9-Year Oversight Results in $100 Million Loss! Financial Supervisory Commission Fines Hua Nan Bank $12 Million and Suspends Credit Card Operations for One Month

The Financial Supervisory Commission (FSC) announced today (11th) its disciplinary action against Hua Nan Commercial Bank (HNCB). Due to significant internal control deficiencies in handling credit card dispute settlements, HNCB failed to timely file refund claims with international card organizations or recover funds from cardholders for 6,334 disputed transactions between 2015 and 2024, resulting in a loss of approximately NT$101.64 million. The FSC has imposed a fine of NT$12 million, issued a corrective order, and suspended the bank’s acceptance of new credit card applications for one month.

Wang Yun-chung, Deputy Director of the FSC’s Banking Bureau, stated that the issue was discovered during an internal accounting system migration when discrepancies were found in the reconciliation of the 'credit card advances' account. A retrospective investigation revealed long-standing operational flaws.

Wang explained that when cardholders dispute transactions, banks typically make interim payments and temporarily withhold charges. Under standard procedures, banks must file refund requests with international organizations such as Visa or Mastercard. If merchants reject claims, banks must submit additional documentation; if disputes are invalid, banks must recover the amounts from cardholders. However, over the nine-year period, HNCB failed to file timely refund requests, neglected to submit required documents, and did not pursue collections from cardholders even after disputes were resolved unfavorably. Ultimately, the bank internally wrote off these amounts without proper authorization.

HNCB’s board approved the full write-off of the NT$101.64 million unrecovered amount as a bad debt in January this year. The FSC emphasized that this incident involved only internal bank operations and financial loss, with no impact on cardholder rights.

The FSC identified multiple serious internal control and audit failures at HNCB. First, the lack of operational controls and checks. For nine years, HNCB had no established procedures or time-bound controls for handling disputed credit card transactions. The same employee independently managed system entries, progress tracking, and account adjustments without dual-signature verification or mutual oversight.

Second, the unauthorized destruction of incomplete case files. Between 2021 and 2024, HNCB destroyed dispute-related documents—including复查 applications, declarations, and transaction records—from 2015 to 2020, even though some cases were still pending, preventing later verification.

Third, failure of accounting and audit mechanisms. The bank’s credit card system was not properly integrated with its main accounting system, and the audit unit failed to maintain dedicated audit workpapers, allowing the issue to remain undetected for years. Additionally, HNCB did not enforce employee rotation policies, allowing the responsible employee to remain in the same role for over nine years, eliminating opportunities for new staff to detect anomalies.

In response, the FSC has fined HNCB NT$12 million, issued a corrective order, and suspended new credit card applications for one month. The FSC emphasized that the one-month suspension is a foundational penalty to prevent new risks. After the period ends, HNCB must submit concrete improvement results and obtain FSC approval before resuming operations.

Furthermore, the FSC requires HNCB to conduct a comprehensive review of accountability across all levels involved in the case, including headquarters management, based on its internal 'responsibility map.' The audit unit will oversee and track the implementation of corrective measures to prevent recurrence of similar unresolved balances and internal control gaps.