This article is an extract from GTDT Market Intelligence Anti-Corruption 2023. Click here for the full guide.
1 What are the key developments related to anti-corruption regulation and investigations in the past year in your jurisdiction, and what lessons can compliance professionals learn from them?
Recent significant developments in anti-corruption regulation and investigation in Taiwan necessitate a comprehension of the pertinent legislation, including several crucial bills that have been passed or proposed in the past decade.
On 14 December 2005, the United Nations Convention against Corruption (UNCAC) entered into force, subsequent to its ratification by the United Nations on 31 October 2003. Acknowledging the widespread international acceptance of the UNCAC and with the aim of emphasising its commitment to implementing international anti-corruption standards, Taiwan introduced and enacted the Act to Implement the United Nations Convention against Corruption (Act to Implement UNCAC). This legal framework became effective on 9 December 2015, thereby aligning Taiwan with global anti-corruption norms and standards while enhancing its capacity to proactively prevent and combat corruption effectively.
As a further step to prevent corruption, Taiwan amended the Act on Recusal of Public Servants Due to Conflicts of Interest in 2018. The amendments expanded the scope of the law to cover positions with a higher risk of corruption and broadened the definition of related persons to include individuals with financial or identity-related interests related to public servants. These changes aimed to reduce opportunities for abuse of public office for personal gain and align preventive measures with the principle of proportionality.
Another notable development was the amendment of Taiwan’s Government Procurement Act in 2019. These amendments broadened the range of prohibited payments to prevent awards of procurement contracts from being obtained by means of conferring improper benefits. Stricter penalties were also imposed for violations. These changes were implemented to uphold fairness and order in government procurement procedures.
In recent years, important developments have been seen in the fight against criminal activity by preventing the transfer of illicit proceeds. In 2016, amendments to Taiwan’s Criminal Code added a dedicated chapter on confiscation. The new chapter expands the scope and subject matter of confiscation to target unlawful gains from criminal activities comprehensively. In 2018, the Mutual Legal Assistance in Criminal Matters Act was enacted. This established a complete framework for international criminal justice cooperation to combat transnational crimes more effectively. Additionally, stricter amendments to the Money Laundering Control Act were enacted in 2016 and 2018. These too aimed at preventing the illegal transfer and disposal of criminal proceeds.
Investigative authorities in Taiwan continue to be busy. According to prosecution statistics, the number of individuals indicted for corruption-related crimes exceeded 14,000 between 2009 and August 2023. Convictions rates rose steadily during the same period.
In 2019, a bill titled the Whistleblower Protection Act was proposed to protect whistle-blowers in both the public and private sectors. The website of the Agency Against Corruption [sic] provides regular updates on the bill’s legislative progress and has made relevant legislative research materials accessible to the public through its Whistleblower Protection page.
Legal and compliance professionals should respond to these developments by encouraging their clients to educate their employees and adopt preventive programmes. These programmes help employees understand their rights, responsibilities and potential liabilities. From a post-incident perspective, it is evident that anti-corruption laws and investigations in Taiwan are becoming not only more stringent, but also more aggressive. We anticipate an increase in cross-border anti-corruption cases due to advances in international cooperation. Therefore, legal and compliance professionals and law firms must equip themselves with the necessary expertise and professional knowledge.
2 What are the key areas of anti-corruption compliance risk on which companies operating in your jurisdiction should focus?
Companies must first have a basic understanding of what conduct in the course of interacting with government agencies may potentially involve corruption. The controlling statutes include the Offenses of Malfeasance in Office chapter of the Criminal Code and the Anti-Corruption Act. However, according to Taiwan’s Ministry of Justice Investigation Bureau (Taiwan’s equivalent of the FBI), bid rigging or collusive bids, licence lending, judicial fraud, acts damaging environmental conservation zones and violations of environmental laws, while not typically classified as corruption cases, have a significant likelihood of involving collusion with public officials. Therefore, businesses in related industries should be particularly vigilant about their integrity and compliance when dealing with government agencies.
It is worth noting that the Government Procurement Act also contains relevant provisions against corruption and is an area of focus for investigative authorities. Under this law, ‘procurement’ refers to goods and services purchased by central or local governmental agencies. These include contracting for construction work, the purchase or lease of property, and commission of services or employment. Therefore, any business engaging in transactions related to these activities with government agencies must be particularly mindful of the need for integrity at all times during the procurement process. Additionally, engaging in corrupt practices could lead to the company being prohibited from participating in tendering, being awarded contracts, or receiving subcontracts. This can lead to significant opportunity loss for businesses.
