FSC fines non-compliant cryptocurrency exchanges! First case of anti-money laundering statement in effect, FSC fines Honghan Creative NT$500,000

The Financial Supervisory Commission (FSC) of Taiwan has issued multiple responses stating that entities engaging in virtual currency businesses without passing the anti-money laundering declaration are operating illegally, following the release of the anti-money laundering declaration. On January 3rd, the first fine was imposed on Hong Han Creative Company for failing to complete the anti-money laundering compliance statement while continuing to operate virtual currency business, resulting in a fine of 500,000 NTD.

"Hung Han Creative" Fined 500,000 for Operating a Currency Business in Violation of Regulations

The Financial Supervisory Commission's Securities and Futures Bureau announced on 1/3 that Hung Han Creative Co., Ltd. engaged in virtual currency platform business without completing the anti-money laundering compliance declaration. Following the investigation by the Bureau and the transfer of data to the Tainan City Government Police Bureau, the company was fined 500,000 Taiwanese dollars.

The Financial Supervisory Commission stated that it had sent a letter to the company last October requesting submission, but Hung Han Creative did not provide the required documents. After imposing the fine, the Financial Supervisory Commission also required the company to complete the anti-money laundering compliance declaration within 1 to 2 months, or they might face repeated fines.

Financial Supervisory Commission Warns Operators: Failure to Pass is Illegal

The Financial Supervisory Commission previously stated that according to the anti-money laundering regulations for virtual currency platforms, individuals engaged in virtual currency activities, i.e., ordinary individuals, should register their businesses and tax registration and comply with relevant anti-money laundering regulations.

Any operator engaging in virtual currency activities without completing the anti-money laundering compliance declaration is illegal. Limited to those registered domestically

Prosecutors demand regulation of individual currency businesses! Financial Supervisory Commission responds: Operators without completion of anti-money laundering declaration are considered illegal

VASP Association Preparatory Group: Operators need to wait for approval, and those who pass will also be subject to financial inspections

Prior to the implementation of the anti-money laundering declaration system, Taiwan already had many existing currency businesses engaging in OTC, over-the-counter trading activities. However, after the system was put in place, not all had completed or passed the anti-money laundering declaration. The Financial Supervisory Commission's Securities and Futures Bureau, responsible for the review, has slowed down the number of approvals in recent years, with only exchange operators being approved recently. Many currency businesses that have not passed are still waiting anxiously.

Preparatory Group Convener Hui-Zong Xiao Suggests

Interviewing the VASP Virtual Asset Service Providers Association Preparatory Group, Preparatory Group Convener Hui-Zong Xiao stated:

"Given that the Financial Supervisory Commission tends to be conservative in reviewing applications for anti-money laundering declarations from VASP (Virtual Assets Platform and Trading Business Operators), yesterday the Financial Supervisory Commission issued its first fine to operators who did not pass the anti-money laundering declaration. It can be expected that many operators waiting for review may face business interruption. Especially in situations where the review timeline and outcome are unpredictable, they are bound to encounter significant challenges. In response to this issue, I propose the following:

Understand the Regulatory Perspective

Firstly, industry regulation is just beginning, and both the regulatory authorities and operators are still in the early stages of coordination. The association has submitted its documents and is awaiting approval from the Ministry of the Interior, and the self-regulatory norms for operators have not yet been completed. From the regulatory perspective, steady development is preferable to rapid progress.

Passing Does Not Guarantee Compliance

It is important to note that currently, VASP operators in Taiwan are diverse, with significant differences in scale and business operations. However, according to the guidelines announced by the Financial Supervisory Commission on September 26, 2023, the focus is primarily on exchange operations. Therefore, a foreseeable challenge is that even qualified operators who pass the anti-money laundering may not fully meet the requirements of the guidelines in terms of their business operations. Therefore, operators eager to pass the review should understand that the anti-money laundering declaration is not a license, and passing the review does not equate to legality and compliance.

Based on the regulatory authority's public statements, VASP operators who pass the anti-money laundering declaration are considered "qualified" and will be subject to subsequent financial inspections; those who do not pass are considered "illegal."

Recommendation to Understand the VASP Association Charter

It is recommended that operators awaiting the review of the anti-money laundering declaration fully understand the guidelines and draft association charter, as this information is publicly available. At the same time, collaborating with qualified operators who have passed the anti-money laundering declaration can help avoid business interruptions. Through collaboration with qualified operators, a deeper understanding of actual regulations can be gained, preparing for future reviews in advance, and considering how to adjust business activities within the existing regulatory framework to continue operations in line with the expectations and requirements of the regulatory authorities."

Qualified Operators Need to Notify in Advance if Transferring Operations, Changes in Business Content

Furthermore, the association preparatory group reminds that in the case of transferring operating rights or changing business content, advance notification to the Financial Supervisory Commission is required. Currently, some qualified operators are transferring operating rights without following these necessary steps. The preparatory group advises other operators to prioritize completing the anti-money laundering declaration because it is the first requirement under the current regulatory mechanism in Taiwan.

Additional Information:

1. Draft Association Charter

2. Financial Supervisory Commission Guidelines

3. List of Operators Passing the Latest Anti-Money Laundering Declaration