Virtual Asset Service Providers are Required to Conduct Anti-Money Laundering Operations

The Money Laundering Control Act was comprehensively amended on July 31, 2024. Article 6 of the Money Laundering Control Act, referencing the recommendations, annotations, and technical compliance evaluations of the Financial Action Task Force (hereinafter referred to as “FATF”), introduces regulations requiring virtual asset service providers (hereinafter referred to as “VASPs”), including enterprises and individuals, to register for anti-money laundering compliance. VASPs established overseas, in addition to registering for anti-money laundering compliance, must also complete company registration before providing services within Taiwan. Failure to complete the required registrations before offering services will result in criminal penalties[1].

In addition, to align the terminologies and regulatory scope with the FATF, this amendment changes the term “virtual currency” to “virtual assets,” thereby including non-fungible tokens (NFTs) under the regulations governing virtual asset services[2].

Regarding VASPs, the Financial Supervisory Commission (hereinafter referred to as “FSC”), on November 26, 2024, issued the “Regulations Governing Anti-Money Laundering Registration of Enterprises and Individuals Providing Virtual Asset Services” (hereinafter referred to as the “Registration Regulations”) and amended the “Regulations Governing Anti-Money Laundering and Counter-Terrorism Financing for Enterprises and Individuals Providing Virtual Asset Services” (hereinafter referred to as the “AML Regulations”). Both the Registration Regulations and the AML Regulations came into effect on November 30, 2024. Key points of the aforementioned regulations are explained below.

‍I. Regulations Governing Anti-Money Laundering Registration of Enterprises and Individuals Providing Virtual Asset Services

Article 3 of the Registration Regulations stipulates that VASPs shall register according to their business categories, including virtual asset exchangers, trading platforms, transfer providers, custodians, and underwriters. Each service provider shall apply for anti-money laundering registration in accordance with the documents and procedures specified in Article 5 of the Registration Regulations. The Registration Regulations also outline distinct management methods for different types of VASPs.

Referencing Annotation 3 to Recommendation 15 of the FATF, Article 4 of the Registration Regulations establishes qualification requirements for VASPs’ responsible persons and beneficial owners to prevent criminals from becoming the beneficial owners or part of the management of VASPs[3].

VASPs may, based on business needs, handle the receipt and payment of legal tender involved in transactions and, with client consent, retain funds in the VASP’s designated deposit accounts at financial institutions. Furthermore, VASPs shall entrust the retained legal tender to a trust or obtain a full performance guarantee from a bank to ensure the segregation of proprietary assets and client assets.

‍II. Regulations Governing Anti-Money Laundering and Counter-Terrorism Financing for Enterprises and Individuals Providing Virtual Asset Services

The AML Regulations (formerly known as the “Regulations Governing Anti-Money Laundering and Countering the Financing of Terrorism for Enterprises Handling Virtual Currency Platform or Transaction”) include the following three key changes:

1. Previously, Article 14 only required VASPs to prepare a risk assessment report every two years and submit it to the FSC upon request. The revised regulations now mandate the preparation of risk assessment reports annually, which shall be submitted to the FSC for reference by the end of March of the following year to enhance supervision and oversight by the FSC.

2. In alignment with the Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers of FATF, the revised Article 15, Paragraph 5, requires VASPs to allocate sufficient and competent compliance personnel.

3. With the establishment of a registration system, VASPs are no longer required to file anti-money laundering compliance declarations. As such, Article 17, which previously governed compliance declarations, has been removed.

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[1] Refer to the legislative reasons for Article 6 of the Money Laundering Prevention Act, which was amended in full on July 16, 2013 and promulgated on July 31, 2013.

[2] Refer to the legislative reasons for Article 5 of the Money Laundering Prevention Act, which was amended in full on July 16, 2013 and promulgated on July 31, 2013.

[3] The definition of a substantial beneficiary is stipulated in Article 2, Paragraph1, Subparagraph 8 of the Registration Regulations: “A substantial beneficiary refers to a natural person who has the ultimate ownership or control over a virtual asset service provider, or a natural person who entrusts others to operate virtual asset services.”

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