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June 27, 2018: Legislature Yuan Has Passed the Third Reading of the Draft of Foundations Act to Construct the Legal System of Foundation and Anti-Money Laundering. The Regulation of Foundation has Entered a New Era

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The legislature yuan has passed the Third Reading of the draft of the Foundation Act today. The legislature and administrative department's mutual engagement enables the government to regulate the Foundations completely and promote the development of public welfare. Besides that, it helps the three-round mutual evaluation of the Asia/Pacific Group on Money Laundering.

Since the establishment and management of the foundation in the past only had the relevant provisions of the civil law principle and the powers or administrative rules set by the competent authorities ex officio as the primary basis, the normative content and hierarchy were insufficient. Besides, APG will conduct the third round of mutual evaluation this year, and the information disclosure and financial management mechanism of the foundation are essential parts of preventing money laundering Foundations Act is one of the critical supporting bills. The Foundation Act passed by the Third Reading today is divided into the “Government Donations” and “People Donations” for other supervision and management to improve personnel, accounting, financial management, information disclosure, and exit mechanism of Foundation Act. Foundations Act stipulates that the competent authority should prevent and combat terrorism for foundations that are easy to be used as the method of money laundering and terrorist activities.

Art. sixty-eight of Foundation Act passed today, which aims to bring certain privatized financial entities back under the government's control. Before implementing this Act, some foundations that originally founded with public money later became privatized because of accepting civil donations. When the central authority thinks the purpose of the policy still exists. The private foundation could not achieve the aim of social benefit and public administration or avoid the supervision from the government, the central authority could take back financial control of certain financial entities within three years by buying up a majority stake of their stocks to do high-density supervision and management.

To respect various points of view and the particularity of religious organizations, this Act stipulated that the central authority, the Ministry of the Interior, identifies the range and draft another law to regulate them. Before the legislation, religious organizations are subject to civil law and other relevant laws. The normative focus and effectiveness of the Act are as follows:

  1. Differentiate between foundations with public money or private money, each with a different supervision density.
  2. Improve the personnel system of foundations to avoid the conflict of benefit.
  3. Establish the accounting, inter-control, and inspect structures to strengthen financial management and prevent money laundering.
  4. Establish the information disclosure system to guide sound development and to avoid money laundering.
  5. As to foundations that are easy to be used for laundering or terrorist financing activities, the central authority should stipulate the mechanism to prevent money laundering or terrorist financing.
  6. Establish a comprehensive exit mechanism and revitalize foundations.
  7. Strengthen the supervision mechanism for foundations that attract great concern from the government and be supervised more strictly.
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