Mid-Term Report on Concluding Observations from Review of the ROC’s Initial Report under the United Nations Convention against Corruption December, 2020

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Mid-Term Report on Concluding Observations from Review of the ROC’s Initial Report under the

United Nations Convention against Corruption

December, 2020

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in March 2018, the Executive Yuan (EY) held an international review meeting with five international experts on anti-corruption in August 2018 to dialogue with representatives from Taiwan‟s government departments and non-governmental organizations (NGOs). After the meeting, the five international experts put forward their 47 points of concluding observations, which named as ”Anti-corruption Reforms in Taiwan”, in a press conference. The concluding observations are the important reference for the government‟s policies, legislation, and efforts relating to anti-corruption.

The EY will present the status of implementation in the second report (published on a quadrennial basis) and receive a second domestic and international review.

The scope of concluding observations covers all aspects of anti-corruption work promoted and implemented through the coordination and collaboration of entities of both the central and local governments. To ensure that the concluding observations are enforced by all entities and optimize various anti-corruption actions, at the end of two years after the previous international review, an interim review is conducted and an interim report is published to present the progress of implementation and preliminary achievements of these concluding observations during this period, and the planning for future promotion of anti-corruption.

I. Preparation for implementation of concluding observations by entities

At the 21st Central Integrity Committee Meeting on November 7, 2018, the Ministry of Justice (MOJ) reported the planning of implementing the concluding observations. With respect to the resolution made at the meeting, a meeting on the division of responsibility and labor was held with experts, scholars, and related entities on December 24, 2018 to confirm the organizing and sponsoring entities for each concluding observation. Including the MOJ, a total of 41 central government entities and 22 local governments (hereinafter called “Responsible Entities”) are responsible to conjointly promote and implement these concluding observations.

Responsible entities proposed the plans, measures, performance indicators, and projected date of completion of each concluding observation within their responsibility. During April 18-May 1, 2019, the EY and MOJ held four review meetings with experts, scholars, NGOs, and

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related entities to determine the actions for implementing the concluding observations. On August 12, 2019, a total of 371 performance indicators were approved for recordation and monitoring by the EY for the reference of implementation of all responsible entities, which should also review the status of achievement of these indicators periodically.

II. Follow-up and monitoring of 371 performance indicators

To follow up and monitor the progress of implementation of responsible entities in terms of the 371 performance indicators, the National Development Council (NDC) has constructed the

“Follow-Up, Oversight, and Evaluation” section on the “Government Project Management Network” (GPMnet) for responsible entities to report their performance every half a year. Then, MOJ would report the oversight and evaluation results over time to the Central Integrity Committee at the EY for continual follow-up.

The progress updates and oversight and evaluation results of individual responsible entities are published on the “United Nations Convention Against Corruption” (UNCAC) section of the Agency Against Corruption (AAC) website for disclosure to the public.

III. Interim progress overview

Regarding the implementation progress of the said 371 performance indicators, during December 2019 and June 2020, the responsible entities completed two times of online reporting.

In addition, the MOJ organized four meetings from April 27-May 6, 2020 and the EY held one meeting on October 7, 2020 with experts, scholars, and NGO representatives to evaluate the implementation of performance indicators. By the second report of the follow-up, control, and evaluation results, 156 performance indicators were achieved and deregulated for monitoring, 137 performance indicators were changed into self-tracking indicators, and 78 performance indicators required continuous follow-up. The progress of implementation is summarized as follows:

(I) Present achievements

In two years after the end of the international review, Taiwan has made an outstanding performance in many aspects in implementing the concluding observations. In the Mutual Evaluation Report (MER) Round 3 published by the Asia-Pacific Group on Money Laundering (APG) in 2019, Taiwan is rated the best rank “regular follow-up," with significant progress from

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“enhanced follow-up” than before. According to the 2019 Corruption Perceptions Index (CPI) published by Transparency International (TI), Taiwan has scored 65 points and ranked 28th in the world, the best results since the adoption of the new rating criteria in 2012.

To extend Taiwan‟s No. 1 rank among 138 economies in the 2014 “customs transparency index” among the global enabling trade indexes (GETI) in The Global Enabling Trade Report 2014 published by the World Economic Forum (WEF); and the band “B” (low risk of corruption) 2015 performance in the Government Defence Anti-Corruption Index (GDAI) rated by the TI, Taiwan held the “International Customs Workshop” in both 2016 and 2018 to share the measures for enabling trade measures to constantly enhance customs transparency. In addition, Taiwan has participated in the third GDAI global evaluation to continuously combat corruption in government defense, hoping to make better performance.

In response to the recommendations made in the concluding observations, Taiwan has made solid achievements in revising the “Act on Recusal of Public Servants Due to Conflicts of Interest”; amending the “Company Act” to stipulate the need to disclose the information of shareholders holding over 10% of the company‟s stake; enhancing the kind governance, including internal control and legal compliance, in the private sector; strengthening the reporting channels and protection mechanisms for whistleblowers in the financial industries; and reinforcing integrity education in kindergarten and elementary schools. To expand international cooperation and exchange, apart from signing Integrity Collaboration Agreement with Belize in 2019 to develop substantial cooperation on anti-corruption, Taiwan studies and proposes the country‟s first “Open Government National Action Plan” in 2020 for the substantial participation in the “Open Government Partnership” (OGP).

According to the results of the “MOJ 2019 Integrity Survey” published in 2020, the average score of “corruption tolerance” dropped to below “1” (from 0-10, the lowest the score, the lowest tolerance) for the first time in the last five years; and the tolerance score to the “severity” of corrupt acts, such as offering red envelopes, lobbying, improper enterprise influence on the government, and election bribery, also dropped significantly, suggesting that the government has made considerable progress and effectiveness in efforts for preventing and combating corruption,

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including optimizing anti-corruption laws and regulations, promoting public-private partnership in anti-corruption, strengthening the anti-corruption network, and enhancing anti-corruption power.

