Corruption laws in Taiwan
By John Eastwood and Heather Hsiao
Taiwan has made respectable improvements in its battle against corruption, rising from a ranking of 36 out of 177 in the 2013 Transparency International Corruption Perceptions Index to 28 in 2019. This puts Taiwan ahead of several European nations, South Korea, transparency stalwarts such as Botswana, and slightly behind the United States. Taiwan is a founding member of the Asia-Pacific Group on Money Laundering (although it is known as “Chinese Taipei”) where it has been praised for the development of stopping money laundering as well as blocking the financing of terrorism.
While corruption is no longer considered a hindrance to conducting business on the island, there have been several high-profile official corruption cases. One of the more historically notable incidents involved former president Chen Shui-bian, leading to him becoming the first Taiwan president to receive a prison sentence. More recently, three lawmakers and some of their assistants have been held in relation to an alleged bribery case involving ownership of a major department store.
Bribery is not expressly defined under Taiwan statutes, but is still considered an offence as a benefit gained under illegal circumstances. A definition of bribery has been provided by the courts, and cases involving bribery can be punished under the Criminal Code and other laws such as the Banking Act, and Securities and Exchange Act. The penalties under the two latter acts are heavier than those provided in the Criminal Code, and are applied first.
Attempting to bribe, or the acceptance of a bribe by a government official, is a criminal offence and is punishable under the Organic Statute for Anti-Corruption Administration and/or the Criminal Code. Payment of a bribe to a foreign official is also a crime. What constitutes a “bribe” is not statutorily defined; rather, bribes are determined by the courts on a case-by-case basis.
The Ministry of Justice’s Agency Against Corruption (AAC), constituted under the Organic Statute for Anti-Corruption Administration, has published a set of ethics guidelines for employees who fall under the Civil Servants Act – namely civil servants, military personnel and employees of public enterprises, such as public hospital workers and public school teachers.
Both the Anti-Corruption Act and Criminal Code can be applied extraterritorially, as outlined in Article 11 of the Anti-Corruption Act and Articles 6, 7 and 11 of the Criminal Code. Officials who receive bribes within or outside Taiwan are subject to the Anti-Corruption Act. Taiwan has no jurisdiction over the bribing of local officials outside of Taiwan.
Compliance defence and mitigation
While Taiwan does not have provisions related to compliance defence and mitigation, having proper rules and procedures to prevent corruption may be viewed in a positive light by prosecutors.
While not explicitly called “facilitation payments”, the AAC’s ethics guidelines do outline acceptable low-level gratuities. Any facilitation payment could be viewed as a bribe by the courts. Facilitation payments made by private individuals or corporations would be considered on a case-by-case basis by the courts.
Gifts and entertainment
The AAC’s ethics guidelines set the following limits on gifts and entertainment:
An official is not allowed to receive gifts from people or organizations who have a vested interest in that official’s performance of his or her duties unless the gift is under NT$500 for an individual official, under NT$1,000 for an official entity, or under NT$3,000 for attending engagement ceremonies, weddings, baptisms, etc. If the giver has no such vested interest, a gift may not exceed the amount customarily given under such circumstances. Any gifts not from relatives or close friends that exceed a market value of Taiwan NT$3,000 must be reported. Gifts from relatives or friends with no vested interest in an official’s duties may be accepted without the need to make a declaration.
Officials are not allowed to accept invitations to attend dinner parties or other entertainment activities from those with vested interest in an official’s duties. Exceptions to such prohibitions include public festivals (such as Lunar New Year banquets), weddings, baptisms, housewarming parties and job promotion festivities. Even if the host of a party has no vested interest in a civil servant’s official duties, officials are advised to be cautious about the events they attend.
Government officials are not allowed to be paid more than NT$5,000 (approximately US$167) an hour for any private speaking, judging or panellist events. Compensation for the preparation of manuscripts associated with private events must not be more than NT$2,000 (approximately US$67) per 1,000 Chinese characters.
Corporate liability for the acts of intermediaries
Corruption in Taiwan is based on individual criminal responsibilities. A company would not be held liable. Only individual chairpersons, directors, or anyone else in a company who participates in corruption would be held liable.
Liability of individual directors and officers
As bribery and other forms of corruption are criminal offences, individual directors and officers would only be liable if they actually participated in a crime. Under strict criminal scrutiny, the person in question might be deemed as an accomplice or accessory, depending on the degree of their participation, even if he or she was not personally involved in the actual bribe. Having knowledge of a matter but not intervening can often involve moral issues, but not necessarily criminal responsibilities.
Under Article 11.1 of the Anti-Corruption Act, any person who tenders a bribe or other unjust valuables, promises to give anything of value, or gives anything of value to a public official in return for that person’s performing or omitting to perform his or her official duties shall be punished by imprisonment from one to seven years and may also be fined not more than NT$3 million (approximately US$100,000).
Specifically in the banking industry, the Banking Act prohibits a responsible person or any other staff member of a bank from accepting, under any pretence, commissions, rebates and other unwarranted benefits from depositors, borrowers or other customers. Violators face imprisonment for not more than three years, detention and/or a criminal fine of up to NT$5 million.