In the private sector, companies should be attentive to corruption offences committed by internal staff members, such as illegal grant of loans, stock market offences like insider trading, asset embezzlement or tunnelling, and misappropriations of other companies’ trade secrets. These are instances where internal members of a company might abuse their positions or status to gain unlawful benefits. Taiwan’s Criminal Code, Company Act, Securities and Exchange Act and Trade Secrets Act impose criminal penalties for offending relevant provisions upon individuals or their employers. Companies can also refer to article 7 of the Ethical Corporate Management Best Practice Principles for TWSE/TPEx (Taiwan Stock Exchange Corporation/Taipei Stock Exchange) Listed Companies as a guideline for reviewing and gradually improving their internal anti-corruption mechanisms.
3 Do you expect the enforcement policies or priorities of anti-corruption authorities in your jurisdiction to change in the near future? If so, how do you think that might affect compliance efforts by companies or impact their business?
According to Taiwan’s official Second Report under the United Nations Convention against Corruption, Taiwan is working on several bills that will change enforcement priorities if enacted.
The 2018 proposed draft amendments to the Criminal Code introduced several new offences. Among them, one notably targets gratuities given to public officials, while another seeks to end trading in influence. If enacted, these offences would broaden the scope of bribery-related offences. These proposed changes respond to challenges encountered in judicial practice arising from strict interpretation of the elements of bribery offences. This has made application of the law uncertain, especially in cases involving activities such as building relationships or laying the groundwork for bribery. Additionally, the proposed amendments include revisions to articles 172-1 through 172-8 of the Criminal Code. These would insert a new chapter titled Obstruction of Judicial Authority. This chapter encompasses a range of offences, including bail jumping, contempt of court and judicial influence-peddling as well as crimes related to harassment, bribery and improper conduct adverse to witnesses, expert witnesses, translators or individuals closely connected to a pending case.
In 2019, the government introduced a draft bill on whistle-blower protections known as the Whistleblower Protection Act. This proposed legislation would apply to both the public and private sectors. It places particular emphasis on ensuring the confidentiality of whistle-blower identities, ensuring their personal safety and safeguarding their job security. In other words, it aims to prevent any adverse consequences whistle-blowers might face when they disclose inside information to law enforcement officials. The draft bill is now pending review at the Legislative Yuan. The progress of this legislation can be checked on the webpage of the Anti-Corruption Commission, a regulatory body committing to clean governance.
Although Taiwan has not yet enacted the Whistleblower Protection Act, several regulatory authorities have proactively incorporated whistle-blower reporting channels and related protection mechanisms into their regulations. For example, the Financial Supervisory Commission (FSC) has amended regulatory rules such as the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries. Similarly, the Environmental Protection Administration, in 2019, proposed including whistle-blower provisions in the Toxic and Concerned Chemical Substances Control Act. The legislature enacted the proposed provisions, which enhance overall protection for individuals who report violations that may cause pollution or other environmental hazards. In addition, the draft Witness Protection Act and several labour laws contain provisions designed to protect whistle-blowers or witnesses from retaliation.
As for cross-border cooperation, the Second Report under the United Nations Convention against Corruption highlights that there is still room for improvement in Taiwan’s extradition law. The Report urges Taiwan to align its domestic laws and regulations more closely with international extradition practices. Additionally, in terms of judicial assistance agreements, Taiwan is expected to continue entering into agreements with more countries and jurisdictions. This reflects a commitment to enhancing international cooperation in the fight against corruption and other criminal activities.
As Taiwan continues its efforts to strengthen legal provisions against corruption, many companies and enterprises in the private sectors have become increasingly aware of the severe consequences of corruption incidents regardless of whether such incidents occur in the public or private sector. This has led businesses to take proactive preventive measures that in turn create growing demand not only for in-house compliance counsel but also for the establishment of internal audit and control mechanisms.
4 Have you seen evidence of continuing or increasing cooperation by the enforcement authorities in your jurisdiction with authorities in other countries? If so, how has that affected the implementation or outcomes of their investigations?
