FSC imposes administrative penalty on CTBC Bank for deficiencies involving a former employee's misappropriation of ATM Settlement Funds and FISC Settlement Funds

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FSC imposes administrative penalty on CTBC Bank for deficiencies involving a former employee's misappropriation of ATM Settlement Funds and FISC Settlement Funds

2026-07-02

The Financial Supervisory Commission (hereinafter referred to as FSC) imposed a penalty on CTBC Bank for violation of regulations. A former employee of CTBC Bank was found to have misappropriated the bank's ATM settlement funds and Financial Information Service Co., Ltd. (FISC) settlement funds, totaling approximately NT$2.97 million. The deficiencies in this case showed the bank's failure to establish a comprehensive internal control system and to effectively implement it, which was a violation of Paragraph 1, Article 45-1 of the Banking Act as well as Paragraph 1, Article 3, and Paragraphs 1 and 3, Article 8 of the "Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries". Therefore, the FSC imposed a fine of NT$4 million in accordance with Subparagraph 7, Article 129 of the Banking Act. I. Penalized entity: CTBC Bank. II. Legal basis for penalty: Subparagraph 7, Article 129 of the Banking Act. III. Facts and reasons of violations: (I) A former employee of the bank's Consumer Banking Centralized Operations Department, surnamed Liao, misappropriated the bank's ATM settlement funds and FISC settlement funds between November 2024 and August 2025. The misappropriated amount was approximately NT$2.97 million, and the violations persisted for a period of approximately 10 months. The deficiencies in this case indicated that the bank failed to establish a comprehensive internal control system and failed to effectively implement it. (II) The bank exhibited the following deficiencies: 1. Failure to establish a comprehensive internal control system: (1) Failure to establish comprehensive control mechanisms for the refund of long-outstanding settlement funds that were classified as "no anomalies and no customer complaints": The settlement funds misappropriated by Liao in this case were all settlement funds pending on the books for more than 2 years with "no anomalies and no customer complaints," and were all below a certain threshold. Therefore, the refund process did not require reviews for individual transactions and was instead subject to random sampling reviews. As the reasons and recipients for refunding these settlement funds remained unidentifiable for a long period, the bank should have strengthened its validation of the reasonableness and accuracy of subsequent refund operations for such funds. However, the bank failed to establish comprehensive control mechanisms for refunding these settlement funds, which led to the misappropriation of settlement funds by Liao. (2) Failure to establish comprehensive control mechanisms for abnormal concentration of settlement fund refunds to customers: The settlement funds misappropriated by Liao in 10 consecutive months were ultimately transferred to his own deposit account at CTBC Bank. The concentration of settlement fund refunds during this period was highly abnormal. However, the bank failed to establish comprehensive control mechanisms to detect that the refunded settlement funds were abnormally concentrated in Liao's deposit account. 2. Failure to fully implement the internal control system: Failure to fully implement the random sampling and review mechanisms for settlement fund refunds below a certain threshold: The bank established a mechanism that require supervisors to randomly check and review a certain percentage of cases daily for settlement fund refunds below a certain threshold (instead of reviewing every transaction). Although the supervisors signed off on the daily sampling and review reports, they failed to retain audit trails or evidence of the actual random sampling and reviews. This made it difficult to retroactively verify whether the operations were indeed completed, demonstrating a failure to effectively implement the sampling and review mechanisms. IV. Results of penalties: (I) Penalty: The FSC imposed a fine of NT$4 million in accordance with Subparagraph 7, Article 129 of the Banking Act. (II) Other regulatory requirements: 1. The bank is required to report Liao, who violated the law in this case in accordance with the "Guidelines for Reporting Information of Negligent Personnel of Member Institutions and Designated Entities" established by the Bankers Association of the Republic of China (hereinafter referred to as the Bankers Association). 2. The bank is required to upload the details and typology of this case in a de-identified format to the dedicated section of the Bankers Association's website as a reference for other member institutions. The FSC stated that this case involved an employee who took advantage of his position to misappropriate long-outstanding funds that had received no customer complaints. Financial institutions should continuously review the adequacy and effectiveness of their control mechanisms for all operations, enhance their control systems, and strengthen internal compliance education to prevent such incidents from recurring.

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Update： 2026-07-30

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