However, if more severe punishments are stipulated in other laws, those are imposed instead. Moreover, a bank’s responsible person or staff member who violates his or her duty with the intent to gain illegal benefits for himself or herself, or a third party, and damages the bank’s assets or other interests is punishable by imprisonment for between three to 10 years, and may be subject to fines between NT$10 million and NT$200 million (approximately US$333,333 to US$7.6 million).
Those who obtain criminal income of NT$100 million (US$3.3 million) or more are subject to imprisonment for at least seven years, and may also be fined between NT$25 million (US$833,333) and NT$500 million (approximately US$16.7 million).
In the securities sector, the Securities Exchange Act requires that a director, supervisor, or manager of a listed company who, with the intent to procure a benefit for himself or herself or a third person, acts contrary to his or her duties or misappropriates company assets, causing damage of NT$5 million (approximately US$167,000) or more to the company, faces imprisonment for between three to 10 years, in addition to a fine of between NT$10 million (approximately US$333,333) and NT$200 million (approximately US$6.7 million).
Where the amount gained by the commission of an offence under the preceding paragraph is NT$100 million (approximately US$3.3 million) or more, a prison sentence of not less than seven years must be imposed. In addition, a fine of not less than NT$25 million (approximately US$833,333) and not more than NT$500 million (approximately US$16.7 million) may be imposed.
The AAC was established in 2011, as the Taiwan Government’s first-ever agency dedicated to fighting corruption. The AAC’s main purposes are to strengthen existing mechanisms against corruption, increase conviction rates in corruption cases, and further protect human rights in Taiwan. Its headquarters are in Taipei, and it also has offices in both central and southern Taiwan. The Special Investigation Division, set up by the Supreme Court Prosecutors Office, is in charge of investigating corruption issues involving the president, vice presidents, heads of the five yuans (legislative bodies), ministers, and military officials holding the rank of general and above. It is also in charge of investigating corruption involving elections. The Supreme Court Prosecutors Office also has the authority to investigate other types of corruption, as seen fit by the prosecutor general of the Supreme Court Prosecutors Office.
Anti-money laundering laws
Taiwan’s Money Laundering Control Act and its accompanying Regulations Governing Cash Transaction Reports and Suspicious Transaction Reports by Financial Institutions apply to financial institutions and retail jewellery businesses. The Act currently defines 17 types of financial institution and gives the competent authorities the discretion of designating additional types of institution in the future.
Taiwan banks holding accounts for customers paying out of Taiwan would be subject to the Act and its Regulations. The Money Laundering Control Act imposes obligations on financial institutions to establish money laundering prevention guidelines and procedures and to submit those guidelines and procedures to the competent authorities and the Ministry of Finance for review. The Act also imposes obligations on financial institutions to report certain transactions over a certain amount (NT$500,000 (approximately US$17,000)) to the competent authorities as well as to know the identities of their customers. The Regulations Governing Cash Transaction Reports and Suspicious Transaction Reports by Financial Institutions also impose additional obligations upon financial institutions to report suspicious transactions as set out in the Regulations.
Taiwan has continued to strengthen its anti-money laundering regime and is under pressure to make further amendments to its current regime so as to bring all types of designated non-financial businesses and professions listed in the international anti-money laundering standards into the regime.
The Anti-Corruption Informant Rewards and Protection Regulations were introduced in July 2011. Article 10 of the regulations guarantees that the name, gender, date of birth, identification numbers and address of a whistleblower must be kept confidential. Any statements, affidavits or other related information on a whistleblower must be stored separately and kept away from investigation files unless absolutely needed. Any violations against a whistleblower will be dealt with according to the Criminal Code and other related laws.
Taiwan’s Personal Information Protection Act (PIPA) came into force in October 2012. It replaced the Computer Processed Personal Data Protection Act that only applied to computer-processed data by government entities and designated industries. The PIPA applies to all collection, processing, and use of personal information by government and non-government entities and individuals in Taiwan. PIPA should not impede a lawful investigation by a government entity nor would it prevent a non-governmental entity from complying with lawful requests made by authorities. It should also not hinder an investigation by a non-governmental entity investigating internal corruption or related issues. The latter though would obviously depend on the facts of the matter as well as the conduct of the investigation. Other laws and protections though could apply to employees in the workplace that could have an effect on internal investigations.
Disclosure and privilege
The procedure stipulated in the Criminal Code provides that a lawyer may refuse to testify when being questioned as a witness for a client’s confidential matters unless permission from that client is obtained. In addition, mail or other correspondence between a defendant and his or her defence lawyer could be seized provided that they are deemed to be criminal evidence, or it is discovered that the sender or receiver may destroy, forge, or alter evidence or conspire with a co-offender or witness, or the defendant has absconded.
To protect the relationship between a lawyer and client in the course of their communication, confidential matters such as the written documents of a defendant’s confession of a crime to the lawyer is not allowed to be seized. However, this privilege does not extend to allowing the lawyer to cover up, destroy or forge criminal evidence. In other words, criminal evidence could be seized even if it is in the custody of the lawyer.
John Eastwood is the managing partner of award-winning firm Eiger and regularly works with SMEs to multinationals on compliance, white collar crime, and investigation matters.
Heather Hsiao is a partner at Eiger, helping manage the firm’s corporate and employment practices.