Financial Supervisory Commission Penalty Against Bank of Taiwan for Internal Control Deficiencies

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Regarding the case of Bank of Taiwan's deficiencies in handling employees' off-site account opening, deposit and remittance transactions, ongoing customer identity verification, account monitoring operations, and employee abnormal behavior management, it is determined that the bank has violated Article 45-1, Paragraph 1 of the Banking Act and its delegated "Implementation Measures for Internal Control and Audit Systems of Financial Holding Companies and Banks" Articles 3, Paragraph 1, 8, Paragraph 1, and 3. Pursuant to Article 129, Item 7 of the same Act, a fine of New Taiwan Dollars (hereinafter the same) 22,000,000 is imposed.

2025-03-11

Financial Supervisory Commission Penalty Decision

Addressee: As per original and copy

Date of Issue: March 11, 2025 (Republic of China Year 114)

Document Number: Jin Guan Yin Kong Zi No. 11402706262

Penalized Entity: Bank of Taiwan Co., Ltd.

Unified Business Number: 03557311

Address: No. 120, Section 1, Chongqing South Road, Zhongzheng District, Taipei City

Legal Representative or Manager: Ling OO

Address: Same as above

Subject: Regarding the case of your bank's deficiencies in handling employees' off-site account opening, deposit and remittance transactions, ongoing customer identity verification, account monitoring operations, and employee abnormal behavior management, it is determined that the bank has violated Article 45-1, Paragraph 1 of the Banking Act and its delegated "Implementation Measures for Internal Control and Audit Systems of Financial Holding Companies and Banks" Articles 3, Paragraph 1, 8, Paragraph 1, and 3. Pursuant to Article 129, Item 7 of the same Act, a fine of New Taiwan Dollars (hereinafter the same) 22,000,000 is imposed.

Facts: Former employees Guo OO of the Songshan Branch and Huang OO of the Ren'ai Branch, between April 2021 (Year 110) and July 2024 (Year 113), had improper fund dealings with clients and conducted transactions on behalf of clients. Furthermore, the accounts involved in the case were listed as derivative controlled accounts, reported through the joint defense mechanism, and triggered multiple alerts in your bank's internal anti-money laundering system. These deficiencies indicate that your bank failed to properly establish and execute its internal control system.

Reasons and Legal Basis:

1. Article 45-1, Paragraph 1 of the Banking Act and its delegated "Implementation Measures for Internal Control and Audit Systems of Financial Holding Companies and Banks" Articles 3, Paragraph 1, 8, Paragraph 1, and 3 stipulate that banks must establish an internal control system. Additionally, pursuant to Article 129, Item 7 of the same Act, a bank that fails to establish an internal control system pursuant to Article 45-1 or fails to execute it properly shall be fined between NT$2,000,000 and NT$50,000,000.

2. Upon review, your bank has the following deficiencies regarding employees' off-site account opening, deposit and remittance transactions, ongoing customer identity verification, account monitoring operations, and employee abnormal behavior management:

(1) Failure to properly establish an internal control system:

1. Failure to properly establish a monitoring mechanism for abnormal transaction patterns: Regarding the abnormal transaction pattern "funds remitted in and quickly transferred to overseas accounts of virtual currency trading platforms" added by the Taipei City Bankers Association (hereinafter referred to as the Bankers Association) on December 16, 2022 (Year 111), your bank only monitored customers whose foreign exchange remittance declaration category was "purchasing foreign virtual assets." However, this declaration item is selected by the customer, allowing malicious actors to evade abnormal transaction alert monitoring by failing to declare honestly.

2. Failure to properly establish a continuous transaction monitoring mechanism: For suspicious transaction monitoring alerts generated by your bank's internal system, verification was conducted by branch personnel and supervisors of the branch where the involved account was located. The verification personnel and supervisors of the involved branch failed to verify the reasonableness of the transaction, the source of funds, and whether the remittance amount was commensurate with income, simply concluding there was no money laundering concern because the account owner was an employee of the same branch. There was no head office control and review mechanism.

3. Failure to properly establish an investigation and management mechanism for employee abnormal behavior: The involved employees, from 2016 (Year 105) to 2024 (Year 113), repeatedly remitted funds from your bank's accounts to overseas virtual currency platform operators, with several transactions conducted over the counter. Their accounts were listed as derivative controlled accounts due to alerts from other banks in 2018 (Year 107), and were monitored for abnormalities by your bank's internal system multiple times between 2022 (Year 111) and 2023 (Year 112). Furthermore, there were improper fund dealings between their accounts and the involved corporate accounts of other banks. Your bank did not establish relevant management and investigation mechanisms regarding whether the large fund dealings in employee accounts were commensurate with their income, whether accounts were listed as derivative controlled accounts, or whether alerts and monitoring abnormalities occurred.

