Taiwan amends tobacco reward rules to curb fraud and collusion

Taiwan's Ministry of Finance is introducing significant regulatory changes to combat fraud within its reward system for reporting illegal tobacco and alcohol. The amendments aim to prevent collusion between investigative personnel and illicit tobacco operations, where individuals are allegedly set up to falsely claim informant rewards. Three key measures are being implemented to strengthen the system's integrity.

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In the past, there were instances of illegal investigators colluding with private tobacco groups, arranging for informants and penalized individuals to arrange illegal cases in advance and then defraud rewards through the existing reward system.

Firstly, the calculation of informant rewards will shift from being based on the assessed fine amount to the actual amount of fines collected and remitted to the national treasury. This change addresses a loophole where fraudulent schemes could lead to high reward payouts even if the fines were uncollectable. Rewards will still be based on the value of confiscated goods, seeking a balance between preventing fraud and maintaining incentives for public reporting.

Secondly, the revised regulations introduce a mechanism for reclaiming rewards that are later proven to have been obtained illicitly. Previously, recovering issued rewards involved a complex administrative process of revoking the original decision. The new rules streamline this, allowing administrative agencies to directly issue recovery orders, thereby increasing efficiency.

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If the fines are ultimately not actually collected, the reward cannot be calculated based on non-existent fine income, but the valuation basis for confiscated and forfeited goods is still retained, hoping to strike a balance between preventing fraud and maintaining public incentives for reporting.

Thirdly, the amendments stipulate that reward payments can be withheld or reclaimed if investigative personnel are found to be involved in illegal activities. This applies both before rewards are issued and after, provided the illicit gains have not been judicially confiscated. Furthermore, all investigative agencies, including local governments, the Coast Guard, police, and customs, will be required to establish robust internal control and auditing systems for reward distribution. These agencies must submit their internal control frameworks when applying for reward funds, institutionalizing risk reduction measures.

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If the reward case is later proven through judicial investigation to be without concrete evidence and is a false and fraudulent case, previously, if the already issued reward money was to be recovered, the original approval decision had to be revoked according to the Administrative Procedure Act before demanding repayment, which was quite cumbersome.