1. Banking Bureau, Financial Supervisory Commission, R.O.C. 1 Overview of the AML/CFT Regulatory Regime Governing the Financial Sector Financial Supervisory Commission September 21, 2009

2. Banking Bureau, Financial Supervisory Commission, R.O.C. 2 Outline  Introduction of the Financial Supervisory System and FSC  AML/CFT regulatory regime governing the financial Sector  Legislative/Regulatory Developments of AML/CFT in the Financial Sector  International Cooperation  Money Laundering Prevention Measures for securities and futures industries  Money Laundering Prevention Measures for insurance companies  Enhanced AML/CFT financial examinations  Our Commitment to AML/CFT

3. Banking Bureau, Financial Supervisory Commission, R.O.C. 3 Financial Supervisory System Securities And futures Bureau The Executive Yuan The Central BankFinancial Supervisory Commission Insurance Bureau Financial Examination Bureau Banking Bureau

4. Banking Bureau, Financial Supervisory Commission, R.O.C. 4 Commissioners Banking Bureau Insurance Bureau Department of Planning Department of International Affairs Department of Legal Affairs Department of Info Management Other supporting units Securities & Futures Bureau Examination Bureau Chairperson Organization Chart of FSC

5. Banking Bureau, Financial Supervisory Commission, R.O.C. 5  Financial Supervisory Commission (FSC) (Established in July 1, 2004) Primary objectives Consolidated supervision of the banking, securities and insurance industries Single regulator Financial stability Consumer & investor protection Primary objectives of FSC

6. Banking Bureau, Financial Supervisory Commission, R.O.C. 6 Numbers of Financial Institutions as of June 30, 2009 Financial Institutions Head officesBranch units Domestic Banks 373,260 Foreign Banks 32143 Credit Cooperatives 27272 Credit Departments of Farmer’s Associations 266811 Credit Departments of Fishermen’s Associations 2542 Bills Finance Companies 1032 Postal Savings System 11,321

7. Banking Bureau, Financial Supervisory Commission, R.O.C. 7 The Profile of Taiwan’s Banking Market (NT$billion; as of June 30, 2009) InstitutionsDepositLoanAssetsNet Worth amount% % Domestic Banks20,74674.2%16,43790.85%29,5551,824 Foreign Banks9133.27%6253.46%3,07190 Credit Cooperatives5391.93%3431.9%63639 Credit Departments of Farmer’s and Fishermen’s Associations 1,3944.99%6873.79%1,60494 Postal Savings System4,36615.62%N/A 4,73149 Bills Finance Companies N/A 813116

8. Banking Bureau, Financial Supervisory Commission, R.O.C. 8 Overview of AML and CFT regulatory regime governing the financial sector  Articles 6, 7 and 8 of Money Laundering Control Act (MLCA)  Regulations Governing Cash Transactions Reports and Suspicious Transaction Reports by Financial Institutions  Money Laundering Prevention Guidelines and Procedures for Banks, Credit Cooperatives, Bills Finance Companies issued respectively by the Bankers Association, National Federation of Credit Cooperatives, Bills Finance Association

9. Banking Bureau, Financial Supervisory Commission, R.O.C. 9 Measures for cash transactions over certain threshold (NT$500,000, approximately USD$15,000) under Article 7 of the MLCA and related regulations issued by the FSC:  Customer Due diligence.  Mandatory reporting to the Anti-Money Laundering Division (AMLD), Investigation Bureau, Ministry of Justice  Mandatory record keeping AML and CFT regulatory regime governing the financial sector

10. Banking Bureau, Financial Supervisory Commission, R.O.C. 10 Measures for transactions suspected to be money laundering activities under Article 8 of the MLCA and related regulations thereto promulgated by the FSC:  Customer Due Diligence  File the Suspicious Transaction Report (STR) of the suspect transaction, regardless of the transaction amount, with the AMLD  Mandatory record keeping AML and CFT regulatory regime governing the financial sector (Cont. )

11. Banking Bureau, Financial Supervisory Commission, R.O.C. 11 The Bankers Association issued the “Money Laundering Prevention Guidelines and Procedures for Banks” in March 1997 and amended on a regular basis as per the orders of the FSC.  Establish the internal operation and control procedures of AML.  Arrange the staff to attend on-the-job AML trainings on a regular basis.  Designate senior management to coordinate and supervise the compliance with the guidelines. AML and CFT regulatory regime governing the financial sector (Cont. )

12. Banking Bureau, Financial Supervisory Commission, R.O.C. 12  STRs filings and enhance CDD measures related to terrorist financing (Article 7 of the Regulations Governing Cash Transaction Reports and Suspicious Transaction Reports by Financial Institutions )  Prompt circulation of lists of terrorists to financial institutions  Require financial institutions to establish and update a database for the lists of terrorists AML and CFT regulatory regime governing the financial sector (Cont. )

