Directions Governing Banking Enterprises for Operating Foreign Exchange Business

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Title：

Directions Governing Banking Enterprises for Operating Foreign Exchange Business

Inactive Regulations

Announced Date： August 6, 2003

Amended Date： Amended on April 28, 2016（effective from April 28, 2016）

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(Presentation of relevant regulations)

2. When operating foreign exchange business, banking enterprises shall follow these Directions in addition to complying with the Regulations Governing banking enterprises to Operate Foreign Exchange Business.

Banking enterprises engaged in foreign exchange business shall verify the identity of the customer in accordance with Directions Governing Anti-Money Laundering and Countering Terrorism Financing of Banking Sector and relevant rules.

(Export related foreign exchange business)

3. Banks approved by the Central Bank of the Republic of China(Taiwan)(hereinafter referred to as the Bank) to operate foreign exchange business (hereinafter referred to as authorized banks) shall abide by the following provisions when operating export foreign exchange business :

(1) Export Negotiation, Collections, and Factoring Business :

i. Documents Required: Operate on the basis of transaction documents provided by domestic customers.

ii. Certificates Issued: Issue an export negotiation certificate when foreign exchange earned from exports is exchanged into New Taiwan dollar; while other transaction certificates shall be issued when the foreign exchange is not sold for New Taiwan dollar.

iii.Reporting Documents: A daily transaction report shall be submitted through a [electronic] medium together with data, also in the form of a [electronic] medium, concerning the foreign exchange business or other designated documents on the following business day.

(2) Export Letter of Credit Advising and Confirming Business: Operate in accordance with documents entrusted by foreign correspondent banks.

(Import related foreign exchange business)

4. Authorized banks shall abide by the following provisions when operating import foreign exchange business :

(1) Documents Required: Issue letters of credit, collections and bills acceptance, and negotiations in accordance with transaction documents provided by domestic customers.

(2) Percentage of Margin Collected When Issuing a Letter of Credit: An authorized bank may decide of its own accord.

(3) Certificates Issued : Issue an import negotiation certificate when the New Taiwan dollar is used to purchase foreign exchange needed for imports;issue other transaction certificates when the foreign exchange is not purchased with the New Taiwan dollar.

(4) Reporting Documents: A daily transaction report shall be submitted on a [electronic] medium together with data, also in the form of the [electronic] medium, concerning the foreign exchange business or other designated documents on the following business day.

(Outward and inward remittance business)

5. Authorized banks and post offices under the Chunghwa Post Co. Ltd. shall act in accordance with Money Laundering Control Act and relevant rules and in addition, abide by the following provisions when performing domestic and cross-border outward and inward remittance business except a transfer and settlement between a financial institution and another financial institution where both institutions are acting on their own behalf:

(1) Outward Remittance Business:

i. Documents Required: Operate in accordance with relevant documents filled out by the customer and inspect ID documents or basic registered information. In the case of a company or a firm, query the “company registration inquiry” section or “ business registration inquiry” section in the Commerce Industrial Services Portal of the Ministry of Economic Affairs to confirm the basic registered information of the company or the firm. If the foreign exchange is purchased with the New Taiwan dollar, banking enterprises shall process the settlement in accordance with the "Regulations Governing the Declaration of foreign exchange receipts and disbursements or Transactions" (hereinafter referred to as “Regulations for Declaration”), and assist the declarant to make a detailed and accurate declaration.

ii.Certificates issued: A foreign exchange sale memo shall be issued when the foreign exchange is purchased with the New Taiwan dollar. Other transaction certificates shall be issued when foreign exchange is not purchased with the New Taiwan dollar. The above certificates may be produced in electronic form.

iii.Delivering wire transfer: Wire transfer remittance shall include required originator and beneficiary information.

