MONEYCHANGERS IN TEMPLES AND JEWELRY STORES

S E C R E T SECTION 01 OF 02 TAIPEI 003957

SIPDIS

DEPT PASS TO AIT/W AND USTR
DEPT FOR EAP/TC, EAP/EP, EB/IFD/OIA AND NKWG
TREASURY FOR OASIA MOGHTADER AND OCC AMCMAHON
TREASURY ALSO PASS TO FEDERAL RESERVE BOARD OF GOVERNORS,
SAN FRANCISCO FRB AND NEW YORK FRB

E.O. 12958: DECL: 09/18/2020
TAGS: ECON PINR KCRM KTFN TW HK
SUBJECT: MONEYCHANGERS IN TEMPLES AND JEWELRY STORES
PROMOTE TOURISM?

REF: A. TAIPEI 3867

B. TAIPEI 3288

C. TAIPEI 3766

Classified By: AIT ACTING DIRECTOR DAVID KEEGAN, REASON 1.5 B/D


1. (SBU) Summary and comment: In what is being billed as an
attempt to promote tourism, Taiwan's Central Bank of China
(Central Bank) plans to revise regulations to permit jewelry
stores and handicraft shops to offer currency exchange
services. The Central Bank has assured AIT it will limit
transaction amounts and strictly regulate the new (or newly
legal) service providers to prevent money laundering. This
revision, expected to become effective in October, follows a
revision in March which permitted temples, convenience
stores, national parks, travel service centers, and train
stations to offer currency exchange services. These new
regulations could be a way of shutting criminals out of money
brokering by providing regulatory oversight of existing
practices. End summary and comment.

A Framework for Control of Traditional Money Brokers
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2. (C) AIT/Econ has repeatedly raised the issue of
unregistered money brokers with Taiwan Ministry of Justice
officials (ref c) out of concern that these unlicensed
brokers may be involved in money laundering, or financing
criminal activities. The new measures announced by the
Central Bank on September 21 will provide a legal and
regulatory framework for controlling unlicensed money brokers
that wish to be legalized.


3. (C) AIT/Econ has confirmed with Taiwan's Central Bank
that it plans to add jewelry stores and handicraft shops to
the list of non-bank businesses permitted to apply for
licenses to provide currency exchange services. A Central
Bank official told AIT that non-bank enterprises wishing to
provide exchange services must first be licensed and
incorporated (he noted that about 80% of Taiwan's jewelry
stores are currently incorporated). In addition, jewelry
stores must obtain a recommendation from Taiwan's Jewelry
Store Association.


4. (U) The new regulations require non-bank money brokers to
keep currency exchange transaction and customer records for
10 years. The Central Bank has designated the Bank of Taiwan
to monitor and regularly inspect their record-keeping
practices to ensure conformity with international regulations
on currency exchange. The exchange services offered by these
non-bank brokers can only be provided to foreign passport
holders and can only involve converting foreign cash and
foreign currency travelers, checks into local currency.
There is a transaction limit of US$10,000 and the
moneychangers must settle with the Bank of Taiwan.

Central Bank Says Measure Will Promote Tourism
-------------- --


5. (C) In response to AIT questions, the Central Bank
official insisted that the new regulations are not designed
to legalize existing, traditional money brokering practices,
but, rather, to promote tourism. He explained that tourists
often buy jewelry or handicrafts or items from temple gift
shops. According to the official, the Central Bank in March
of this year revised its regulations to permit applications
for currency exchange licenses from temples, convenience
stores, and train stations. The jewelry stores, which have a
long history of providing 'unregistered' (read illegal) money
brokering services (reftels),demanded the same opportunity.
While some of these non-traditional brokers have already
expressed an interest in applying, no licenses have yet been
issued.

Taiwan's Very Convenient Stores
--------------


6. (C) Taiwan places much importance on convenience. In
additional to what the normal U.S. convenience store offers,
most of Taiwan's convenience stores already provide a host of
other services such as accepting payment for phone bills,
parking fees, traffic violations, cable TV, credit cards,
public transportation (train, bus, taxi) stored-value cards,
and, of course, ATMs. When AIT noted that most foreign
tourists would probably use their credit cards, or ATM cards
to obtain local currency rather than trying to exchange
foreign cash currency for local cash currency, the Central
Bank official countered that many Taiwan temples were so old
and traditional they lacked ATM machines. (Comment: AIT,
however, believes that the potential impact on tourism of
these new regulations will be minimal due to Taiwan's already
widespread ATMs and acceptance of international credit cards
at nearly all significant places of business. End comment.)

Records of Taiwan Remittances to Banco Delta Asia
-------------- --------------


7. (C) The Central Bank official also noted that the Central
Bank has records of Taiwan companies' remittances to Banco
Delta Asia and its subsidiary in Hong Kong, but that AIT
would need to send a written request with justification
before it could share those records.

Comment
--------------


8. (S) These new regulations could be a significant step
towards bringing Taiwan's unregistered money brokers into
compliance with the Financial Action Task Force on Money
Laundering, UNSCR 1267, and the U.S. Patriot Act requirements
on keeping transaction and customer records. The new
regulations could also aid in preventing the take-over of
money brokering operations by organized crime that was warned
of in reftels. Recent investigations into the North Korean
supernotes in Taiwan established that international tour
groups are used as a channel for spreading counterfeit
currency. These new regulations will squeeze this channel by
lessening the need for tour guides or tour operators to
provide informal currency exchange services for their clients.


9. (C) However, the extensive business, cultural,
immigration, and travel links between Taiwan and China will
continue to feed demand for non-bank money brokering services
that remain illegal under Taiwan's laws, and remain an
attractive source of profits for criminal organizations.
KEEGAN