Seminar Sidelights | Challenges in Judicial Practice Regarding Virtual Asset Crime

Virtual asset crimes often involve illegal capital-raising scams, money laundering, robbery and extortion, computer crimes, and contraband transactions. Among these, money laundering via dummy accounts is most rampant in Taiwan. Regarding the recent third reading and amendment of the Money Laundering Control Act, penalties have been added targeting the receipt, possession, or use of accounts and account numbers by criminal syndicates before any criminal proceeds are deposited, in order to patch existing legal loopholes. However, regarding Article 15-2 of the same Act, the following points remain worthy of further in-depth discussion.

First, the proviso in Paragraph 1—"provided, however, that this shall not apply to those conforming to general commercial or financial transaction customs, based on trust relationships among relatives, or for other legitimate reasons"—appears to shift the prosecutor's burden of proof in criminal cases onto the parties involved. Second, regarding Paragraph 2—"Violators of the provisions of the preceding paragraph shall be penalized with an admonition by the police bureau of the municipality or county (city) government. The same shall apply to those who violate the provisions of the preceding paragraph again more than five years after being penalized with an admonition"—how should the police concretely implement this? What are the relief procedures? The substantive details are still lacking. Third, Paragraph 3 stipulates: "Those who violate the provisions of the first paragraph and fall under any of the following circumstances shall be sentenced to imprisonment for not more than three years, short-term imprisonment, or in lieu thereof or in addition thereto, a fine of not more than NT$1,000,000: 1. Committing the offense by agreeing to or receiving consideration. 2. Delivering or providing a total of three or more accounts or account numbers. 3. Recommitting the offense within five years after being penalized by the police bureau of a municipality or county (city) government pursuant to the preceding paragraph or paragraph 4." Even though the amendment explicitly sets forth corresponding penal provisions, perpetrators often commit money laundering through fraud. Therefore, when a money laundering offense is constituted, the offense of fraud is simultaneously constituted. When this article conflicts with Article 339 of the Criminal Code regarding fraud, pursuant to Article 55 of the Criminal Code where a single act constitutes multiple offenses, the severest punishment shall be imposed. Consequently, this provision is frequently absorbed due to the競合 (concurrent) relationship by the offense of fraud under Article 339 (imprisonment for not more than five years), rendering its penalty unable to exert substantive effectiveness, which runs counter to the legislative intent and makes it difficult to achieve the purpose of penalizing dummy account crimes.

Furthermore, virtual asset crime is an emerging technological form of crime. Taiwan still lacks a comprehensive understanding of the circulation and actual operation of virtual currencies, cryptocurrencies, or virtual currencies in the market. Consequently, when such crimes occur, they cannot be effectively resolved and understood in their entirety. Currently, prosecutors and relevant law enforcement personnel in Taiwan possess insufficient knowledge of virtual currency and its foundational understanding during the criminal investigation stage, making it frequently difficult to effectively and comprehensively pursue related virtual currency or virtual currency crimes. Moreover, there are practical difficulties in the procedure for seizing virtual currency. If stored via a cold wallet, it appears to be substantively seizable pursuant to Article 133, Paragraph 1 of the current Code of Criminal Procedure, as a cold wallet is stored physically. However, regarding hot wallets, due to their non-traditional electronic storage methods, implementation appears to present difficulties.

In addition, virtual capital crimes often flow to overseas exchange platforms, and Taiwan has few judicial mutual assistance agreements with other countries. How can cross-border law enforcement concretely operate and implement actions against crimes involving virtual currency or dummy accounts? How can illicit funds or the circulation of virtual currencies be frozen? How can the recovery of illicit proceeds be pursued? Even though Binance or other third-party exchanges currently provide supervision, they can only partially freeze related virtual currencies or accounts.
Alternatively, under Article 7 of the current Money Laundering Control Act, there are procedures for customer due diligence (Know Your Client) to verify customer identities and retain records, enabling customer due diligence and ongoing monitoring. Therefore, when fraud or dummy account crimes emerge, there are opportunities and possibilities to trace the flow of funds. However, many fraud syndicates still use KYC trading—similar to virtual account trading—to evade the loopholes of the real-name system. In other words, when regulating issues related to virtual currencies or money laundering, Taiwan still faces many dilemmas. Taiwan's relevant laws still require continuous subsequent improvement and amendment in order to truly curb crimes exploiting virtual currency.