Taiwan regulator to accelerate tightening of AML rules for crypto service providers

What’s new? Taiwan’s Financial Supervisory Commission (FSC) will accelerate the implementation of new anti-money laundering (AML) regulations to boost anti-fraud efforts. These regulations will require virtual asset service providers (VASPs) to undergo registration with AML-compliance checks. Violations could result in up to two years in prison and a fine of up to 5 million new Taiwan dollars ($153 700).

Material by The Block

What else is known? Officials clarified that foreign crypto exchanges and other VASPs must establish a company or branch in Taiwan under local laws and undergo registration before they can operate in the local market.

For now, the regulations introduced by the FSC in July 2021 are still in effect for VASPs. The new rules were originally scheduled to be implemented by January, but officials pushed back the deadline and will now take effect on November 30. All exchanges, even those that filled out a declaration of compliance with the old rules, will have to undergo the new registration.

According to FSC Chairman Jin-Lung Peng, the accelerated implementation of the rules is intended to meet the public’s need for stronger fraud protection. The new VASP registration system is only part of a broader legal framework aimed at combating fraud.

For example, the tightening will affect securities firms, including aspects such as fiat currency custody, information security, customer complaint procedures, record keeping, and disclosure.

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As for crypto exchanges, they must establish clear procedures for listing and delisting cryptocurrencies, as well as take measures to prevent unfair trading and detect abnormal prices and trading volumes characteristic of market manipulation attempts.

Already, crypto service providers are attracting increased attention from the FSC. Earlier this week, for example, the largest local crypto exchanges MaiCoin and BitoPro were fined $1,5 million new Taiwanese dollars for violating current AML rules.

According to officials, both exchanges failed to strengthen customer due diligence, did not sufficiently understand the sources of their revenue, poorly maintained records of transaction data, and failed to effectively identify suspicious transaction patterns.

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MaiCoin said it will immediately address the shortcomings to ensure that users’ assets are protected, and business operations run smoothly.

BitoPro has also assembled a working group and has begun to address the deficiencies by tightening internal audit and control procedures, improving its employee training program, and raising awareness of the company’s FSC rules.