(2) Inward Remittance Business:

i.Documents required: Operate in accordance with inward remittance notice, foreign currency notes, or foreign currency banknotes, and inspect ID documents or basic registered information. In the case of a company or a firm, query the“ company registration inquiry” section or “business registration inquiry” section in the Commerce Industrial Services Portal of the Ministry of Economic Affairs to confirm the basic registered information of the company or the firm. If the foreign exchange is sold for the New Taiwan dollar, the transaction shall be treated in accordance with the Regulations for Declaration, and assist the declarant to make a detailed and accurate declaration.

ii.Certificates issued: A foreign exchange purchase memo shall be issued when the foreign exchange is sold for the New Taiwan dollar. Other transaction certificates shall be issued when foreign exchange is not sold for the New Taiwan dollar. The above certificates may be produced in electronic form.

iii.Take following reasonable risk control measures：

(i)Take reasonable measures, including post-event monitoring or real-time monitoring where feasible, to identify wire transfers that lack the required originator or beneficiary information.

(ii)Implement risk-based policies and procedures for determining when to execute, reject, or suspend a wire transfer lacking the required originator or required beneficiary information and the appropriate following-up action where the originator and beneficiary information is insufficient.

(3)Intermediary financial institution：

i. A financial institution that is an intermediary institution shall retain all the wire transfer originator and beneficiary information accompanying the wire transfer.

ii.Where technical limitations prevent the required information accompanying a cross-border wire transfer from importing to the related domestic wire transfer, a record should be kept, for at least five years, by the receiving intermediary financial institution of all the information received from the ordering financial institution or another intermediary financial institution.

iii.Items 3 of the preceding Subparagraph shall apply mutatis mutandis.

(4) Reporting Documents: A daily transaction report shall be submitted to the Department of Foreign Exchange of the Bank on the first business day following the transactions in accordance with the following provisions:

i.When a daily transaction report is submitted in written form, certificates issued when operating foreign exchange transactions in person, a list of foreign exchange transactions made via the Internet and relevant data through a [electronic] medium, Declaration Statement of Foreign Exchange Receipts and Disbursements or Transactions (hereinafter referred to as “Declaration Statement”) or information considered the same as declaration information according to the Regulations for Declaration, and other designated documents shall be attached to the report.

ii.When a daily transaction report is submitted through a [electronic] medium, data in the form of the [electronic] medium concerning the foreign exchange business, written Declaration Statements, or other designated documents shall also be attached to the report.

The term " originator and beneficiary information " referred to in Items 3, Subparagraph 1, Items 3, Subparagraph 2 and Subparagraph 3 of the preceding paragraph shall mean：

(1)Originator information：

i.Full name.

ii.Account number: in the absence of an account, a unique transaction reference number should be included which permits traceability of the transaction.

iii.Address：ordering bank could decide whether to replace address with national identity number, or customer identification number, or passport number, or the resident certificate number, or date and place of birth.

(2)Beneficiary information：

i.Full name.

ii.Account number:in the absence of an account, a unique transaction reference number should be included which permits traceability of the transaction.

(Foreign exchange deposit business)

6. Authorized banks shall abide by the following provisions when operating foreign exchange deposit business:

(1) Documents Required: Operate in accordance with inward remittance notice, foreign currency loans, foreign currency notes, foreign currency banknotes, foreign exchange purchased with the New Taiwan dollar, and deposit documents.

(2) Operating Restrictions: Shall not be operated with checking deposits.

(3) Purchase and Sale Procedures: In case the New Taiwan dollar is used to purchase foreign exchange for deposit and when fund from a foreign exchange deposit is sold for the New Taiwan dollar, banking enterprises shall handle the purchase or sale that reaches the foreign currency equivalent of 500,000 New Taiwan Dollars in accordance with the Regulations for Declaration and the Directions for Declaration.

(4) Foreign Currency Deposit Transfers: Shall be performed by authorized banks; transferees shall deposit the foreign exchange received in a foreign currency deposit account at an authorized bank.

(5) Foreign Currency Time Deposit Pledge: The customer may pledge his/her own foreign currency time deposit to borrow in foreign currency.