(II) Directions and methods of future promotion and implementation

Based on the recommendations made in the concluding observations, Taiwan has engaged in active legislation. Apart from establishing the “Whistleblower Protection Act,” we have amended the offense of bribery, the offense of trading in influence, the offense of gratuity, and the offense of destruction of criminal evidence under and added the chapter on obstruction of justice to the

“Criminal Code”; and amended “State Compensation Law” and the “Act of Extradition.” The review of these bills has begun, hoping that the legislation and amendment processes will be completed smoothly. The discussion of other laws is under progress, such as the integration of the

“Anti-Corruption Act” with “Chapter IV Offenses of Malfeasance in Office” in Part 2 of the

“Criminal Code,” the legislation model for commercial (business) bribery prevention, the statute of limitations on the right of prosecution for corruption, the drafting of the “Undercover Investigation Act,” and the legislation of the “Scientific and Technological Investigation Act.” We will continue to integrate the opinions of the academia and in the field to cohere a consensus for legislation and amendment. In addition, actions are taken to adopt related measures for enforcing the concluding observations, such as the outsourced research of the “The Construction of Anti-corruption Mechanisms in the Private Sector,” the development of integrity assessment on public institutions, and the promotion of the digital registration system for integrity and ethics incidents, are in active progress as scheduled, and their achievements will be reported in the second national report.

B. Interim progress of the concluding observations on the “Initial Report Under the United Nations Convention Against Corruption”

To review the progress of implementation of the concluding observations, the interim progress, as well as the related subsequent promotion actions, of the 47 concluding observations will be described in terms of the following six aspects: (1) strengthening anti-corruption in the private sector;

(2) promoting preventive measures for anti-corruption; (3) strengthening the framework of the anti-corruption organization; (4) drafting, amending and implementing laws and regulations related

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to conviction and enforcement; (5) strengthening international mutual legal assistance and law enforcement cooperation for criminal cases; and (6) developing professional training.”

I. Strengthening anti-corruption in the private sector

(I). More attention to preventive measures in the private sector. (Measure 5)

Measure 5：As the preventive measures have focused mainly on the public sector, Taiwan should devote more attention to preventive measures in the private sector to meet the growing threat of private sector corruption.

1. Pilot research project for building an anti-corruption mechanisms for the private sector

In response to this recommended measure, the AAC outsourced the “The Construction of Anti-corruption Mechanisms in the Private Sector” research project in 2019. Through the project, the AAC also formed a working team with the Ministry of Economic Affairs (MOEA), Financial Supervisory Commission (FSC), and the Ministry of Justice Investigation Bureau (MJIB) to evaluate the contents of the “ISO 37001 Anti-Bribery Management System (ABMS)” and the anti-corruption management mechanisms for the private sector in other countries, and assess the feasibility of implementing them in Taiwan. The results of the research project ending in September 2020 will be submitted to the related competent authorities for the reference of implementation to enhance Taiwan‟s overall measures for anti-corruption in the private sector.

2. Expansion of the substantial review of financial statements and the audit of the internal control system of public companies

(1) Besides enhancing the supervision of the finance, sales, and internal control system of companies listed on the Taiwan Stock Exchange (TWSE) and Taipei Exchange (TPEX), the Financial Supervisory Commission (FSC) has also completed the substantial review of the financial statements and the audit of the internal control system of these companies.

The table below shows the statistics of reviews and audits in the last three years.

Year Substantial Review of the Financial Statements of TWSE/TPEX-Listed

Companies

Audit of the Internal Control System

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2017 374 companies 186 companies

Note: The statistics on the number of companies receiving the substantial review of the financial statements and the audit of the internal control system refer to the statistics (non-accumulative) on the companies selected based on the defined criteria in each year.

(2) Concerning the International Standards on Auditing (ISA) 250, the Accounting Research and Development Foundation (ARDF) in Taiwan published the Statements on Auditing Standards (SAS) No. 72 “Consideration of Laws and Regulations in an Audit of Financial Statements," which took effect as of 2020. The requirements in SAS No. 72

“are designed to assist the auditor in identifying material misstatement of the financial statements due to non-compliance with laws and regulations (point #4); such as corruption and bribery that may significantly affect financial statements. The auditor is required to remain professionally alert and consider if the nonconformities in the financial statements have a direct influence to determine the audit procedures and countermeasures. For a better understanding of SAS No. 72, the FSC asked the CPA Associations in correspondence to evaluate the necessity to establish a set of guidelines for implementing the audit procedures in SAS No. 72 and enhance the education and training for auditors to raise their awareness of misstatement of the financial statements due to non-compliance with laws and regulations.

(3) Concerning ISA 240, the ARDF published SAS No. 74 “The Auditor‟s Responsibilities Relating to Fraud in an Audit of Financial Statements” taking effect as of 2021 to replace SAS No. 43 “The Auditor's Responsibility to Consider Fraud in an Audit of Financial Statements” The Standard aims to define the auditor‟s objectives: “To identify and assess the risks of material misstatement of the financial statements due to fraud... to respond appropriately to fraud or suspected fraud identified during the audit." (ISA 240) After the publication of the Standard, the FSC will ask the CPA Associations to arrange related trainings for auditors as necessary to help auditors to audit financial statements accordingly.

(4) The “Regulations Governing Establishment of Internal Control Systems by Public

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Companies” prescribes how a company should establish the internal control system for legal compliance with laws and regulations relating to the industry and implement self-assessment and internal audit to help enterprises to ensure legal compliance. The Regulations prescribes that an internal control system shall cover the legal compliance matters in the laws and regulations governing the industry to which a company belongs (Article 7); and requests the internal audit unit shall include legal compliance in the annual audit program and faithfully implement the audit (Article 13). The FSC also constantly oversees the Taiwan Stock Exchange (TWSE) and Taipei Exchange (TPEX) to enhance the audit of legal compliance when conducting internal audits. In addition, the FSC has also included legal compliance in the “Internal Control System Statement” it formats according to Article 46 of the Regulations.