13. Banking Bureau, Financial Supervisory Commission, R.O.C. 13 Legislative/Regulatory Developments of AML/CFT in the financial sector  The recommendations from the APG mutual evaluation in 2007: underpinning force of the recent developments in the AML/CFT regulatory regime  Recent significant progress in the AML/CFT regulatory regime:  Amendments to Article 19-3 of the Foreign Exchange Control Act and Article 5-2 of the Offshore Banking Act (promulgated on April 29, 2008): the legal basis for financial sanctions

14. Banking Bureau, Financial Supervisory Commission, R.O.C. 14 Legislative/Regulatory Developments of AML/CFT in the financial sector (Cont. )  Issuance of the “Regulations Governing Cash Transactions Reports and Suspicious Transaction Reports by Financial Institutions” (issued on Dec. 18, 2008 and went into effect on Mar. 18, 2009) (1) Lower the threshold for occasional cash transactions that triggers CDD obligation and cash transaction reporting (2) Improve the regulatory purview of suspicious transaction reporting  Amendments to the “Money Laundering Prevention Guidelines and Procedures for Banks” (approved for recordation by the FSC on 18 March 2009) (1)Enhanced Customer Due Diligence (CDD) measures (2)Strengthened the internal control, auditing and compliance system (3)Explicitly provided for measures pertaining to shell banks

15. Banking Bureau, Financial Supervisory Commission, R.O.C. 15 Legislative/Regulatory Developments of AML/CFT in the financial sector (Cont. )  On –going issue: formulation of the policy and regulatory framework governing Politically Exposed Persons (PEPs)  Proposed revisions to the “Money Laundering Prevention Guidelines and Procedures for Banks”: discussion and communication with the Bankers Association underway (since January 2009)  Risk-based supervisory approach: different treatment between financial institutions with substantial international presence and those with only local customer base

16. Banking Bureau, Financial Supervisory Commission, R.O.C. 16 Number of STRs Reported by Financial Institutions

17. Banking Bureau, Financial Supervisory Commission, R.O.C. 17 Reporting InstitutionsNumber of STRs Domestic Banks1,053 Foreign Banks87 Credit Cooperatives7 Credit Departments of Farmers’ & Fishermen’s Associations 16 Postal Saving System347 Credit Card Companies1 Securities Firms8 Futures Commission Merchants1 Taiwan Securities Central Depository108 Insurance Companies15 Total1,643 Number of STRs Reported by Financial Institutions Table: Statistics of STRs (2008)

18. Banking Bureau, Financial Supervisory Commission, R.O.C. 18 International Cooperation  In furtherance of the FATF Rec. 40 “Other forms of cooperation”  The FSC has entered into 38 MOUs with foreign financial supervisory agencies.  The FSC has been signatory to the IOSCO MMOU since 2007 and the IAIS MMOU since 2009.  Cross-Strait cooperation in AML/CFT  Cross-Strait Joint Crime-Fighting and Judicial Mutual Assistance Agreement (went into effect in 25 June 2009)  Proposed MOUs reinforcing the Cross-Strait financial supervisory cooperation  Join the global efforts in AML/CFT  Active member of the APG since 1997  Enhanced formal/informal cooperation with the FATF in the future: observership/membership

19. Banking Bureau, Financial Supervisory Commission, R.O.C. 19 Money Laundering Prevention measures for securities and futures industries  MLP related laws and regulations: those industries shall.. 1.Safely archive transaction records and vouchers, ascertain the identity of customers, and do reports to authority for suspicious transactions or large amount currency transactions 2.Carry out a check procedure to ascertain whether the customer is involved in money laundering or other illegal transactions 3.Set up internal control system to assure law compliance 4.Design training programs for associated persons, internal auditors and compliance staff  The aforementioned regulations has been set up in Article 35-1 of the “Regulations Governing Securities Firms”, Article 22-1 of the “Regulations Governing Securities Investment Trust Enterprises”, Articles 6 and 42 of the “Regulations Governing Offshore Funds”, and Paragraph 3 of Article 2 of the “Regulations Governing Futures Commission Merchants”.

