Local Cryptocurrency Exchange HzBit Fined by FSC
Local cryptocurrency exchange HzBit (Hongzhu Digital Co., Ltd.) was fined today by the Financial Supervisory Commission (FSC) for failing to comply with the anti-money laundering and personal data protection regulations applicable to virtual currency operators.
(Background: FSC: Virtual asset exchanges prohibited from “cash transactions”! Only bank transfers and other traceable cash flows are allowed)
(Context: All OTC transactions in Taiwan are illegal! Experts say the FSC’s new regulations are “hopeless”: VASP licenses are like poison, scaring all customers away)
On the 14th, the Financial Supervisory Commission released a press statement announcing a fine of NT$1.52 million against Hongzhu Digital Co., Ltd. (HzBit) for violating the Anti-Money Laundering Act and the Personal Data Protection Act. This action reflects the FSC’s ongoing commitment to enforcing anti-money laundering and information security requirements for such operators, following previous fines against other virtual asset platforms.
The FSC’s Securities and Futures Bureau discovered multiple serious deficiencies during a special inspection of HzBit conducted in October last year. According to the FSC’s announcement, HzBit failed to establish specific and objective risk assessment standards in customer due diligence, leading to inconsistencies with the FSC’s regulations regarding the identification of customer money laundering risks. The company even established business relationships before completing customer reviews and did not adequately understand the sources of customer funds or the purposes of unusual transactions.
The FSC’s press release noted that there were also gaps in HzBit’s continuous transaction monitoring mechanism, including the failure to trigger alerts for suspicious transaction patterns. The monitoring parameters and thresholds were disconnected from the customer risk levels, and the company did not properly maintain records of customer risk assessments. Additionally, the inspection found that Hongzhu failed to report large currency transactions as required.
Regarding information security and personal data protection, HzBit did not regularly back up external cloud databases and did not establish security control standards and auditing procedures for the protection of customer personal data.
HzBit Operational Status
HzBit primarily operates physical storefronts located in Taipei, Taoyuan, Taichung, and Kaohsiung, and had previously registered with the FSC to join the anti-money laundering list for virtual currency operators (VASP).
The FSC emphasized that the virtual asset business is a high-risk area for money laundering prevention. Operators must establish and implement internal control and auditing systems to ensure compliance with laws and regulations, thereby maintaining healthy market development and protecting customer rights.
