FSC imposes first penalty on VASP: ACE Exchange fined 1.52 million New Taiwan Dollars for anti-money laundering deficiencies

The Securities and Futures Bureau of the Financial Supervisory Commission announced today the penalty imposed on ACE Exchange, a subsidiary of King Digital Group, for violating multiple anti-money laundering regulations and personal data protection laws, resulting in a fine of NT$1.52 million.

Financial Supervisory Commission: Violations Discovered

The Financial Supervisory Commission (FSC) stated that in November 2023, it conducted a special inspection on Aces Digital Innovation Co., Ltd. for anti-money laundering and counter-terrorism financing operations. The inspection revealed various violations by the company, indicating its failure to comply with relevant laws and regulations.

Inadequate Customer Due Diligence

The FSC believes that Aces Company did not effectively enhance due diligence measures for high-risk customers, nor fully understand the purposes and nature of establishing business relationships. Additionally, the company failed to fully identify and verify customer identities, did not accurately identify the ultimate beneficial owners of legal entity customers, and did not prudently assess the necessity of raising customer risk levels.

Inadequate Transaction Monitoring

In terms of transaction monitoring, Aces Company did not set different monitoring thresholds for customers based on their money laundering risk levels, did not accurately record the handling status of suspicious transaction alerts, and did not maintain comprehensive investigation records of suspicious transactions alerts for the same customer. Moreover, the company did not fully understand the sources and destinations of customer funds.

Inadequate Record Keeping

Aces Company had several deficiencies in record keeping, including incomplete preservation of external sender wallet address data for customer virtual asset transfers, as well as records of customer interactions and transactions. The company also failed to provide transfer data for virtual assets during the FSC's audit.

Inadequate Personal Data Management

In addition, Aces Company stored customer personal data in external company systems without appropriate security measures, further exacerbating its violations.

FSC's Penalty on ACE

The FSC stated that based on the provisions of the Anti-Money Laundering Act Articles 5(2), 6(5), 7(5), 8(4), and the Personal Information Protection Act Article 48(2), it imposed a fine of NT$1.52 million on Aces Digital Innovation Co., Ltd. as a disciplinary measure.

Taiwan's Penalties on Exchanges under AML Laws: Deterrence

This penalty case emphasizes the importance for financial institutions to prevent money laundering and protect personal data. The FSC urges all financial institutions to strengthen internal controls and compliance with relevant regulations to maintain the safety and stability of the financial system.

From the reasons for the penalty on ACE, it is evident that the FSC is now evaluating domestic VASP (Virtual Asset Service Provider) internal control mechanisms based on international standards. Many industry players may have had shortcomings in the past, indicating a step forward in Taiwan's virtual asset regulation.