Statement of Opinion on the Ministry of Justice's 2021 Draft Amendments to the Money Laundering Control Act

Procedural Matters

Pursuant to your Ministry's Letter Fa-Jian-Zi No. 11004540370 dated December 27, 2021, we hereby submit comments on the draft amendments to the Money Laundering Control Act within 60 days from the day following their announcement on the Public Policy Network Participation Platform.

* For the Ministry of Justice draft, please see the link or the PDF file.

Substantive Matters

I. Background

Since 2014, the Judicial Reform Foundation has monitored what are commonly known in judicial practice as "dummy-account" cases. After learning of and reviewing your Ministry's announced draft amendments to the Money Laundering Control Act, we identified numerous procedural deficiencies and provisions that may conflict with the principles of legality and the presumption of innocence. We therefore submit this statement and respectfully request that, pursuant to Item 4, Paragraph 1, Subparagraph (1) of Executive Yuan Letter Yuan-Tai-Gui-Zi No. 1050175399 dated September 5, 2016, your Ministry include our comments in the "Bill and Gender Impact Assessment Checklist" so that they may be broadly discussed during the legislative process.

II. Our Comments on the Ministry's Proposed Amendments to the Money Laundering Control Act

1. Amendment to Article 2 of the Money Laundering Control Act: To expand the scope of punishment, the draft "cherry-picks" from both the former and current German law while disregarding provisions in the current law concerning the rights of attorneys and the public; this approach is inappropriate.

   1. Subparagraph 2: "impeding or endangering the State's investigation, discovery, preservation, or confiscation of specified criminal proceeds"

      • Paragraph 1, Subparagraphs 1 and 2 of the original Money Laundering Control Act regulated financial transfer acts intended to conceal or disguise criminal proceeds, as well as the acts of concealment and disguise themselves. According to your Ministry's proposed amendment to Article 2 of the Money Laundering Control Act, the original "intent" requirement in Subparagraph 1 has been deleted. The original provisions have been amended to become Subparagraph 1 ("concealing specific criminal proceeds or disguising their origin") and Subparagraph 2 ("impeding or endangering the investigation, discovery, preservation, or confiscation by the State of specific criminal proceeds"), with your Ministry's legislative reasoning citing the second sentence of Paragraph 1, Section 261 of the German Criminal Code.

      • However, upon careful analysis of your Ministry's amendments, it is evident that your Ministry takes the view that regardless of whether the perpetrator has the "intent to conceal or disguise" the criminal proceeds of the predicate offense, "any" act targeting criminal proceeds can be interpreted under this subparagraph as an act affecting state investigation, thereby constituting money laundering. Furthermore, the transfer of criminal proceeds is not required to be limited to direct intent with a specific "intent." Nevertheless, such an amendment clearly fails to meet the requirement of legal certainty.

      • Upon examination, Article 261 of the current German Criminal Code cited in the legislative reasoning-concerning concealment- or disguise-type money laundering-has been specifically amended to provide that in addition to concealment or disguise, there must also be a transfer of such illicit property for an offense to be established ^[1]. Moreover, German courts have developed numerous restrictive interpretations for this provision to compress the scope for establishing this offense, thereby preventing excessive infringement upon people's property rights. The provisions of the new law also retain "in der Absicht" (intent) as an element. Although the legislative reasoning for your Ministry's amendment claims to reference the German Criminal Code, it actually refers to the former German Criminal Code rather than the aforementioned latest German amendment (dated March 18, 2021), and fails to consider the many restrictive interpretations developed by German practice in this regard. Your Ministry risks misapplying former German law in this respect and the matter warrants further deliberation.

   2. Subparagraph 3: "receiving, possessing, or using another person's specified criminal proceeds." the same applies to a person who uses their own specific criminal proceeds to engage in transactions with others":

      • According to your Ministry's amendment, the original text-"Receives, holds, or uses another person's criminal proceeds"-has been changed to "Receives, holds, or uses another person's specific criminal proceeds. The same applies to a person who uses their own specific criminal proceeds to engage in transactions with others." It is stated that this amendment was formulated with reference to Paragraph 3 and the first sentence of Paragraph 4 of the German Criminal Code.

