To strengthen compliance with AML/CFT requirements on insurance brokers and insurance agent companies ("Brokers and Agents"), theFinancial Supervisory Commission (FSC) amended Article 5.3 of theDirections Governing the Internal Control System for Anti-Money Laundering and Countering Terrorism Financing of the Insurance Sector(the "Directions"), effective upon promulgation on May 31, 2018.
This amendment aims to raise the insurance industry's awareness of money laundering risk and to improve the quality of risk assessment. The FSC has instructed industry associations of Brokers and Agents to establish risk assessment frameworks for all the Brokers and Agents to take reference from; moreover, for Brokers and Agents to recognize the risk of being used as a conduit for money laundering by their own clients and to have a reasonable understanding of the money laundering risk resulting from their own business attributes, the FSC also took references from the tenth point of the evaluation criteria in the first recommendation of the Financial Action Task Force (FATF), thus amending Article 5.3 of the Directions and making the following instructions:
1. According to Article 5.3 of the Directions, aside from statutory obligation to recognize, assess, and manage risk of money laundering, Brokers or Agents with annual revenue over NTD50 million should produce risk assessment reports and establish risk assessment update mechanisms.
2. According to the order issued by the FSC (Ref. No.: Bao-Zong-Zi No. 10704562454), Brokers and Agents with revenue under NTD50 million should still follow the risk assessment framework enacted by their respective industry associations to recognize, assess, and manage relevant risk. Risk assessment reports and risk assessment update mechanisms are also required. In addition, these reports shall be compiled and submitted to FSC for review by industry associations before June 30, 2018, and subsequent annual update on risk assessment reports of the members of the associations should be submitted to FSC before June 30 of each year.
In the future, all Brokers and Agents should carry out risk assessment, consider all risk factors, set up mechanisms for update on risk assessment reports, and submit the reports to authorities for review. Through implementation of the guidelines enacted by industry associations and amendment of laws, the FSC expects insurance industry in Taiwan will better comply with international standards of anti-money laundering and prevention of terrorist financing.