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Taiwan is seeking to crack down on rampant oil smuggling out of its ports by toughening measures against terrorist financing, in an attempt to combat a trade that has undermined international sanctions against North Korea for years.

Draft amendments to the Counter-Terrorism Financing Act, set to be published this month, would criminalise any transaction with a citizen or entity from a country that is subject to UN sanctions, as well as any transaction conducted in such a country’s territory, according to senior government officials and prosecutors.

Under the current law, only a direct sale to a person or company under sanctions is illegal.

“In recent years there have been a series of cases regarding oil transshipments to North Korea where we realised the law is not comprehensive enough,” Huang Mou-hsin, Taiwan’s deputy justice minister, told the Financial Times. “The scope of criminal behaviour is defined too narrowly, and we are seeking to close these loopholes.”

Taiwan’s failure to stop illicit North Korea trade has long been a sore point in its relations with western countries, whose support it seeks in countering China’s growing aggression. Beijing claims Taiwan as part of its territory and threatens to bring the island under its control by force if necessary.

As part of Taipei’s campaign to deter such an attack, it has portrayed itself as part of a community of like-minded democracies that backs the rules-based international order and opposes autocracies.

But according to foreign officials and analysts, the overwhelming majority of the oil shipped to North Korea has come out of Taiwan since the UN imposed sanctions capping such trade in 2017, a record that jars with this image.

“Our analysis and previous reporting indicates a significant portion of the oil shipped to North Korea in circumvention of sanctions has come out of Taiwan ports over the past years,” said Joseph Byrne, a research fellow at the Royal United Services Institute, a UK think-tank. Foreign government officials said Taiwan accounted for more than 90 per cent.

The draft bill removes the requirement for the prosecution to prove that suspects “knowingly” sold to entities under sanctions. The rule in the past has derailed cases over illicit oil shipments to North Korea.

It also criminalises camouflage tactics such as painting over a ship’s name or switching off its automatic identification system as well as false reporting on counterparties in transactions at sea. Such behaviour is currently only subject to administrative fines.

But western government officials said Taipei had also been slow to act in the past when presented with evidence of transshipments, including satellite imagery and surveillance aircraft footage.

“As long as we receive intelligence from foreign partners, we will investigate,” said Huang Hui-hsin, a senior prosecutor. But she estimated that only about 20 investigations had been opened into oil transshipments to North Korea since 2017. Little more than half led to charges, and only one resulted in a guilty verdict.

A Taiwan court found six people charged for smuggling oil in the East China Sea using the tanker Polaris in 2018 not guilty because it deemed the evidence insufficient.

Taipei’s push to tighten its regulations comes as Russia has resumed direct oil deliveries to North Korea, reducing the role of Taiwanese supplies.

“Since March 2024, the trade has been upended by the provision of oil from Russia directly by North Korean vessels,” Byrne said. “We have seen a huge drop-off in the ship-to-ship transfers involving vessels out of Taiwan ports since then, although we are still seeing some activity by the same ships and networks.”

Taiwan’s plans for stricter oversight of its vessels also includes amendments to the Law of Ships. The customs administration also tightened regulations last year to require shipowners to register transactions in international waters with exact positioning data and information on the counterparty.

Officials expect opposition from shipowners over the anti-terrorism financing law amendments during a two-month consultation period. It could also face resistance in the opposition-controlled parliament.

“It is very hard to get legislative changes done,” said Huang, the deputy justice minister.