Confronting the threat of transnational crime requires the effective utilisation of mechanisms such as international criminal judicial cooperation and extradition. In response to the escalating trend of cross-border criminal activities in this era of globalisation, Taiwan has adopted significant measures. In 2013, Taiwan enacted the Transfer of Sentenced Persons Act. Recognising the need for a more comprehensive framework for international criminal judicial cooperation, Taiwan went a step further in May 2018 by promulgating and implementing the Mutual Legal Assistance in Criminal Matters Act. These initiatives collectively aim to establish a robust and inclusive framework for international criminal judicial cooperation, bolstering Taiwan’s capabilities in this regard.
As mentioned earlier, while Taiwan’s official Second Report under the United Nations Convention against Corruption acknowledges that there is room for improvement to its extradition laws, it has made noteworthy progress in recent years by signing judicial cooperation agreements with other countries. As at April 2022, Taiwan has successfully signed criminal judicial cooperation treaties (agreements) with Poland, Nauru and Belize. Additionally, Taiwan has entered into a criminal judicial cooperation agreement with Slovakia. These agreements enable Taiwan to provide or receive assistance in various criminal judicial procedures related to investigations, trials and enforcement, significantly enhancing the efficiency and effectiveness of international criminal judicial cooperation.
Furthermore, in recent years, Taiwan has seen practical examples of cooperation, including the signing of agreements on the transfer of sentenced persons with Eswatini, Denmark and Switzerland to follow up on earlier agreements with Germany, UK and Poland. Taiwan has successfully transferred several convicted offenders under these agreements, including German, British, Danish and Polish nationals to their respective countries to serve out their sentences.
Despite this progress, Taiwan faces several challenges due to its unique international political situation that limits its opportunities to participate in international or regional organisations, events or programmes that focus on preventing or combating corruption. These challenges are especially acute in the area of asset recovery. While Taiwan performed well in the third round of mutual evaluations by the Asia/Pacific Group on Money Laundering in the context of anti-money laundering efforts, there have been few successful anti-corruption cases where assets were recovered directly. Despite these challenges, the trends mentioned earlier indicate that Taiwan is committed to developing its capabilities in this area. Regional and international partners can expect better performance from Taiwan in international cooperation on cross-border anti-corruption cases in the future.
5 Have you seen any recent changes in how the enforcement authorities handle the potential culpability of individuals versus the treatment of corporate entities? How has this affected your advice to compliance professionals managing corruption risks?
Taiwan’s Criminal Code primarily imposes penalties on natural persons. In contrast, legal persons are generally held liable through fines under specific statutes. For example, the Banking Act (article 127-4), the Money Laundering Control Act (article 16, paragraph 1) and the Trade Secrets Act (article 13-4) all contain provisions that impose fines upon legal persons for certain offences committed by individuals within the organisations. However, there has been limited change in this area in recent years. According to Taiwan’s official Second Report under the United Nations Convention against Corruption, there are ongoing discussions and evaluations of related issues, including the imposition of criminal liability on corporations in addition to fines. These discussions aim to assess the feasibility of applying different types of penalties to legal persons in the context of combating corruption and white-collar crime. We advise businesses to stay informed and updated on these developments.
In terms of civil liability, the Civil Code, specifically articles 26 and 28, already contain provisions regarding civil liability for legal persons (entities such as corporations or organisations). The Government Procurement Act was amended in 2019 to strengthen the civil liability of businesses, particularly under article 59, which holds companies more accountable in government procurement corruption cases.
In the realm of administrative liability, the Administrative Penalty Act serves as the general legal framework for the imposition of administrative penalties on legal entities. Article 7.2 of this Act stipulates that when a legal person, an unincorporated association with a representative or manager, a central or local government agency, or any other organisational entity engages in an action that contravenes its administrative obligations, the intent or negligence of its representative or manager, or any individual vested with the authority to act on its behalf, as well as any of its staff members, employees or workers involved in the said action is imputed as the intent or negligence of the organisation itself.
The most notable recent amendment is the 2019 amendment to the Government Procurement Act that introduced specific provisions to address corrupt behaviour in government procurement cases. This amendment explicitly states that corrupt actions in government procurement can lead to severe consequences for bidding suppliers. These consequences include the confiscation of bid bonds and even a prohibition on participating in government procurement for three years. This provision is aimed at deterring corrupt practices within the context of government procurement and ensuring greater accountability among businesses involved in such processes.
6 Has there been any new guidance from enforcement authorities in your jurisdiction regarding how they assess the effectiveness of corporate anti-corruption compliance programmes?