(5) With respect to Article 14-5, paragraph 1, Securities and Exchange Act, “For a company that has...established an audit committee...the following matters...shall be subject to the consent of one-half or more of all audit committee members and be submitted to the board of directors for a resolution…[including the] adoption or amendment of an internal control system pursuant to Article 14-1; the assessment of the effectiveness of the internal control system....”

3. Encouraging enterprises to publish corporate social responsibility (sustainability) reports

(1) The FSC requests listed companies to publish the CSR report (Corporate Governance 3.0:

Sustainable Development Map, changed into “sustainability report” as of 2022), to ensure the transparency of governance information. As shown in the table below, the number of listed companies publishing the CSR report has been increasing in the last three years.

Year Number of Companies Publishing CSR Reports

2017 432 companies

(2) In 2019 the Industrial Development Bureau (IDB) of the MOEA commissioned The

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Manufacturers United General Association of Industrial Park of ROC to conduct the

“Survey on the Status and Invention of CSR Implementation of Industrial Park Manufacturers” to create a list of manufacturers intending to implement CSR in industrial parks. In the same year, the IDB provided guidance for 16 manufacturers (including 11 TWSE/TPEX-listed companies and 5 non-listed companies) to complete their CSR reports.

(3) In 2019 the Small and Medium Enterprises Administration (SMEA) of the MOEA helped 3 non-listed companies to complete their CSR reports.

4. Encouraging ethical management of enterprises

(1) Amending the “Ethical Corporate Management Best Practice Principles for TWSE/TPEX Listed Companies”

On May 23, 2019 the TWSE and TPEX announced the amended “Ethical Corporate Management Best Practice Principles for TWSE/TPEX Listed Companies,” which included “ISO 37001 Anti-bribery management systems.” The foci of the amendment include the need for the approval of the board of directors for ethics-based policies and the establishment of mechanisms for assessing unethical behavior, and these foci have been included in the Corporate Governance Evaluation Indicators and related documentation in 2020.

(2) Revising the “The Handbook of Business Principles of Integrity for Small and Medium Enterprise”

In September 2019, the Small and Medium Enterprises Administration (SMEA) of the Ministry of Economic Affairs (MOEA) announced and published the revised "The Handbook of Business Principles of Integrity for Small and Medium Enterprise", and authorized civil service ethics units to download, reproduce, print in paper format, and use as publicity materials, providing the civil service ethics units nationwide to publicize anti-corruption in the private sector.

5. Encouraging the organization of training and education on anti-corruption by enterprises

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In 2019, the MJIB established the anti-corruption contact person for TWSE/TPEX-listed companies, financial institutions, and high-tech companies in Taipei City, New Taipei City, and Taoyuan City. In 2019, a total of 366 exchanges of enterprise anti-corruption experiences were held in listed companies such as AU Optronics Corporation and Franbo Lines Corporation, with 28,309 participants from 1,924 companies.

6. Promoting financial transparency to SMEs

On November 8, 2018, the MOEA promulgated the “Company with a certain amount of capital and a certain scale” based on Article 20, paragraph 2, Company Act, which took effect as of January 1, 2019. This regulation stipulates: As claimed in Article 20, paragraph 2, Company Act if a company‟s equity capital exceeds a certain amount (with paid-in capital up to TWD 30 million or more at the closing date of financial report period), its financial statements shall be audited and attested by a certified public account before submitting to shareholders for approval or to a general meeting of shareholders for ratification. As claimed in the same article, if a company‟s equity capital does not exceed a certain amount but the company is with a certain scale (with paid-in capital less than TWD 30 million (excluded) at the closing date of financial report period but fulfill either of the following two conditions: (1) net revenue has reached TWD 100 million; or (2) the number of employees insured under the Labor Insurance Program has reached 100 people), this company shall have their financial statements audited and attested by a certified public account before submitting to shareholders for approval or to a general meeting of shareholders for ratification.

7. Completing the establishment of the “Foundations Act”

The “Foundations Act” was completed and promulgated on August 1, 2018 and took effect as of February 1, 2019 to stipulate the regulations governing the avoidance of conflicts, financial management, and information disclosure of foundations as follows:

(1) Avoidance of conflicts of interest

A foundation shall not transfer or use its property through collusion, fraud, or other undue means. The Act also stipulates the administrative fine for violation of this

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provision. A director or supervisor shall not seek profit by taking over the advantage of his/her power and shall voluntarily avoid a conflict of interest (Articles 14-16).

(2) Optimization of financial management and establishment of accounting, internal control, and auditing systems.

The methods for retention and utilization of the foundation‟s property are stipulated (Article 19). A foundation shall establish an accounting system.

A foundation shall also establish internal control and auditing system if its total property or annual income reaches a specified amount. The foundation shall have its financial statements certified by an accountant and stipulate a code of ethical management (Article 24).

(3) Establishment of a system for the information transparency.

A. The principle of financial information disclosure for companies states that companies should submit to competent authorities for reference and voluntarily disclose their work plans, financial statements, and work reports (Articles 25, 26).

B. Besides actively disclosing the said information, competent authorities have also set up websites to disclose information or disclose information on their entity websites. For example, the Ministry of Education (MOE) has established the “Educational Foundation Website," “Youth Development Affairs Companies Online Management System,"

“Nationwide Sports Foundations Information Website," and “Sports Information Cloud Pilot System." The MOE also discloses information in the “MOE-Supervised Government-Endowed Foundation Information” on the MOE website. On its website, the Ministry of Health and Welfare (MOHW) discloses information over the “Medical Foundation Management” and “MOHW-Supervised Government-Endowed Foundation Information” sections. The MOHW has also established the “Nationwide Health Foundations Information Management System” to manage related documents and data to strengthen the information disclosure of foundations for public supervision.