(6) Certificate issued: A foreign exchange sale memo shall be issued when the deposited amount is purchased with the New Taiwan dollar. Other transaction certificates shall be issued when the foreign exchange is not purchased with the New Taiwan dollar. A foreign exchange purchase memo shall be issued when the fund from a foreign exchange deposit is sold for the New Taiwan dollar. Other transaction certificates shall be issued when the foreign exchange is not sold for the New Taiwan dollar.

(7) Reporting Documents: A daily transaction report and daily foreign exchange deposit report shall be submitted on a [electronic] medium to the Department of Foreign Exchange of the Bank on the first business day following the transactions and attached with data, in the form of the [electronic] medium, concerning the foreign exchange business, written Declaration Statements, or other designated documents.

(Foreign currency loan business)

7. Authorized banks shall abide by the following provisions when operating foreign currency loan business:

(1) Counterparties: limited to domestic customers.

(2) Documents Required: Verify and operate in accordance with foreign transaction documents provided by the customer or documents approved by the Bank.

(3) Conversion Restrictions: Foreign currency loans shall not be converted into the New Taiwan dollar; this does not apply, however, to export foreign currency loans after exportation.

(4) Reporting Documents: With regard to the disbursement and repayment of foreign currency loans, daily transaction reports shall be filled out in accordance with the "Instructions for Completing Declaration on Short-, Medium-, and Long-Term Foreign Currency Loans Made by Authorized Banks"; the monthly balance and turnover amount of such loans shall be tabulated by category into short-, medium-, or long-term loans and submitted to the Department of Foreign Exchange of the Bank.

(5) External debt declaration: When it is revealed in the course of operating foreign exchange business that a private enterprises has negotiated abroad a medium or long term foreign currency loan, the authorized bank shall advise the enterprises to operate in accordance with the "Directions for Declaring Medium- and Long-Term External Debt by Private Enterprises," and notify the Department of Foreign Exchange of the Bank.

The foreign transaction documents and documents approved by the Bank referred in the second subparagraph of the preceding paragraph, and compliance of relevant operational issues will be separately prescribed by the Bank.

(Foreign-currency loan business – combined filing)

8. When a company applies for a single import/export foreign currency loan and the documents provided combine with several import/export transactions, the authorized bank may operate according to the list of transaction documents provided by the company. Each transaction on the list shall be accompanied by a record of the name, number, and date of the transaction document, payment terms or due date, name of the foreign company involved, and the amount of the transaction. The information indicated in the list concerning the transaction shall be authenticated. The company is required to preserve relevant transaction documents for reference.

(Foreign Currency Guarantee business)

9. Authorized banks shall abide by the following provisions when operating foreign currency guarantee business:

(1) Counterparties: Limited to domestic customers.

(2) Documents Required: Operate in accordance with documents provided by the domestic customers demonstrating that there is a practical need for the foreign currency guarantee.

(3) Exercise of Guaranteed Debt: Shall be processed in accordance with the provisions of the Regulations for Declaration.

(4) Reporting Documents: The balance at the end of the month and the nature of guarantee shall be submitted to the Department of Foreign Exchange of the Bank.

(Business of NTD non-discretionary trust funds )

10. Authorized banks approved to engage in New Taiwan dollar non-discretionary trust funds for investment in foreign-currency denominated securities shall abide by the following provisions:

(1) Trustors are limited to the followings:

i. A domestic natural person or a foreign natural person or citizen of Mainland China who holds a valid Resident Certificate of Taiwan Districts, Alien Resident Certificate or an identification document issued by the Ministry of Foreign Affairs.

ii. A domestic legal entity or a foreign legal entity recognized by the ROC government.

iii. Other entities approved by the Financial Supervisory Commission (hereinafter referred to as the "FSC") or the Bank.

(2) Payment and redemption of the trust funds shall only be handled in the New Taiwan dollar instead of foreign currencies.

(3) Reporting relevant business information: Filing reports in accordance with the rules prescribed by the Bank for business of NTD non-discretionary trust funds for investment in foreign-currency denominated securities.