      • However, upon examination, Paragraph 1 of Article 261 of the current German Criminal Code stipulates that when a criminal defense attorney accepts a fee from a specific offender, the attorney commits an intentional offense only if they had certain knowledge of the origin of the fee at the time of acceptance ^[2]. Yet, your Ministry's current amendment fails to reference the aforementioned provision of the German Criminal Code. This may cause attorneys to refuse to accept specific cases listed under the Money Laundering Control Act in order to avoid subsequent state prosecution, thereby severely infringing upon the right of defendants in specific cases to receive assistance from counsel. Furthermore, apart from Germany, other countries have enacted legislation similar to the aforementioned German law; however, your Ministry has merely expanded the scope of criminalization without considering whether it would infringe upon the fundamental rights of citizens.

      • In addition, since this article deeply involves citizens' rights to litigation, your Ministry should consult with professional bodies such as the Taiwan Bar Association and National Federation of Certified Public Accountants Associations to jointly negotiate and adjust the wording, and should incorporate safe harbor provisions for professionals in this amendment.

2. Amendment to Article 14 of the Money Laundering Control Act: The draft fails to achieve the objectives stated in the legislative reasoning-namely, proportionality between crime and punishment and the opportunity for minor offenses to be commuted to fines. Furthermore, the draft will make it even more difficult in the future to identify the legal interest protected by the crime of money laundering, which is detrimental to the perfection of the overall money laundering legal system.

   1. Amendment to Article 14 of the Money Laundering Control Act: The maximum penalty is raised from seven years to ten years, but the legislative reasons do not explain why or provide supporting data; further study is needed.

   2. However, while controversies persist in academic theory regarding the protected legal interest of the Money Laundering Control Act, Paragraph 3 of the original Article 14-"In the circumstances of the preceding two paragraphs, the punishment imposed shall not exceed the heaviest principal punishment prescribed for the specific crime"-was considered an important provision for interpreting the legal interest protected by money laundering as the prosecution of predicate criminal proceeds because it linked the penalty for money laundering to the predicate offense. Deleting this provision may create systemic difficulties in identifying the legal interest protected by the Money Laundering Control Act.

   3. Moreover, comparing the draft content of the amendment to Article 2 of the Money Laundering Control Act, any act that impedes the state investigation of a specific crime and its criminal proceeds constitutes an act of money laundering. This shows that the legal interest the Money Laundering Control Act seeks to protect remains the safeguarding of state authorities' investigations into predicate offenses against obstruction. The legislative reasoning for deleting this provision clearly contradicts the legislative reasoning for the amendment to Article 2.

   4. Furthermore, although comparative legislative examples in various countries do not feature this kind of penalty-limiting legislation, the statutory penalties for money laundering in other countries are mostly capped at five years or less, which is commensurate with ordinary property offenses. Indeed, Paragraph 8 of Article 261 of the current German Criminal Code even excludes perpetrators of certain predicate offenses from the possibility of establishing a money laundering offense ^[3].

   5. Although the current draft amends the penalty to "imprisonment for not less than six months and not more than five years" ^[4], appearing similar to German penalties, the legislative reasoning notes that this amendment was made considering that under current regulations, minor cases cannot be commuted to fines, leading to controversies over disproportionality between crime and punishment. However, a statutory penalty of "not less than six months and not more than five years" remains a penalty that cannot be commuted to fines; thus, the draft is manifestly incapable of achieving the purpose stated in its legislative reasoning. Such a legislative design will inevitably compress the room for judicial practice to sentence minor money laundering acts to fines, and force courts to additionally invoke the provisions of Article 59 of the Criminal Code to achieve proportionality between crime and punishment in minor cases. Regarding how statutory penalties should be amended, your Ministry should consult with professional units such as the Judicial Yuan and the Taiwan Judges Association to understand current practical difficulties and sentencing principles before proceeding.

3. Amendment to Article 15 of the Money Laundering Control Act: Misinterpreting Australian legislative examples and lacking a subject in the statutory text, the application of this provision will severely infringe upon citizens' right to informational self-determination and the privilege against self-incrimination.