8. Legislation (amendment) of bribery prevention in enterprises

Please refer to section B-IV-(I)-1-(1) Constantly promoting the legislation (amendment)

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of commercial bribery control in this report for details.

9. Promoting the system for reporting the information of the responsible person and principal shareholders of enterprises

Please refer to section B-I-(VI)-1 Promoting the system for reporting the information of the responsible person and principal shareholders of enterprises in this report for details.

(II). Further restricting political donations from companies and associations (Measure 14).

Measure 14：Government, with the support of Legislative Yuan, should consider further restricting political donations from companies and associations.

1. Establishing a transparent mechanism for tracking the circulation of political donations

(1) To enforce this recommended measure, the Ministry of the Interior (MOI) inquired for the opinions on the legal amendment by correspondence on January 31, 2019. The following provision was added with the recommendation of the Control Yuan: Political donations of a political party, political group, and campaigner disbursing to a specific related party shall be stated and disclosed in the accounting report. The MOI has drafted the amendment to Articles 20, 23, and 36 of the “Political Donations Act,” which were submitted to the EY for evaluation on August 7, 2019.

(2) According to the “Political Donations Act” currently in force, a profit-seeking business and a charity-oriented social association may donate to a specific polity party. To prevent political donations from being operated under the table to affect effective monitoring and management, donations by such organizations that may affect national security, disfavor fair political competitions, easily cause corruption, or that are apparently against the organization‟s foundation aim are banned by law. For example, religious associations, public enterprises, manufacturers that have signed a government procurement contract of a large amount or an investment contract of important public construction and are performing the contract, and profit-seeking businesses in an accumulated deficit that have not been made up in accordance with relevant provisions concerning the financial statements in the previous year are not allowed to make political donations. Citizens,

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juridical persons, associations, or other institutions of a foreign country, the People‟s Republic of China, Hong Kong, and Macau, or the principal members of such are not allowed to make political donations (Article 7). In addition, a maximum amount has been set on the total amount of donations each year of profit-seeking businesses, civil association, political groups, and persons planning to participate in a campaign (Articles 17 and 18). Since the implementation of the “Political Donations Act” in 2004, no significant corruption has been reported in practice. The current provisions are thus proper, reasonable, and feasible.

2. Statistics on the income from political donations of campaigners, political parties, and political groups

(1) The table below shows the income from donations reported by campaigners of major elections between 2008 and 2020.

(expressed in NTD)

Year Campaign Total Income Income from

Individual Donations

Income from Business Donations 2008 Presidential and

Legislative Elections 1,081,368,252 304,427,310 402,422,080 2009 County (City) Civil

Servant Elections 1,542,896,510 700,145,973 475,192,432 2010 Special Municipality

Civil Servant Elections 2,740,270,822 1,656,736,309 951,544,767 2012 Presidential and

Legislative Elections 3,650,773,727 1,874,127,435 1,015,209,354 2014 7-in-1 Local Civil

Servant Elections 4,523,270,957 2,318,044,454 1,496,403,581 2016 Presidential and

Legislative Elections 3,908,203,162 1,939,673,150 1,074,479,038 2018 9-in-1 Local Civil

Servant Elections 4,105,356,576 2,461,127,650 1,466,156,049 2020 Presidential and

Legislative Elections 3,235,444,052 1,909,598,306 1,004,413,997

Year Campaign

Income from Political Party

Donations

Income from Civilian Association

Donations

Income from Anonymous

Donations

Other Income

2008 Presidential and

Legislative Elections 302,084,381 6,563,688 65,848,058 22,735 2009 County (City) Civil 344,940,840 16,476,678 5,792,488 348,099

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2010 Special Municipality

Civil Servant Elections 65,394,978 26,493,010 39,320,003 781,755 2012 Presidential and

Legislative Elections 572,869,279 53,283,290 135,007,029 277,340 2014 7-in-1 Local Civil

Servant Elections 625,831,195 45,785,545 36,760,222 445,960 2016 Presidential and

Legislative Elections 733,297,958 63,389,325 96,873,057 490,634 2018 9-in-1 Local Civil

Servant Elections 80,288,625 46,206,136 51,356,548 221,568 2020 Presidential and

Legislative Elections 147,901,967 60,300,237 113,091,107 138,438 Note: Concerning Article 18, paragraph 1, Political Donations Act, the maximum amount of donations for the same (group) of campaigners each year shall be: Individuals: NTD 100,000; profit businesses: NTD1 million; civilian associations: NTD 5 million.

(2) The table below shows the income from donations reported by political parties and political groups between 2014 and 2019.

(expressed in NTD) Year Total Income Income from Individual

Donations

Income from Business Donations

2014 452,405,420 241,187,876 194,676,269

2015 427,210,792 266,337,532 142,323,683

2016 354,902,296 226,532,915 118,575,789

2017 234,997,686 188,622,278 40,757,200

2018 454,476,449 288,267,042 153,201,165

2019 496,305,545 313,059,714 165,237,800

Year Income from Civilian Association Donations

Income from

Anonymous Donations Other Income

2014 4,578,100 11,638,890 294,285

2015 5,504,803 12,806,994 237,780

2016 3,359,194 6,288,595 145,803

2017 1,329,804 4,169,799 118,605

2018 6,792,476 6,127,064 88,702

2019 5,464,801 10,436,265 2,106,965

Note: Concerning Article 17, paragraph 1, Political Donations Act, the maximum amount of donations for the same (group) political party or political group each year shall be: Individuals: NTD 300,000; profit businesses: NTD3 million; civilian associations: NTD2,000,000.