(Business of foreign-currency non-discretionary trust funds)

11. Authorized banks approved to engage in foreign currency non-discretionary trust funds for investment in foreign securities shall abide by the following provisions:

(1) Trustor of the trust fund shall be limited to the following:

a. Subparagraph 1 of the preceding point shall apply mutatis mutandis.

b. A foreign natural person or a citizen of Mainland China who holds a valid entry visa and has opened a foreign currency deposit account at the authorized bank in accordance with the relevant account opening rules prescribed by Financial Supervisory Commission.

(2) Trustors should open foreign currency deposit accounts at the authorized bank.

(3) Payment and redemption of the trust funds shall only be handled in foreign currency instead of the New Taiwan dollar.

(4) When the trustor is the beneficiary, the trustor's beneficial rights in the trust may be pledged as the collateral for a foreign currency loan in accordance with the Trust Enterprise Act and other relevant provisions.

(5) Reporting relevant business information: Filing reports in accordance with the rules prescribed by the Bank for business of foreign-currency non-discretionary trust funds for investment in foreign-currency denominated securities.

(Foreign currency ATM business)

12. Authorized banks providing foreign currency ATM services shall abide by the following provisions:

(1) If authorized banks provide cross-bank foreign currency cash withdrawal services for ATM card holders via deduction from their NTD account, the ATMs should display a screen that enables the customer making cross-bank cash withdrawal to indicate whether he/she is a non-resident or not.

(2) The authorized banks shall, in their own name, compile and report daily by means of media the ATM transaction information sorted by customer identity status, whereas the report does not need to state the remittance serial number, customer's identification number, amount of foreign currency, code of remittance classification, or destination of the remittance for every single transaction.

(Processing and merchanting trade )

13. When an authorized bank’s foreign exchange business for imports/exports and inward/outward remittance involves processing trade and merchanting trade, import/export negotiation certificates, foreign exchange purchase/sale memos or other transaction certificates and relevant data medium submitted to the Bank’s Department of Foreign Exchange shall comply with the prescribed instructions and descriptions.

(Purchase and Sale of foreign currency cash and traveler's check business)

14. Banking enterprises shall comply with the following provisions when processing the purchase and sale of foreign currency cash and traveler's checks:

(1) Exchange rates set should comply with relevant regulations stipulated by the Department of Foreign Exchange of the Bank.

(2) Documents Required: The provisions of Item 1, Subparagraph 1, and Item 1, Subparagraph 2, Direction 4 are applicable to said business.

(3) Authorized banks shall issue a foreign exchange sale (purchase) memo after accepting a customer’s request for purchasing and selling of foreign currency cash or traveler's checks. A Declaration Statement shall be filled out if the value of a foreign exchange transaction with a customer is equal to or over New Taiwan dollars 500,000.

(4) Authorized banks shall post a sign for this business in Chinese and English in a conspicuous place outside the door.

(5) Banks authorized by the Bank to buy/sell foreign currency cash and traveler’s checks equal to or under an equivalent amount of US$5,000 per transaction at airports or other temporarily installed exchange outlets may adopt simplified declaration procedures after notifying to the Bank.

(6) Non-authorized banks, credit cooperatives, and the credit departments of farmers' and fishermen's associations engaging in the purchase and sale of foreign currency cash and traveler's checks shall comply with the following provisions:

i. They may open foreign currency deposit accounts at authorized banks, but shall not establish correspondent relationships with foreign banks or other financial institutions outside the territory of the Republic of China.

ii. Subject to the provisions under the relevant regulations on the foreign currency risks limit prescribed by the relevant competent authority for financial institutions, they may hold overbought foreign exchange positions as long as such positions do not exceed the maximum permitted by the Bank; the limit of the oversold foreign exchange position is zero.

iii. They may proceed to purchase (or sell) foreign exchange needed for operating this business from authorized banks pursuant to the Regulations for Declaration, and are not obliged to enquire online and count the amount of aggregate settlement amount of the current year. However, the name of the business and the number of approval letter from the Bank shall be denoted on the Declaration Statement.

iv. Reporting Documents: A daily transaction report attached with relevant certificates shall be submitted to the Department of Foreign Exchange of the Bank on the first business day following the transaction.

