Taiwan Advances Anti-Money Laundering Regulations for Crypto Exchanges After Fines

Taiwan is ramping up its efforts to combat money laundering within the cryptocurrency industry by advancing its new Anti-Money Laundering (AML) regulations. This move follows the recent fines imposed on two crypto exchanges for failing to meet existing AML standards. The Financial Supervisory Commission (FSC) of Taiwan announced on November 27 that the registration mandate for cryptocurrency exchanges under the new AML framework has been moved forward, with a new deadline set for November 30, 2024—just days ahead of the original deadline of January 1, 2025.

Fines and New Regulations: A Wake-Up Call for Crypto Exchanges

The change in registration deadline comes after the FSC imposed fines on two well-known cryptocurrency exchanges, MaiCoin and BitoPro, for violations of Taiwan’s AML regulations. These violations included issues with customer due diligence (CDD), transaction monitoring, and suspicious transaction reporting. The fines serve as a clear warning to the crypto industry that Taiwan is taking serious steps to enforce stricter controls in line with global AML standards.

The new AML registration mandate will apply to all virtual asset service providers (VASPs) operating in Taiwan, including those who were already registered under the previous framework. Any VASP that fails to comply with the registration requirements could face serious consequences, including fines of up to 5 million New Taiwan dollars (around $155,900) or even prison sentences of up to two years.

As of the latest update, Taiwan’s FSC has stated that 26 crypto providers are currently approved to continue offering their services. However, under the new regulations, all crypto entities—whether previously registered or not—must complete the Money Laundering Prevention Registration by the newly set deadline of November 30, 2024.

In its announcement, the FSC made it clear that no crypto business has yet completed the necessary registration under the new rules. This is a significant step in the government’s ongoing effort to ensure that the crypto sector adheres to stringent anti-money laundering measures.

Crypto Exchanges Must Strengthen Suspicious Activity Tracking

To help crypto businesses comply with the new mandate, the FSC has provided a checklist outlining the key factors to monitor for suspicious activities. Exchanges must implement processes to track unusual patterns and identify potential money laundering activities. Among the key warning signs for exchanges to look for are:

• Suspicious customer identities: Including names and bank account details that seem inconsistent or potentially fraudulent.
• Unusual activity patterns: This includes things like frequent account changes, multiple trading accounts from the same IP address, and other signs of suspicious behavior.
• Unusual transaction activities: Exchanges are required to monitor transactions that involve splitting funds, using multiple accounts from the same IP address, or frequent asset switching, all of which may be red flags for money laundering activities.

These measures are designed to bolster the country’s defenses against illicit activities, ensuring that crypto businesses are held to the same high standards as traditional financial institutions when it comes to anti-money laundering efforts.

To comply with Taiwan’s new AML regulations, crypto businesses must submit a simple one-page form detailing the nature of their business operations. The form includes a stipulation that any changes to the business or information provided must be submitted to the Securities Over-the-counter (OTC) Trading Center within five business days.

Additionally, crypto providers will be required to establish a robust quality management system for accounting and auditing purposes. This system will ensure that all financial records are maintained accurately and that businesses have the proper safeguards in place to prevent illicit financial activities.

Looking Ahead: Strengthening Taiwan’s Crypto Regulations

Taiwan’s push for more stringent AML regulations reflects a growing global trend towards increasing oversight in the cryptocurrency space. With an eye on the potential for money laundering and other illicit activities within the fast-evolving digital asset market, Taiwan is positioning itself as a leader in crypto regulation in Asia.

The government’s actions are not only aimed at protecting the financial system but also at boosting investor confidence by ensuring that crypto exchanges operate with transparency and compliance. The fines imposed on exchanges like MaiCoin and BitoPro are a clear indication that non-compliance will not be tolerated, and crypto exchanges in Taiwan must prioritize AML compliance to avoid costly penalties.

Taiwan’s decision to advance its AML registration mandate for cryptocurrency exchanges is a significant step towards increasing transparency and security within the digital asset market. As the deadline approaches, crypto businesses in Taiwan will need to implement robust measures to comply with the new rules, which could set a strong precedent for other countries looking to regulate the industry more tightly. The FSC’s crackdown on non-compliant exchanges sends a strong message that crypto businesses must prioritize compliance to ensure the long-term sustainability and credibility of the industry.