(III). Active participation of chambers of commerce, the federation of (sectoral) industries, and SMEs (Measure 17)

Measure 17：The Taiwanese Chamber of Commerce, Federation of (sectoral) Industries, Small

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and Medium Enterprises (SMEs), among others, should participate more actively to combat corruption and to promote good governance and combat corruption in the private sector.

1. Encouraging chambers of commerce, federation of (sectoral) industries, and SMEs to establish related self-disciplinary regulations for promoting anti-corruption (1) Apart from establishing the “Self-Disciplinary Convention for Members of the Bankers‟

Association of the Republic of China” to urge members to demonstrate the self-disciplinary spirit; enhance professional ethics, and uphold to not boycott the transactions of other members or acquire the trade secrets of other members or the data of their counterparts by unfair means; the Bankers‟ Association (BA) has set up a Financial Regulations and Disciplinary Committee to review related complaints and conduct related investigations. The informant (whistleblower) protection system is also stipulated in the “Corporate Governance Best Practice Principles for Financial Holding Companies,” “Corporate Governance Best Practice Principles for the Banking Industry,”

and “Corporate Governance Best Practice Principles for Bills Finance Businesses.”

(2) The Taiwan Securities Association has established the “Self-Disciplinary Convention for Members of the Taiwan Securities Association” to urge members to demonstrate the self-disciplinary spirit; enhance professional ethics; abide by the laws and regulations, and uphold the principle of good faith. The Taiwan Securities Association has also established related self-disciplinary regulations for related services. For example, in the

“Taiwan Securities Association Rules Governing Underwriting and Resale of Securities by Securities Firms,” Article 3-1 stipulates that underwriters shall not be influenced by an issuing company; and Article 5-3 stipulates that a securities firm shall not pay any unreasonable commission.

(3) The Securities Investment Trust & Consulting Association has established the “Securities Investment Trust & Consulting Association Employee‟s Code of Ethical and Integral Conduct” and the “Self-Disciplinary Convention for Members of the Securities Investment Trust & Consulting Association of the Republic of China.”

(4) The Chinese National Futures Association has established the “Self-Disciplinary

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Convention for Members of Chinese National Futures Association” to urge members to strictly supervise their pratitioners‟ professional practice, business conduct, and professional service quality; and request members do to not engage in behavior against the principle of good faith to maintain the actual employee conduct of members and avoid conflicts of interests. In addition, the Chinese National Futures Association has also established the “Chinese National Futures Association Employee‟s Code of Ethical and Integral Conduct” for employees.

(5) The Non-Life Insurance Association and the Life Insurance Association have also established their self-disciplinary conventions to prevent insurers from engaging in corruption and urge them to maintain conduct to ensure that they engage in business activities correctly, honestly, and properly and prevent conflicts of interest. For example, the “Self-Disciplinary Rules for Business Solicitation and Policy Underwriting” of both associations stipulates that insurers shall request agents to uphold general social ethics, the principle of good faith, and the spirit to protect the applicants, insured, and beneficiaries while selling life insurance products. In addition, Article 28-1 of the

“Corporate Governance Best Practice Principles for the Insurance Companies” stipulates the establishment of an informant (whistleblower) protection system; Article 33-2 of the

“Regulations Governing Implementation of Internal Control and Auditing System of Insurance Enterprises” stipulates that an insurance company shall establish a whistleblower system and designate a unit at the head office with independent functions to accept and investigate the reported cases. It also stipulates that the protection for whistleblowers shall include the anonymization of identity and the protection of the right to work.

2. Encouraging chambers of commerce, the federation of (sectoral) industries, and SMEs to organize anti-corruption education and training

(1) In 2019 the Banking Bureau of the FSC supervised bankers‟ associations under its jurisdiction or training organizations to organize 222 sessions of education and training on topics relating to anti-money laundering (AML) and constantly supervised bankers‟

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associations within its jurisdiction or training organizations to organize seminars on anti-money laundering/combating the financing of terrorism (AML/CFT) (at least 120 sessions each year) for members and perform periodic audits. The Securities and Futures Bureau of the FSC supervised the Taiwan Securities Association to organize 47 sessions of anti-corruption courses and publicity activities; Securities Investment Trust and Consulting Business Association to organized 15 training courses relating to anti-corruption; the Chinese National Futures Association to organize three anti-corruption publicity activities at the AML/CFT regulation analysis and case study seminar. The Insurance Bureau of the FSC supervised the insurance associations under its jurisdiction and training organizations to organize 146 sessions of education and training on topics relating to AML/CFT.

(2) In 2020, the above organizations organizing education and training activities will be requested to adjust the contents of education and training courses according to the recommended measures disclosed in the Mutual Evaluation Report Round 3 published by the Asia-Pacific Group on Money Laundering (APG) and invite related law-enforcement departments to give related courses to enhance Taiwan‟s AML/CFT effectiveness.

3. Encouraging enterprises to organize anti-corruption education and training

(1) On October 16, 2019, the AAC organized the “2019 Foreign Business and Enterprise Integrity Forum” and invited representatives from the industry, government, academia, and NGOs to the event. The forum included a keynote on “Business Integrity and Legal Compliance: International Trends and Taiwan‟s Challenges,” benchmarking learning for foreign businesses “Implementing Business Integrity and Legal Compliance with Digital Technology,” and a keynote discussion “Creating a Home of Integrity Through Public-Private Partnership: From Corporate Social Responsibility to Building Corruption Prevention Mechanism in the Private Sector.” Over 100 enterprises and foreign businesses participated in the forum.