(Credit card, ATM card, and debit card business)

15. For entities engaging in credit card, ATM card, debit card or cash card business, as well as card issuing banks, acquiring banks and institutions engaging in credit card business involving foreign exchange, the head office shall apply to the Bank for approval. For credit card and debit card business related to Mainland China an approval letter should be obtained from the FSC before commencing operation. All shall abide by the following provisions :

(1) If a foreign natural person is issued a card, the card-issuing bank shall strengthen credit check, the evaluation of the cardholder’s ability to repay, and risk control.

(2) For issues related to foreign exchange transaction involving the New Taiwan Dollar, the Regulations for Declaration and other relevant regulations should be followed.

(Certificates)

16. Foreign exchange business certificates issued by banking enterprises shall be accurately filled out in accordance with the“Code and Description of Outward and Inward Remittance Classification”and the“Instructions for Issuing Various Certificates In Connection with Foreign Exchange Business.”

Banking enterprises may determine on their own the formats of imports/exports negotiation certificates, foreign exchange purchase/sale memos and other transaction certificates issued in connection with the foreign exchange business.

Any foreign exchange business certificate issued in connection with foreign exchange business may be produced in electronic form in compliance with the relevant provisions of the "Digital Signature Act" and its Enforcement Rules.

(Reporting)

17. Banking enterprises that operate foreign exchange business shall, based on the type of business, file the following reports with the established format:

(1) Daily Report of Foreign Exchange Position.

(2) Daily Transaction Report of Export and Inward Remittances.

(3) Daily Transaction Report of Import and Outward Remittances.

(4) Daily Report of Foreign Exchange Deposits.

(5) Daily Report of Foreign Exchange Forwards.

(6) Daily Transaction Report of NT Dollar Exchange Rate Options.

(7) Daily Report of NT Dollar Foreign Exchange Non-Delivery Forwards on [electronic] medium.

(8) Daily Report of Foreign Liability Balance.

(9) Monthly Balance Report of Foreign Currency Loan and Foreign Currency Guarantee.

(10) Monthly Report of Foreign Exchange Transactions Involving a Third Currency.

(11) Monthly Report of NTD Loans to Foreigners without Residence in Taiwan by Domestic Financial Institutions.

(12) Daily Transaction Report of Purchase and Sale of Foreign Currency Banknotes and Traveler's Checks.

(13) Monthly Report of NTD Deposits of Non-Residents.

(14) Ten-Day Reserve Report of Bank’s Foreign Currency Deposits and Other Liability.

(15) Monthly Report of Renminbi Business (CNY1 ~ CNY5).

(16) Quarterly Transaction Report of Foreign Currency Banknotes and Traveler’s Checks Business.

(17) Other designated reports.

The Bank will prescribe the format, contents, and instructions of reports mentioned in the preceding paragraph as well as the format and audit of electronic data files accompanying the transaction reports of banking enterprises.

(Operating manuals and other explanatory information)

18. Banking enterprises that operate foreign exchange business shall refer to the following operation manuals and instructions for operating the relevant systems and filing the reports:

(1) Online Information Transmission System Operating Manual for Large Spot and Forward Transactions between NTD and Foreign Currencies, Large Cross Currency Swap (CCS) Transactions, and Large Non-Deliverable Forward (NDF) Transactions.

(2) Description of Renminbi Business.

(3) Instructions for Completing Daily Transaction Reports on Short, Medium, and Long Term Foreign Currency Loans Made by Authorized Banks.

(4) Code and Description of Inward and Outward Remittance Classification.

(5) Instructions and Reference Formats for issuing Various Certificates of Foreign Exchange business.

(6) Instructions for Issuing Certificates and Media Data Reports about Processing Trade and Merchanting Trade Business.

The operation manuals and instructions mentioned in the preceding paragraph will be separately prescribed by the Bank.

(Record-keeping on transaction documents)

19. Certificates or records on transactions should be maintained for at least five years; all ecords obtained through customer due diligence measures should be kept for at least five years after the business relationship is ended or the date of the occasional transaction.