I. Introduction

In recent years, the Financial Supervisory Commission has been calling for effective prevention of nominee accounts in order to counter financial crimes. As such, whether a person who provides a nominee account commits an offense of money laundering has become a controversial topic of discussion.

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II. In current practice, most courts hold that a person who provides a nominee account does not necessarily commit an offense of money laundering:

(I) The offense of money laundering, according to Article 2 of the Money Laundering Control Act (“MLCA”), is established under any of the following three conditions:

1. knowingly disguises or conceals the origin of the proceeds of a specified predicate offense, or transfers or converts the proceeds of a specified predicate offense to assist others avoid criminal prosecution; or

2. disguises or conceals the true nature, source, movement, location, ownership, and disposition or other rights of the proceeds of a specified predicate offense; or

3. acquires, possesses or uses the proceeds of a specified predicate offense committed by others.

(II)  Fraud is one of the predicate offenses specified in the MLCA. As such, the wrongdoer who commits the fraud may also commit an act of money laundering for transferring its proceeds derived from the offense of fraud to a nominee account:

Fraud committed by scam group against victims to gain proceeds is an offense of fraud as prescribed in Article 339 of the Criminal Code, which stands a predicate offenses under the MLCA; hence, if a scam group transfers its proceeds derived from its fraud activities to a nominee account, such transfer of the illicit proceeds may also constitute an offense of money laundering.

(III) However, most courts hold that a person who simply provides a nominee account for the use of scam groups does not constitute an offense of money laundering for the following reasons:

1. However, from the perspective of objective elements (actus reus), the offense of money laundering requires a certain order of activities. That is, there needs first to exist a serious predicate offense deriving illicit proceeds, then an act of disguising, concealing, acquiring, possessing or using the illicit proceeds, for the act to be deemed as money laundering. Providing a nominee account often occurs before a scam group commits fraud activities against the victim; hence, it does not meet the required elements of money laundering.

2. From the perspective of subjective elements (mens rea), the actor needs to know that the funds (i.e., the illegal proceeds) are derived from a "specified predicate offense," and knowingly disguises or conceals such illegal proceeds. However, scam groups most likely would not have informed the account provider of their criminal purpose, and at the time of providing his/her account, the account provider would not know that his/her account is being used for a criminal purpose. As such, the subjective elements are also not met.

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III. Conclusion

Based on the foregoing, in current practice, most courts hold that a person who simply provides a nominee account does not necessarily commit an offense of money laundering as the elements of crime set forth in the MLCA are not met. However, one should pay attention to whether the courts will change such opinion in the future.

(Author: Intern Attorney Jia-Rong Lin)

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