group 
and the Asia/Pacific Group on Money Laundering (APG) adheres 
to regulations/recommendations from other international 
groups including the Financial Action Task Force on Money 
Laundering (FATF).  Where necessary, Taiwan has amended its 
regulations to meet international standards. 
¶15. The Taipei Economic and Cultural Representative Office 
(TECRO) and the American Institute in Taiwan (AIT) signed a 
Mutual Legal Assistance Agreement (MLAA) in March 2002. 
This agreement remains the primary avenue of law enforcement 
cooperation in regards to investigations of narcotics 
trafficking, counter-terrorism issue, including terrorist 
financing, and other transnational crimes. 
 
Asset Forfeiture and Seizure Legislation 
---------------------------------------- 
¶16. Taiwan has established drug-related asset seizure and 
forfeiture regulations, which state that according to 
treaties or agreements Taiwan's Ministry of Justice shall 
share seized assets with foreign official agencies, private 
institutions or international parties who provide Taiwan 
with assistance in investigations/enforcements.  Assets of 
drug traffickers, including instruments of crime and 
intangible property, can be seized along with legitimate 
businesses used to launder money.  The injured parties can 
be compensated with seized assets.  The Ministry of Justice 
distributes other seized assets to the prosecutor's office, 
police, or other anti-money laundering agencies.  The law 
does not allow for civil forfeiture. 
 
¶17. In January-September 2004, total seized assets reached 
NT$ 20 million (about US$ 660,000).  To prevent money 
laundering and other serious crimes, Taiwan works with the 
financial intelligence units of other countries on asset 
tracing, freezing, and seizure.  Taiwan's banking community 
and public have been supportive of Taiwan authorities' 
enforcement efforts. 
 
PAAL