(2) On July 14, 2020, the Ministry of Justice (MOJ) and Ministry of Finance (MOF) organized session 1 of the “2020 Foreign Business and Enterprise Integrity Forum” and

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invited experts in corporate governance to give a keynote speech “Promoting Business Integrity and Sustainable Development from Legal Compliance,” representatives of foreign businesses with outstanding performance to share the experience of the “Best World‟s Employers 2020,” and representatives from the industry, government, academia, and NGOs to discussion on topics including “International Benchmarking Examples and Opportunities for Taiwan‟s Implementation,” “The Importance of Integrity, Legal Compliance, and Corporate Social Responsibility on Business Sustainable Development.”

Over 100 enterprises and foreign businesses participated in the forum. Session 2 will be held on September 2, 2020, with topics covering business integrity and enforcement of legal compliance.

(3) From June 2019 to June 2020, the MOJ organized six large business seminars for science parks, businesses, and government employees in collaboration with the Ministry of Economic Affairs (MOEA), Ministry of Science and Technology (MOST), Taipei City Government, and Taoyuan City Government. Enterprises participated in the event enthusiastically, with 1,585 participants, including 920 enterprise representatives.

(4) In June 2019, the Industrial Development Bureau (IDB) of the MOEA organized four enterprise anti-corruption publicity activities in Taipei, Taichung, Kaohsiung, and Nantou.

Experts were invited to give courses on “Building Corruption Prevention Mechanisms in Public and Private Sectors and Implementation of ISO 37001 Anti-Bribery Management Systems,” with a total of 258 participants. In 2019, an English keynote speech on

“Sustainable Development, Corporate Social Responsibility, and Anti-Corruption” at the

“Green Productivity Consultant Training Course.” In 2020, the IDB planned and organized publicity activities on corporate social responsibility (CSR) and ethical management and corruption prevention in industrial parks to expand the corruption prevention network and social participation. The IDB also enhanced the guidance for park businesses to implement internal control and internal audit systems.

(5) In June 2019, the Project & Construction Division and LNG Project Construction Division of CPC Corporation, Taiwan (Taiwan CPC) organized respectively one

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“Business Integrity and Employee Integrity Seminar” with a keynote report on “Case Study of Procurement Practice Breaches” and “Business Integrity and Anti-Corruption Regulations Publicity,” for a total of 174 participants from the Taiwan CPC and its suppliers.

(6) Taiwan Water Corporation organized 15 training activities on corruption prevention for undertakers of materials procurement and suppliers. A total of 1,069 people participated in the training, including the chairperson and vice-chairperson, officers, undertakers of materials procurement, suppliers, and undertakers of other businesses. The corporation also organized 15 “Procurement Risk and Anti-Corruption” seminars for purchasers and suppliers, with a total of 1,379 participants, ( 21 people including the chairperson and vice-chairperson). In addition, the corporation has also compiled the “Anti-corruption Guideline for Pipeline Construction and Materials Management” including the “Criminal Offenses Chapter” and “Administrative Breaches Chapter.”

(7) In response to the completion of the revised edition of the "The Handbook of Business Principles of Integrity for Small and Medium Enterprise" in September 2019, the SMEA organized the SME Business Integrity Seminar in 2020 for SME owners to strengthen the anti-corruption concepts in the ethical management of SMEs. Please refer to section B-I-(I)-4-(2) Revising the “The Handbook of Business Principles of Integrity for Small and Medium Enterprise” in this report for details.

4. Encouraging NGOs to participate in anti-corruption education, training, and publicity

(1) In 2019 the Banking Bureau of the FSC invited training organizations such as the Taiwan Academy of Banking and Finance (TABF) to organize 219 training activities on anti-corruption for employees of listed companies and banks. The Insurance Bureau of the FSC invited the Taiwan Insurance Institute (TII) to include topics relating to business integrity, whistleblower protection, UNCAC, and ISO 37001 Anti-bribery management system (ABMS) in the training courses for insurance workers, auditors, officers, and AML personnel, including the “Legal Compliance On-the-Job Training Program,”

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“AML/CFT On-the-Job Training Program,” “Postal Life Insurance Manager Audit Training Program,” “Pre-Service Training for Insurance Agents, Insurance Brokers, and Insurance Surveyors.” A total of 186 people participated in the 10-hour training.

Anti-corruption training will also be planned and organized in 2020.

(2) To strengthen the understanding of and support for the current anti-corruption policies and corruption prevention work of non-governmental groups, the AAC supervises the civil service ethics units of competent authorities to organize anti-corruption activities and publicity for NGOs under the jurisdiction or having business with competent authorities. For example, in 2019 the Taichung Veterans General Hospital organized the anti-corruption forum: “Healthcare Integrity: New Concepts in Interaction Between Physicians and Pharmaceutical Industry” with NGOs including the Taiwan Federation of Medical Devices Commercial Associations (TFMDCA), Taiwan Pharmaceutical Marketing & Management Association (TPMMA), and Transparency International Chinese Taipei (TICT). In 2020 the hospital will continue to invite NGOs to participate in education and training activities relating to anti-corruption to increase the energy of social participation.

5. Promoting financial transparency to SMEs

Please refer to section B-I-(I)-6 Promoting financial transparency to SMEs in this report for details.

(IV). Combat corrupt practices in the private sector (Measures 26)

Measures 26：To combat corrupt practices in the private sector (A.21), the Ministry of Justice Investigation Bureau established the Enterprise Anti-Corruption Section in 2014 to investigate corporate corruption cases, such as bribery, manipulation of stock prices, insider trading, kickbacks, and asset draining. This work is supported by outposts around the country staffed with specialized personnel to investigate corporate corruption.

1. Effectiveness in corruption investigation in enterprises

The MJIB constantly discovers and investigates corrupt practices in the private sectors, including securities (stock) crimes, bank corruptions, enterprise tunneling, and trade secret infringement. The table below shows the statistics for the last three years.

