Given the strong governmental influence on Taiwanese banks, evaluate the effectiveness of the regulators as the fourth line of defense in the financial industry.
GOVERNMENT INVOLVEMENT IN MEGA BANK
As the money laundering saga continued to snowball, Taiwan lawmakers alleged former President Ma Yingjeou’s involvement in the illegal transactions. Ma was also the Chairman of Kuomintang (KMT), the second largest political party in Taiwan and the ruling party at that time, which was alleged to have used Mega Bank to conduct money laundering activities. In its defense, KMT released the results of an investigation by the Legislative Yuan, showing that none of the 174 suspicious transactions flagged by DFS had passed through Taiwan. However, political activists still found it difficult to ignore the possibility that Mega Bank had assisted KMT in cleaning up illicitly gained assets. Democratic Progressive Party (DPP) legislator Luo Chih-cheng alleged that Mega Bank had been used to empty out KMT’s assets, while Mega-New York was used to launder them. Another DPP legislator, Su Chen-ching, also highlighted the fact that the bank had increased its loan to KMT-backed businesses, from NT$3.68 billion in 2010 to NT$11.19 billion in 2015.
CLEANING UP THE MESS
“The amended law shows our country’s resolve to fight economic crimes and money laundering.” – Premier Lin Chuan.
The entire Mega Bank scandal had cast doubt on the integrity of the anti-money laundering protocols in Taiwan. Given the severity of the situation, the Taiwan government undertook several corrective actions. In one notable move, the government passed a bill to amend the country’s anti-money laundering law, which included, inter alia, increasing the ceiling for the amount of fine from NT$1 million to NT$5 million. The Ministry of Finance also planned to make several improvements by strengthening mechanisms, requiring government-controlled banks to report serious incidents, assessing the qualifications of board members who represent government-controlled shares, reviewing the responsibilities of the board of the banks, as well as enhancing on-the-job training for staff assigned to overseas branches.
Required:
Given the strong governmental influence on Taiwanese banks, evaluate the effectiveness of the regulators as the fourth line of defense in the financial industry.
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