The Taiwan FSC has established its Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies in order to assist companies listed on the TWSE and the TPEx in developing a culture of ethical business conduct and sustainable growth. These principles serve as a reference framework for companies to build robust business operations.
Taking into account the International Organization for Standardization’s (ISO) publication of ISO 7 Anti-bribery management systems in October 2016, the FSC in 2018 revised requirements for companies to implement ethical corporate management. These revisions include:
- Establishing a policy based on integrity, approved by the board of directors.
- Developing a mechanism to assess the risk of unethical behaviour and regularly analysing and evaluating business activities with a higher risk of unethical behaviour within the scope of operations. This analysis is used to develop prevention plans, and the adequacy and effectiveness of these plans are reviewed regularly.
- Requiring directors and senior management to issue statements declaring their commitment to adhering to the ethical corporate management policy. Employment conditions should also require employees to comply with the policy.
- Documenting information related to the ethical corporate management policy, statements, commitments and execution and ensuring proper storage of these documents.
- Allocating sufficient resources and qualified personnel to the dedicated unit responsible for ethical corporate management, which should report to the board of directors at least once a year on its responsibilities.
- Developing audit plans based on the assessment results of unethical behaviour risk and using them to audit compliance with prevention plans. Audit results should be reported to senior management and the dedicated ethical corporate management unit, and an audit report should be submitted to the board of directors.
- Establishing a comprehensive whistle-blower system, which should include procedures for reporting cases, investigating them upon completion and taking follow-up measures based on the severity of the situation. When necessary, reports should be made to the competent authorities or referred to judicial authorities for investigation. The system should also allow for anonymous reporting.
These revisions aimed to enhance the integrity and ethical operations of companies, aligning them with international standards for anti-bribery management systems. While this set of principles appears to target listed companies, it nonetheless has reference value even for non-listed ones.
7 How have developments in laws governing data privacy in your jurisdiction affected companies’ abilities to investigate and deter potential corrupt activities or cooperate with government inquiries?
The tension between personal data or privacy rights and anti-corruption efforts is a recurring challenge in the cases we handle, particularly within the private sector. This often centres around the legality of workplace surveillance. Under Taiwan’s Personal Data Protection Act, there exists some room for interpretation, and, due to the limited number of relevant court decisions, regulatory authorities are not inclined to offer definitive guidance on these matters. Consequently, there is a lack of guidance on certain controversial activities with privacy implications.
For instance, in situations where an employee is suspected of engaging in corrupt activities, questions arise regarding the permissibility of monitoring their private communications. Additionally, there are serious concerns arising from the installation of surveillance equipment in the workplace. In civil infringement cases, these issues tend to be resolved with court rulings that such surveillance does not violate an employee’s right to privacy, often because surveilled devices are considered company property. However, there is a noticeable lack of consistent and unified interpretation of the Personal Data Protection Act.
The Inside Track
What are the critical abilities or experience for an adviser in the anti-corruption area in your jurisdiction?
Since Taiwan’s anti-corruption legal framework continues to evolve, the scope of its anti-corruption efforts is expanding rapidly. This makes a serious commitment to ongoing professional development and staying current on emerging trends crucial. Furthermore, the fact that Taiwan’s anti-corruption rules and prohibitions are scattered throughout many different laws and regulations governing different industries and conduct makes having broad knowledge and sensitivity in various legal fields essential.
What issues in your jurisdiction make advising on anti-corruption compliance challenging or unique?
The majority of Taiwanese businesses are small and medium-sized enterprises (SMEs). Many of these SMEs lack awareness of compliance issues or the resources to address compliance, internal auditing and control matters. Even in the case of larger companies, there is often inadequate staffing for legal and compliance personnel. As a result, when we receive such cases, we frequently discover issues such as insufficient evidence preservation or poorly executed preventive measures. These shortcomings can lead to missed opportunities for avoiding legal disputes.
What have been the most interesting or challenging anti-corruption matters you have handled recently?
We are currently handling a case involving internal cross-border corruption at a corporate client where the company is hesitant to monitor or access an employee’s private communications via devices provided by the company due to Taiwan’s Personal Data Protection Act even though the company has reasonable grounds to suspect that the employee has engaged in corrupt conduct. When advising this client and others, we have to strike a balance between collecting evidence and minimising the risks of violating the Personal Data Protection Act.
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