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Investigated and Referred

Corrupt Practices

Number of

Suspects Involved Amount (NTD)

2017 129 cases 494 persons 111,882,867,745

2018 117 cases 432 persons 123,537,617,954

2019 115 cases 425 persons 94,827,963,875

After the establishment of the

“Malpractices Investigation Division” from July

2014 to December 2019

628 cases 2,468

persons 415,573,755,213

2. Holding the “Prevention and Investigation of Economic Crime Meeting” to review the effectiveness of combating and focus of the investigation of corrupt practices in the private sectors

On November 20, 2019 the MJIB invited supervisory entities and law-enforcement entities to the “132nd Prevention and Investigation of Economic Crime Meeting.” Apart from reporting the progress in “cryptocurrency illegal fund-raising,” “violations of The Banking Act of The Republic of China,” “violation of the Securities and Exchange Act,”

“insurance crimes,” “financial examination cases,” “trans-border phone scams,”

“inventory of not operating companies,” “sharing of major shareholders‟ information,”

“trade secret cases,” and “gold smuggling investigation,” a keynote report on

“Preliminary Investigation of Recommendations for Taiwan in the APG‟s Mutual Evaluation Report Round 3” was presented, and cross-entity investigations was coordinated for the following: “Discussion of Deferred Prosecution Cases on Authorized Capital Fraud,” “Statistics on Securities Crimes and Important Cases Sharing,”

“Discussion on Passport Fraud,” and “Sharing and Coordination of Intelligence on Election Invention with Offshore Capital. ”

(V). Private-Sector Whistle-blower Protections (Measure 29)

Measure 29：Prepare and implement Private-Sector Whistle-blower Protections (whether through a new Act or through amendments to existing legislation).

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1. Developing and establishing the “Whistleblower Protection Act” covering both the public and private sectors

(1) After integrating the recommendations of all entities and reaching a consensus with them, the AAC drafted the “Whistleblower Protection Act” by combining the versions for the public and private sectors. After submitting to the EY for evaluation through the MOJ.

After the review, the EY delivered the draft to the Legislative Yuan (LY) for reading on May 3, 2019. The Judiciary and Organic Laws Committee of the LY proceeded with the review and held the caucuses on October 23 and 30, 2019, part of the articles was retained for discussion at the sitting. The timely legislation of the protection act was prevented by the legislator term change on February 1, 2020. The AAC has re-drafted the articles which were submitted to the EY for evaluation on February 20, 2020. The review is currently pending.

(2) After the legislation, in addition to corruption offenses, the scope of corrupt practices in the private sector also covers the damage of public interest, such as bank loan frauds through collusion with insiders. Whistleblowers can report crimes to the public or private sector and shall receive protection, such as the anonymization of identity, protection of the right to work, punishment on retaliators, and the establishment and release of monetary rewards for whistleblowers.

2. Completing the amendment of related regulations governing the internal control and internal audit of financial institutions to include the whistleblower system and related protections

(1) On March 31, 2018, the Banking Burau of the FSC added Article 34-2 to the

“Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries,” stating that financial holding companies and banks shall establish a whistleblower system, including designating a unit with independent functions at the head office to accept and investigate the reported issues, a standing operating procedure (SOP) shall be established for handling a reported issue, and the protections for the whistleblower, including the anonymization of identity and

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protection of the right to work.

(2) On May 30, 2018, the Securities and Futures Bureau of the FSC added Article 28-1 to the

“Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets,” stating that a service enterprise shall establish a whistleblower system. Apart from designating a unit with the independent exercise of powers to take charge of the processing and investigation of whistleblower reports, it shall also provide protections for the whistleblower, including the anonymization of identity and protection of the right to work.

(3) On May 29, 2018, the Insurance Bureau of the FSC added Article 32-2 to the

“Regulations Governing Implementation of Internal Control and Auditing System of Insurance Enterprises,” stating that an insurance company shall establish a whistleblower system. Apart from designating a unit at the head office with independent functions to accept and investigate the reported cases, it shall also provide protections for the whistleblower, including the anonymization of identity and protection of the right to work.

(4) To encourage insurance companies to establish a whistleblower system and protections for employees and outsiders, the Non-Life Insurance Association and the Life Insurance Association added Article 28-1 to the “Corporate Governance Best Practice Principles for the Insurance Companies” to cover the whistleblower protection system. The principles were approved for recordation by the FSC on April 7, 2017.

3. Including the whistleblower system and related protections in the “Regulations Governing Establishment of Internal Control Systems by Public Companies”

Article 23 of the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies” and Article 28-3 of the “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” have stipulated that TWSE/TPEX listed companies shall establish a whistleblower system and related protections to encourage TWSE/TPEX listed companies to establish the whistleblower system and include it in the internal control system.

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(VI). Fight against money laundering: Amending the “Company Act” and implementing the new forfeiture policy (Measure 32)

Measure 32：Strengthen the fight against money laundering and to recover proceeds of crime.

The committee notes that Taiwan is currently amending the Company Act to regulate and identify the beneficial ownership of companies and the issuing of bearer shares. The committee encourages Taiwan in this effort including the need to consider prohibiting nominee shares and nominee directors, or to provide other mechanisms to ensure they are not misused for money laundering purposes. Taiwan is also implementing new rules (announced in 2016) for confiscation of proceeds of crime (A. 31) and to improve the management system for frozen and confiscated property.