4. The above deficiencies indicate that your bank failed to properly establish an internal control system, which is inconsistent with Article 45-1, Paragraph 1 of the Banking Act and its delegated "Implementation Measures for Internal Control and Audit Systems of Financial Holding Companies and Banks" Articles 8, Paragraph 1, and 3.

(2) Failure to properly execute the internal control system:

1. Failure to properly execute the ongoing customer identity verification mechanism: According to Article 16 of your bank's "Detailed Rules for Confirming Customer Identity," if major changes in customer identity or information, major changes in transaction patterns, a change in risk rating to high risk, or suspected money laundering or terrorist financing transactions are detected, re-verification measures should be taken. The involved corporate account was reported by the joint defense mechanism a total of 7 times between 2023 (Year 112) and 2024 (Year 113). However, after your bank investigated the first two reports and found no suspected illegal or abnormal circumstances, no further verification was conducted for the subsequent 5 reports.

2. Failure to properly execute off-site account opening operational standards: According to Point 12 of the "Deposit and Remittance Business Account Opening - Non-OCR Account Opening Standard Operating Procedure (SOP)" of your bank, off-site account opening should be executed by two employees to confirm customer identity, and the off-site account opening register should be filled out in advance and approved by the supervisor. The involved employee did not fill out the off-site account opening operation register according to regulations and obtain prior supervisor approval. The reviewing supervisor also failed to confirm whether two employees accompanied each other for off-site receipt collection, etc., and failed to retain a trail, hindering the execution of customer identity confirmation.

3. Failure to supervise employees to follow deposit and remittance operational standards: According to Point 2 of your bank's "Deposit Business General Provisions - Interbank Collection and Payment Standard Operating Procedure (SOP)" and Point 1 of the "Precautions for Handling Customer Left-Behind Passbooks, etc.," canceling the nationwide payment withdrawal code must be handled by the depositor in person at the counter. Verification of the personal signature and seal must be performed by different individuals and reviewed by a supervisor. Employees are strictly prohibited from keeping passbooks and seals on behalf of clients. The involved employee held the client company's passbook and seal, forged the legal representative's signature to apply for canceling the nationwide payment withdrawal code, and stamped the company seal on the application form themselves. The verification of the legal representative's personal signature and the seal verification were both performed by the same employee, and the supervisor failed to implement proper review.

4. The above deficiencies indicate that your bank failed to properly execute its internal control system, which is inconsistent with Article 45-1, Paragraph 1 of the Banking Act and its delegated "Implementation Measures for Internal Control and Audit Systems of Financial Holding Companies and Banks" Article 3, Paragraph 1.

5. In summary, the above deficiencies indicate that your bank failed to properly establish and execute its internal control system, violating Article 45-1, Paragraph 1 of the Banking Act and its delegated "Implementation Measures for Internal Control and Audit Systems of Financial Holding Companies and Banks" Articles 3, Paragraph 1, 8, Paragraph 1, and 3. Therefore, pursuant to Article 129, Item 7 of the same Act, a fine of NT$22,000,000 is imposed.

Payment Method:

1. Payment Deadline: Payment must be made within 10 days from the day following the service of this decision.

2. Please follow the payment instructions attached by the Banking Bureau of this Commission.

Precautions:

1. If the penalized entity disagrees with this decision, it must file an administrative appeal with the Executive Yuan through this Commission (18th Floor, No. 7, Section 2, Xianmin Avenue, Banqiao District, New Taipei City) within 30 days from the day following the service of this decision, pursuant to Article 58, Paragraph 1 of the Administrative Appeal Act. However, pursuant to Article 93, Paragraph 1 of the Administrative Appeal Act, unless otherwise provided by law, filing an administrative appeal does not suspend the execution of this decision, and the penalized entity must still pay the fine.

2. If the penalized entity fails to pay the fine within the payment deadline specified in this decision, the case will be transferred to the various sub-bureaus of the Administrative Enforcement Agency of the Ministry of Justice for administrative enforcement, pursuant to the proviso of Article 4, Paragraph 1 of the Administrative Enforcement Act.

Original: Bank of Taiwan Co., Ltd. (Representative: Ms. Ling OO)

Copy: Taiwan Financial Holding Co., Ltd. (Representative: Ms. Ling OO), Central Bank, Central Deposit Insurance Corporation (Representative: Mr. Huang OO), Inspection Bureau of this Commission, Banking Bureau

Number of Views: 34036

Update Date: 2025-03-12

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