Within a few short years Taiwan has moved from failing 16 items of the Asia/Pacific Group on Money Laundering (APG), into the “general tracking list” at the Third Round Mutual Evaluation – a designation shared only by Macao, Indonesia, Hong Kong, and Cook Islands among the 41 countries of the APG. The result serves as international recognition of the Taiwan government’s anti-money laundering (AML) work.
Behind this achievement is the hard work of 37 government departments and 31 industry representatives. Thus, at the AML Evaluation and Celebration Conference, Premier Su Tseng-chang not only presented awards to financial institutions and personnel, but also expressed his gratitude to those in the public and private AML is however just one of many items where Taiwan must comply with international standards. Global financial regulation has long focused on financial resilience to risk events. For instance, Basel Committee on Banking Supervision (BCBS) standards promote capital market stability, reduce credit and market risks in the banking system, and regulate capital adequacy for relevant financial institutions. This APG assessment is based on norms set by the Financial Action Task Force (FATF), based in France.
Such organizations with the ability to develop financial regulations are known as International Financial Standard-Setting Bodies (SSB). Other SSBs such as the Financial Stability Board (FSB) and International Accounting Standards Board (IASB) also set specifications for different industries. The design of these systems is however mostly based on the financial environments of advanced economies like the US, EU, and Japan, without considering special conditions and needs of other countries.
Taiwan’s need to operate in international financial markets, due to its large savings surplus, for example, means that many financial indicators have “Taiwanese characteristics.” As a result, difficulties often arise when implementing global regulatory norms, causing delays. Furthermore, developing countries pay more attention to economic growth and poverty alleviation in their development strategies than financial system stability, forming a serious gap with developed countries. This has made the standards less globally applicable.
Therefore, for the sake of global financial inclusion, Taiwan should consider taking a stronger stance in the formation of global regulations, bringing its own experiences into the international discussion to bridge this gap between advanced and developing countries. The World Economic Forum’s 2019 Global Competitiveness Report ranks Taiwan’s financial system sixth among 140 countries, and first in terms of insurance premiums as a percentage of GDP and non-performing loan ratio. With this foundation, it can hold itself out as a transformation model for sound finances among developing countries.