1. Promoting the system for reporting the information of the responsible person and principal shareholders of enterprises

(1) Completing the amendment of the “Company Act”

The amendment to the “Company Act” was promulgated on August 1, 2018 and took effect on November 11 in the same year. Article 22-1 added the Act stipulates, a company shall report the information of the responsible person(s) and shareholders (only those holding more than 10 percent of the company‟s total shares, without strict request on natural persons, which is different from the “natural person” with “final” ownership or control as defined by international practices) for identification through the crosscheck of an information system, in order to comply with the AML policy and help construct a well-planned AML system to enhance AML actions and the transparency of corporate bodies. In addition, as the consensus to amend the laws and regulations relating to the beneficial owner is pending, including international organizations such as the European Union (EU), Organization for Economic Co-operation and Development (OECD), and Financial Action Task Force on Money Laundering (FATF), or countries including Australia, Canada, and Norway make strong requests for member states to invest in considerable resources to help publicize the information transparency of beneficial owners and corporations, it is hoped that through the concern about related issues of different parts of society in the future, the public will support and urge the amendment of

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the “Company Act” in the future.

(2) Completing the construction of the “Company Transparency Platform”

In response to the addition of Article 22-1 to the “Company Act” to request for information reporting, the MOEA has designated the Taiwan Depository & Clearing Corporation (TDCC) to build the “Company Transparency Platform”

(https://ctp.tdcc.com.tw) and establish the operating guide and FAQ for the reference of companies and different parts of society. The statistics up to May 22, 2020 show that 596,421 companies have completed their “annual report” of information on the responsible person(s) and major shareholders, with an accomplishment rate of 88.01%, and 638,122 companies have completed the “initial report,” with an accomplishment rate of 92.06%.

2. Effectiveness of forfeiture of criminal gains

After the implementation of the new forfeiture policy, the amount of criminal gains adjudicated by a judge forfeited by district Prosecutors offices across Taiwan has increased annually over the last three years, as shown in the table below.

Year Number of Cases Forfeited Amount

2017 16,395 1,048,773,346

2018 16,120 1,078,421,737

2019 16,457 1,543,120,496

3. Effectiveness on enhancing the auction of forfeited criminal gains (1) Auctioning seized items during the investigation

A. The table below shows the number of seized items during the investigation and the total amount of income from auctioning such items by district Prosecutors offices across Taiwan in the last three years:

Year Number of Auctioned

Items

Total Amount of Income from Auctioning

July 2016-June 2017 3,690 pcs 63,605,037

July-December 2017 177 pcs 21,095,650

2018 389 pcs 36,124,884

2019 664 pcs 55,808,286

Note: Statistics for July 2016-June 2017 were retrospective statistics of the Taiwan High Court at the request of the MOJ in June 2017, and data has since been summarized biannually as of

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July 2017. Hence, the total amount of 2017 was unavailable.

B. On April 2, 2018, the MOJ promulgated the “Directions for Communication of Assignments Between Prosecution Entities and Administrative Enforcement Entities,”

stating that prosecution entities may entrust the branches of the MOJ‟s Administrative Enforcement Agency to engage in the auction, allocation, payment, and investigation of the force-collected property and other related matters to improve the management system of property freezing or confiscation. In 2018, 346 items were entrusted and 135 items were auctioned with a designated amount of NTD4,802,160. In 2019, 5 items were entrusted and 67 items were auctioned with a designated amount of NTD2,383,000.

(2) Promoting joint auctioning to enhance the effectiveness of enforcement

Through the “123 Nationwide Joint Auction Day” organized by the 13 branches of Administrative Enforcement Agency, Ministry of Justice across Taiwan, prosecution entities implemented joint auctioning with these branches. The table below shows the performance for the last three years.

Year Auctioned Amount

2017 1,390,198,159

2018 1,059,739,901

2019 1,481,804,667

4. Completing the amendment and constant review of the “Money Laundering Control Act”

The “Money Laundering Control Act” was amended and promulgated on December 28, 2016 and took effect on June 28, 2017. According to Article 7, when verifying the identity of the customer, financial institutions and designated non-financial businesses or personnel shall also verify the beneficial owner. The beneficial owner is also defined in related authorized by-laws to meet FATF‟s international standard and provide a reference for verification of organizations, industries, and personnel. In the future, we will continue to gather information regarding the comments on the beneficial owner system for reference to plan amendments to laws and regulations relating to money laundering control.

5. Amending the “Code of Criminal Procedure” and the forfeiture regulations eight

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financial acts.

To maintain a balance between the forfeiture of criminal gains and the protection of the right to claim of the obligee or victim, the Judicial Yuan (JY) have drafted the amendment to Article 473 of the “Code of Criminal Procedure” to adjust the duration and sequence for the obligee or victim to claim for the return or release of the forfeited items.

Based on the status of the amendment, the FSC will timely amend related provisions in the eight financial acts to protect the rights to claim of the victims of financial crimes.

(VII). The whistleblower system and protections for the financial industry (Measure 35) Measure 35：Consider incorporating whistleblower complaint channels and related protection mechanisms into the norms for internal control measures for the banking, financial holding, securities, and insurance industries, as well as into future inspection items; and to ensure the financial services industry to treat whistle-blowers and complaints properly, protect whistleblowers’ rights and interests, and promote enhanced corporate governance in the financial industry.

1. Listing the whistleblower system and protections as featured financial examination items.

The whistleblower system was a focus of the financial examination of financial holding, banking, securities, and insurance companies in 2019. The examination included the audit of the independence and effectiveness (including the internal operating procedures and control mechanism for internal and external reporting channels and whistleblower protections) of the whistleblower system. In 2019, the Financial Examination Bureau of the FSC examined 37 financial institutions. The bureau listed related comments or requests for improvements for companies with improper whistleblower systems or procedures to urge them to make improvements.

2. Completing the amendment to the internal control and internal audit regulations of the financial industries.

Please refer to section B-I-(V)-2 Completing the amendment of related regulations governing the internal control and internal audit of financial institutions to include the whistleblower system and related protections in this report for details.

Mid-Term Report on Concluding Observations from Review of the ROC’s Initial Report under the United Nations Convention against Corruption December, 2020