US embassy cable - 05TAIPEI3957

MONEYCHANGERS IN TEMPLES AND JEWELRY STORES PROMOTE TOURISM?

Identifier: 05TAIPEI3957
Wikileaks: View 05TAIPEI3957 at Wikileaks.org
Origin: American Institute Taiwan, Taipei
Created: 2005-09-26 09:06:00
Classification: SECRET
Tags: ECON PINR KCRM KTFN TW HK Finance Counterterrorism
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.

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, Finance, Counterterrorism/Nonproliferation 
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 
--------------------------------------------- ------- 
 
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 

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