   1. Amendment to Article 15 of the Money Laundering Control Act: The amendment would expand punishment for cash couriers without providing evidence that the current law is ineffective, and the proposed sentencing structure is disproportionate.

   2. However, putting aside the longstanding controversy that the offense of unexplained property under the Anti-Corruption Act violates the privilege against self-incrimination, since this provision applies to the general public, it should adopt stricter norms than the Anti-Corruption Act. After all, ordinary citizens, unlike public servants, are not bound by any integrity standards. Yet, your Ministry's amendment fails to prescribe who the subject authorized to order an ordinary citizen to provide an explanation is, nor does it specify the timeframe during which this provision may be invoked. This differs markedly from the strict requirements of Article 6-1 of the Anti-Corruption Act, which demands that a "prosecutor" discover during "investigation" that a defendant has unexplained property before demanding an explanation.

   3. Furthermore, the Australian legislative example cited in the legislative reasoning does not criminalize the failure to fulfill the duty of truthful explanation; rather, it merely serves as a supplementary provision to resolve enforcement loopholes where ordinary money laundering offenses cannot be established ^[5].

   4. Furthermore, regarding the penalty, your Ministry has amended the penalty for this provision to imprisonment for not less than six months and not more than five years. This penalty is even heavier than the imprisonment of up to five years under Article 6-1 of the Anti-Corruption Act, demonstrating that this amendment fails to consider the issue of proportionality between crime and punishment, while severely infringing upon the general public's right to informational self-determination and privilege against self-incrimination.

4. Amendment to Article 15-1 of the Money Laundering Control Act: The proposal does not resolve the current difficulty of determining conditional intent and adds the vague element "without justifiable reason," likely creating further disputes in application.

   1. According to your Ministry's legislative reasoning: '...3. Considering that acquiring accounts opened by others with financial institutions is currently the most prevalent and rampant method of money laundering crime in Taiwan, and notwithstanding that our government has heavily promoted for many years that personal financial accounts must not be handed over to others for use-which has become a basic legal concept that the general public should generally know-therefore, aside from targeting those who "apply to open accounts with financial institutions by improper means" and listing it as one of the suspicious money laundering indicators under Article 15, Paragraph 1, Subparagraph 2 of this Act, and weighing the culpability of the perpetrator's own conduct to prevent the serious consequences of legal interest infringement arising therefrom, the criminal elements of the offense and penal effects of such acts are explicitly stipulated to eliminate controversy, thereby adding this criminal penalty.' Thus, it is deemed necessary to explicitly criminalize the act of handing over accounts to others in order to prevent severe infringement of legal interests, while claiming that the elements of the offense have been clarified.

   2. However, the elements of the offense of this offense are extremely vague, which will inevitably lead to difficulties in application in the future. Although the constitutive conduct can be briefly broken down into three elements: "handing over a financial account to another person," "engaging in acts under Article 2 (i.e., money laundering acts)," and "without justifiable reason," what exactly does "engaging in acts under Article 2" refer to? Does it mean the account provider concurrently engages in money laundering to constitute the offense, or does it mean another person commits money laundering for this crime to be established?

   3. If the purpose is to prevent account providers from concurrently engaging in money laundering, there is clearly no legislative necessity for this offense. The original intent of this legislation should be to curb the rampant spread of dummy account cases rather than focusing on money laundering acts. Moreover, if the perpetrator is concurrently engaging in money laundering, according to the theory of statutory concurrence, they would naturally be prosecuted under the heavier money laundering offense in the future, leaving no room for this offense to be established. Based solely on the elements of the offense proposed by your Ministry, it is evidently impossible to specify that this crime regulates the act of providing an account for another person to launder money.

   4. Therefore, to give a meaningful interpretation to the draft content and construe it as punishing "acts where another person commits money laundering after the perpetrator hands over their account," under Taiwan's theory of elements of the offense, since this is an intentional crime, the perpetrator must at least know at the time of handing over the account to another person that the other person will engage in money laundering acts as defined in Article 2 of the Money Laundering Control Act. However, the acts referred to in Article 2 of the Money Laundering Control Act are numerous, and money laundering is inherently a crafted unlawful act-unlike natural crimes such as murder-where the general public lacks similar empirical rules. How then can one expect a perpetrator, when handing over their own account information, to distinguish what money laundering acts another person is about to commit? Consequently, problems regarding how practical operations judge the perpetrator's subjective awareness and criminal intent will still arise under the new law.