20. Banking Bureau, Financial Supervisory Commission, R.O.C. 20 Money Laundering Prevention measures for securities and futures industries  Self regulations of securities association & futures association:  Money Laundering Prevention Guidelines and Procedures are adopted pursuant to Article 6 of the Money Laundering Control Act.  Including: Customer due diligence, anti money laundry operations, and internal control procedure Periodical on-the-job training or conferences for MLP Appointment of personnel to coordinate and supervise the implementation of the Guidelines

21. Banking Bureau, Financial Supervisory Commission, R.O.C. 21 Money Laundering Prevention measures for securities and futures industries  Key points for amendments of MLP measures lately ：  Managed futures enterprises and futures trust enterprises are included as "financial institution” referred to in Article 5 of the MLCA (Money Laundering Control Act ) on Feb. 2009.  In response to APG’s suggestion for our country’s mutual evaluation, and to cope with the promulgation of the “Regulations Governing Cash Transactions Reports and Suspicious Transaction Reports by Financial Institutions”, the related associations amended “Money Laundering Prevention Guidelines and Procedures ” in March, 2009. Major rules include: Strengthening the execution of Know-your-customer (KYC) procedures Improving the accuracy of customer’s identity data Paying attention to customer’s transaction models

22. Banking Bureau, Financial Supervisory Commission, R.O.C. 22 Money Laundering Prevention measures for securities and futures industries  Future Strategies and Priorities  Strengthen Training  Reinforce money laundering prevention reporting system  Check and control thoroughly the transaction of terrorist from the list of non-cooperative countries  Keep close cooperation ties with related institutions so as to enhance money laundering work

23. Banking Bureau, Financial Supervisory Commission, R.O.C. 23  Amendments to the “Money Laundering Prevention Guidelines and Procedures for Insurance Industry ” (approved for recordation by the FSC on 9 March 2009 )  Strengthen the internal operation and control procedures of AML.  Enhance Customer Due Diligence (CDD) measures.  Require staff to attend on-the-job AML trainings on a regular basis.  Designate senior management to coordinate and supervise the compliance with the guidelines. Money Laundering Prevention measures for insurance companies

24. Banking Bureau, Financial Supervisory Commission, R.O.C. 24 Money Laundering Prevention measures for insurance companies-Regulatory Development  On April 22, 2009, Insurance Bureau requested Insurance Agents /Insurance Brokers Association to formulate of Anti-Money Laundering Self- Discipline Guideline

25. Banking Bureau, Financial Supervisory Commission, R.O.C. 25 Money Laundering Prevention measures for insurance companies  Encourage staff to join anti money laundering training programs OrganizerYearAudienceNumber of Sessions Number of attendees Taiwan Insurance Institute 2009/1. 1- 2009/08 /31 Auditor courses 12400

26. Banking Bureau, Financial Supervisory Commission, R.O.C. 26 Examination Manuals for Financial Institutions Anti-money laundering audit  Formation the money laundering control guidelines  Establish the internal operation and control procedures of AML  the compliance with the guidelines  CDD measures and STRs Filings

27. Banking Bureau, Financial Supervisory Commission, R.O.C. 27 Performances of On-site Examinations in 2009  Routine examination  Targeted examination  AML Targeted examination from April to May 2009  Focus on AML and CDD  8 head offices and 14 branches  Selecting criteria

28. Banking Bureau, Financial Supervisory Commission, R.O.C. 28 Types of Findings  Omissions to comply with operation guidelines when dealing with the opening of an account.  Omissions to fill out the Declaration for suspicious money-laundering transactions.  Failure to keep the transaction records when customer conducts offshore inward transactions or outward remittances  Failure to hold periodical training courses or seminars on anti-money laundering operations

29. Banking Bureau, Financial Supervisory Commission, R.O.C. 29 Our Response to Unusual Transactions  Extraordinary transactions - customers transfer large amount of funds among relevant accounts and request the transactions to be processed in cash.  Measures:  Amending the Specimen of “Points for Attention by Banks on Money Laundering Prevention”  Requiring the banking industry to strengthen their internal control and set up appropriate transaction parameters to establish a database with unusual or suspicious transactions

30. Banking Bureau, Financial Supervisory Commission, R.O.C. 30 Ongoing Research for AML activities  New Trends for Financial Examination Mechanism and Financial Crime Investigation.  Focus  Enhance the effectiveness of investigation  Coordinate with prosecutors to sort out the technical details for the court cases  Strengthen international cooperation and assistance

31. Banking Bureau, Financial Supervisory Commission, R.O.C. 31 Our Firm Commitment to AML/CFT  Promote a sound and effective AML/CFT mechanism for the financial sector under the MLCA and relevant regulations  Keep the financial sector abreast with the international standards of AML/CFT  Strengthen international cooperation and assistance  Maintain financial market integrity and stability in response to the FATF initiatives  Relentless efforts and firm commitment to anti-money laundering and combating the financing of terrorism

32. Banking Bureau, Financial Supervisory Commission, R.O.C. 32