Over the past few days the legislature has been reviewing a proposed amendment to the Money Laundering Control Act (洗錢防制法), with differing opinions thick on the ground.
This draft, like regulations for the prevention of funding of terrorism that passed a third reading in July, is different from legislation concerned purely with domestic matters in that there is a great deal of international pressure to sign them into the statute books and the legislature has little room to haggle over specifics.
Therefore, despite the proliferation of stories about interest groups lobbying individual legislators — not just from the financial industry, who most often fall foul of money laundering, but also certain other sectors listed as being obliged to report on money laundering activity — the conclusion was that there was little choice but to pass the proposal.
Taiwan must thoroughly amend its legislation to move it in line with the 40 recommendations set out in the international anti-laundering regulations of the Financial Action Task Force on Money Laundering and to produce a checklist next year of how the rules have been implemented.
If it fails to do so, Taiwan will most likely fail the third round of mutual evaluations by the Asia-Pacific Group on Money Laundering (APG) in 2018, in which case it will be blacklisted by the APG and placed on its roster of “nations at high risk of money laundering.”
The international financial sanctions that would follow will be pervasive and will cut the nation off from the rest of the international finance community. It will be a self-generated financial crash 100 times worse than the scandal involving Mega International Commercial Bank’s New York branch and would be devastating for all concerned.
According to international norms and the legal codes of other countries, money-laundering legislation and confiscations are two sides of the same coin, the latter being the legal implication of the former. The two are inextricably linked.
The laws of the more advanced nations curtail money laundering by allowing for the confiscation of income that is suspected to have come from other criminal activity.
In countries such as Germany and Austria, this is called extended confiscation of assets or profits. The German and Austrian criminal codes both clearly state that confiscations of money launderers’ assets can be extended beyond the income derived through the crimes involved in the case at hand.
As for US and UK law, apart from criminal forfeiture — meaning confiscations for criminal activity — there are provisions for civil forfeiture, which is sometimes called non-conviction based confiscation (NCBC).
In these systems, the scope for confiscations extends well beyond that applied in Europe. Although the systems differ, the conclusion that assets may be confiscated is the same.
Incidentally, as part of its fight against money laundering and other economic crimes, the EU strongly recommends that its member states adopt the NCBC system.
Returning to the state of affairs in Taiwan, the end of last year saw the enactment of a new forfeiture law that has been hailed as a “centennial evolution of criminal law” and takes Taiwan in the direction of a “new era of economic criminal law.” However, a set of amendments suggested by academics that recommended a system of extended forfeitures met with strong opposition from the Judicial Yuan, as well as a number of legislators, with the result that these amendments could not even be formally proposed. This is something of a fly in the ointment in the new forfeiture provisions in the Criminal Code.
As economic crimes generally involve a strong requirement for concealing money flows and laundering illicit money, if we could start from the aspect of money laundering and adopt an extended confiscation system, even though it would still be narrower in scope than the legal provisions of other countries, it would at least be better than nothing and better late than never.
Taking a certain transnational drug-smuggling case as an example. A sum of NT$1 million (US$31,367) connected with the drug deal under investigation was remitted from Thailand to an account controlled by defendant A. There was a further sum of about NT$9 million from unknown sources in the same newly opened account and investigations showed that this money had recently been remitted from Thailand in installments. Defendant A could not explain where this money came from or prove that it came from a legal source.
Because the drug-smuggling case involved mutual judicial assistance between nations and some factual details had not yet been investigated, the prosecutors first indicted defendant A for money laundering in relation to the NT$1 million. This left open the question of whether the other NT$9 million could be confiscated.
According to German, Austrian, UK and US laws, the conclusion would be in the affirmative — that is to say that the full NT$10 million could be confiscated — but according to the Criminal Code it could not be.
Even if the proposed amendments to the Money Laundering Control Act are all passed, if it does not include any provisions for extended confiscation; the outcome would be that only the NT$1 million could be confiscated.
Would such a result be “harboring criminals” or “safeguarding human rights?”
There are innumerable cases that present a similar situation to the one just mentioned, cross-strait telecom fraud being a typical example. However, because the existing system does not allow for extended confiscation in money laundering cases, the judiciary has always had its hands tied.
Taiwan can only do a thorough job of fighting economic crime and rebuilding its financial order if it adopts an extended confiscation system.
Lin Yu-hsiung is a professor in the College of Law at National Taiwan University and chief executive of the Taiwan Criminal Law Society.
Translated by Paul Cooper and Julian Clegg
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