   5. Furthermore, your Ministry's legislative reasoning fails to explain whether "handing over a financial account" refers to handing over a passbook, a ATM card, or merely providing the account number to fulfill the constitutive element. Moreover, handing over passbooks, ATM cards, and passwords is extremely common in Taiwan-such as handing over passbooks and related information when asking someone to handle bank business on one's behalf; delivering passbooks to bank financial advisors when applying for loans; submitting account information at an employer's request in order to receive salary payments; or temporarily lending accounts due to relatives' or friends' poor credit standing so that someone else can withdraw money at an ATM on their behalf. Such reasons for handing over account information are frequently seen, and our judicial practice also recognizes the so-called "borrowed-name (lend-name)" system ^[6]. Banks likewise permit withdrawals on behalf of others based on "passbooks and seals" or "ATM cards and PINs," without requiring personal execution of one's own withdrawal business ^[7]. Therefore, listing the act of "handing over an account" (or account information) as a constitutive element of this crime is obviously merely a descriptive constitutive element, which in itself can hardly be called unlawful. Consequently, the prerequisite for establishing this crime remains the judgment of "whether there is a justifiable reason" at the time of handing over the account.

   6. Consequently, and most seriously, the problems caused by placing "without justifiable reason" into the elements of the offense include:

      • In Taiwan's Criminal Code, crimes that include "without justifiable reason" as part of their elements of the offense roughly include: the offense of unjustified possession of firearms and ammunition ^[8] (Article 186 of the Criminal Code), the offense of using explosives (Article 186-1 of the Criminal Code) ^[9], the offense of using radiation (Article 187-3 of the Criminal Code) ^[10], and offenses against agriculture, industry, and commerce (Article 251 of the Criminal Code) ^[11]. In special laws, the constitutive element of "without justifiable reason" is listed in the offense of unexplained property under Article 6-1 of the Anti-Corruption Act ^[12] and the offense of evading inspection under Article 6 of the National Security Act ^[13].

      • However, putting aside offenses such as the possession of firearms, ammunition, explosives, and the use of radiation-which are already regulated in other special laws (the Firearms, Ammunition, and Knives Control Act and the Ionizing Radiation Protection Act), and where those special laws do not list "without justifiable reason" as a constitutive element (instead using "without permission")-offenses against agriculture, industry, and commerce, which citizens are more likely to commit, see very few cases received by courts over the years. In fact, in 2020, courts at all levels nationwide rendered only 27 judgments ^[14]. Most of these aforementioned cases involved hoarding face masks, in which case the Pharmaceutical Affairs Act took priority in application, and courts and prosecutors did not discuss what constitutes "without justifiable reason" in their judgments or indictments.

      • Furthermore, although the offense of unexplained property under the Anti-Corruption Act lists "failing to provide an explanation without justifiable reason" as a constitutive element, the establishment of this offense requires that after a public servant has already committed corruption or other crimes, a prosecutor discovers during investigation that the public servant or their family members have a manifestly disproportionate increase in property, whereupon the public servant is ordered to provide an explanation. There are numerous prerequisites for its establishment. Moreover, most convictions for the offense of unexplained property in Taiwan result from incomplete explanations or false explanations; instances of completely failing to provide any explanation without reason are extremely rare. As for cases under Article 6 of the National Security Act, under current practical theories of concurrence, they would also be adjudicated under the Immigration Act or the Statute for Punishment of Smuggling, rather than being prosecuted separately. In practice, therefore, the judicial system seemingly has never operated the element of "without justifiable reason" in criminal cases.

      • Moreover, the "without justifiable reason" referred to in the aforementioned crimes inherently varies in interpretation depending on the protected legal interests and the gravity of the offense. Therefore, even if courts may have previously determined what "without justifiable reason" means in various crimes, those determinations cannot be analogized or applied to dummy account cases. This element has also been heavily criticized by legal scholars on the grounds that it formally punishes intentional offenses while substantially punishing negligent offenses.

