By Faith Hung and Liang-Sa Loh
TAIPEI (Reuters) - Mega Financial Holding's <2886.TW> new chairman said the Taiwan state-controlled firm will strengthen risk management after its banking unit was hit by a U.S. fine for anti-money laundering violations, a case that has hugely embarrassed the island's government.
"There are lots of doubts about us. We'll do whatever we can to find out what has happened," Michael C.S. Chang, 68, told reporters on Friday. "We are going to have a deep review and thorough reform."
Chang, who took up his post on Friday, will have to clean up what Taiwan President Tsai Ing-wen has called a "ridiculous and incredible" matter, which is threatening to seriously undermine her three-month-old administration.
New York authorities in mid-August slapped Mega International Commercial Bank with a $180 million fine for violations that included lax attention to risk exposure in Panama, the first time in a decade that a Taiwan-based financial institution has been penalized by U.S. authorities.
Taiwanese financial regulators flew to Panama and New York this week to continue their investigation into whether Mega's activities led to breach of any Taiwanese laws.
In 2009, Mega’s banking unit also ran afoul of Australian authorities over compliance and anti-money laundering rules.
A trained accountant, Chang is known as a firefighter who has dealt with Taiwanese lenders in crisis before.
Taiwan's ruling Democratic Progressive Party (DPP), during its previous term in office, appointed Chang as chairman of First Financial Holding Co <2892.TW>, another major state-controlled financial firm, where he held the position from 2006 to 2008.
Chang’s predecessor, Shiu Kuang-si, quit on Wednesday two weeks after being appointed as chairman, in a bid to address allegations of conflicts of interest. Shiu was president of Mega when the suspect transactions took place, and he is the brother-in-law of Taiwan’s central bank chief.
Another former Mega chairman, Tsai Yeou-tsair, who resigned in March, has been banned from travel abroad, while a former finance minister has been questioned by prosecutors.
Taiwan Premier Lin Chuan has also had to weather calls to resign, with critics blaming him because the boards of state-controlled financial institutions are packed with government-selected appointees.
The case has embroiled the central bank, which prides itself on being an independent institution and has been headed by Governor Perng Fai-nan, 77, for 18 years.
This week the central bank was forced to issue rare statements stating Perng was involved in the Mega case only at the request of other financial regulators in Taiwan.
Financial Supervisory Commission Vice Chairman Kuei Hsien-nung in early August requested Perng's help to plead with U.S. authorities, including the Federal Reserve Bank of New York, for more time for Mega to deal with the case.
“At the time, there was no information that showed Mega was related to any criminal liability,” Kuei told Reuters this week. “This was all done for the country. We would not have selfish intentions,” he said.
(Writing by J.R. Wu; Editing by Stephen Coates and Muralikumar Anantharaman)