   7. In summary, the elements of this offense are overly vague. Rushing legislation will evidently cause practical difficulties and should be handled with caution.

5. Amendment to Article 17 of the Money Laundering Control Act: The scope of blanket delegation is unclear, and the public's financial privacy rights require protection.

   Regarding your Ministry's view that information exchange or sharing is necessary for anti-money laundering purposes, the specific content of such information must be explicitly prescribed by the legislature before your Ministry can be authorized to enact subordinate regulations. However, when submitting this amendment, your Ministry failed to list the domestic and foreign institutions required to exchange or share information, nor did it clearly define the scope of the information content. This potentially raises concerns of infringing upon citizens' personal data. If your Ministry deems the addition of this provision necessary, it should properly negotiate with the Legislative Yuan during the legislative process, establish the scope of information to be shared and the agencies to be shared with, and subsequently enact relevant subordinate regulations concerning details and technical provisions. Only then can it comply with the requirement of the principle of legal reservation set forth in Judicial Yuan Interpretation No. 443.

6. Amendment to Article 18 of the Money Laundering Control Act: Expanding the scope of "extended confiscation" infringes property rights and the presumption of innocence.

   1. Regarding your Ministry's deletion of the requirement in Paragraph 2 that offenses be committed "collectively or habitually," under the view that a perpetrator needs to have committed only a single money laundering act, coupled with facts sufficient to prove that the perpetrator possesses property derived from other illegal acts which may then be confiscated together: whether they committed other crimes becomes the basis for confiscating the perpetrator's property. Your Ministry's legislative reasoning asserts: '... Because criminal proceeds cannot be thoroughly deprived, the German Criminal Code, in order to fill this legal loophole, amended Section 261 of its Criminal Code in 2017 in accordance with the European Confiscation Directive, deleting the wording "committed in a collective or habitual manner" regarding money laundering offenses, thereby further expanding the scope of application of the proceeds of crime confiscation regime.'

   2. However, upon examination, this method of amending the law will severely infringe upon citizens' property rights. According to your Ministry's amendment, courts are not required to prosecute other crimes; as long as there are facts sufficient to prove that the perpetrator's property was acquired through other illegal acts, it may be confiscated together, without requiring a conviction for the "other illegal acts." Such an amendment clearly violates the principle of the presumption of innocence, and the interference with citizens' property also breaches the principle of proportionality.

   3. Although your Ministry claims that this legislative amendment references the 2017 amendment in Germany, under the provisions of Paragraph 2, Section 261 of the current German Criminal Code, German judicial practice requires the requirement of "facts sufficient to prove" to reach "the same degree as a criminal judgment" before a confiscation ruling can be made. This clearly shows that Germany also requires the so-called "other illegal acts" to reach the threshold of establishing a crime before confiscation may exceptionally be ordered concurrently within a money laundering judgment. Your Ministry's amendment manifestly conflicts with the German Criminal Code.

In summary, your Ministry's proposed draft amendment to the Money Laundering Control Act contains numerous violations of the principles of legal certainty, proportionality between crime and punishment, and the presumption of innocence in criminal law. It also exhibits contradictory selectivity and misapplication when referencing German and Australian legislation, and thus warrants reconsideration. Furthermore, the legislative reasoning for the draft mentions that the origin of this amendment is related to the third round of mutual evaluations conducted by the Asia/Pacific Group on Money Laundering (APG) on Taiwan's anti-money laundering system. However, the aforementioned opinions raised by our foundation regarding the amendments are directed precisely at Articles 2, 14, 15, 15-1, and 18-none of which are provisions that the legislative reasoning attributes to amendments responding to the FATF or the 2019 mutual evaluation report. Therefore, pausing deliberation on the aforementioned articles will not affect Taiwan's evaluation performance in anti-money laundering, which we hereby state for the record.

For these reasons, we respectfully submit the foregoing comments and sincerely ask that your Ministry take JRF's views into account in considering these amendments.