Newsletter
Potential impact on "Virtual Asset" and "Third-Party Payment" related service providers of the draft "Fraud Crime Harm Prevention Act" and draft amendment to the "Money Laundering Control Act" announced by the Executive Yuan
To strengthen the government's fraud prevention and related enforcement regulations, the Executive Yuan passed the draft "Fraud Crime Harm Prevention Act" (the "Draft Fraud Prevention Act") and the draft amendment (the "Draft Amendment of AML Act") of the "Money Laundering Control Act" (the "AML Act") on May 9, 2024; both draft bills have been submitted to the Legislative Yuan for deliberation.
Once the above-mentioned two drafts are formally passed by the Legislative Yuan, the compliance costs for "Virtual Asset" and "Third-Party Payment" related service providers would increase accordingly. Some important provisions are summarized as follows:
一、 Enterprises or persons providing virtual asset services (the "Virtual Asset Service Providers")
(一) Draft Fraud Prevention Act
1. Virtual Asset Service Providers shall take reasonable measures to prevent virtual asset accounts from being abused for fraud and crimes, and shall publicize fraud prevention information to customers. (Article 7)
2. Virtual Asset Service Providers shall fulfill the duty of care of a good administrator regarding the virtual asset accounts. For abnormal virtual asset accounts suspected of being involved in fraud, Virtual Asset Service Providers shall strengthen customer identity verification, and may take measures such as continuous review/verification of customer identity, suspension of depositing, withdrawing, or transferring virtual assets, suspension of all or part of the trading functions, or refusal to establish business relationships or provide services. In the circumstances mentioned above, Virtual Asset Service Providers shall retain the data and transaction records obtained from the customer identity verification process, and may report the same to the judicial police authorities. Upon receiving such reports, the judicial police authorities shall notify the Virtual Asset Service Providers within a reasonable period in relation to the subsequent control or release of control of the abnormal virtual asset accounts. (Articles 8 and 9)
3. To effectively block the flow of funds of criminal groups, Virtual Asset Service Providers shall cooperate with the judicial police authorities to establish a joint prevention and reporting mechanism. Upon receiving a notification from the judicial police authorities, each Virtual Asset Service Provider shall conduct continuous monitoring of the reported virtual assets. (Article 10)
4. To strengthen the property protection of the victims of fraud, in certain circumstances, the virtual assets that have not been withdrawn may be returned to the victims. (Article 11)
5. Administrative fines on Virtual Asset Service Providers that violate relevant obligations. (Article 13)
(二) Draft Amendment to AML Act
1. Amend the wording "enterprises handling virtual currency platform or transaction" to "enterprises or persons providing virtual asset services"; additionally, add that when Virtual Asset Service Providers engage in transactions, where necessary, the Ministry of Justice in conjunction with the central competent authority may designate the use of payment methods other than cash when the transaction reaches a certain amount. (Article 5)
2. Virtual Asset Service Providers shall complete the "Anti-Money Laundering Registration" with the central competent authority before they may provide the services; additionally, add the requirement that offshore Virtual Asset Service Providers shall set up a company or branch office in accordance with the Company Act and complete the aforementioned "Anti-Money Laundering Registration" before providing relevant services within Taiwan. Anyone who violates the above provisions may be sentenced to imprisonment for not more than 2 years, detention, or in lieu thereof or in addition thereto a criminal fine of not more than NT$5 million. Furthermore, in addition to punishing the perpetrator, if a juristic person is the actor, such juristic person shall also be subject to a criminal fine. (Article 6)
二、 Enterprises or persons providing third-party payment services (the "Third-Party Payment Service Providers")
i. Draft Fraud Prevention Act
1. Third-Party Payment Service Providers shall fulfill the duty of care of a good administrator towards their customers. For incidents suspected of involving fraud, customer identity verification shall be strengthened, and measures may be taken such as continuous review/verification of customer identity, deferring payments, and refusal to establish business relationships or provide services. In the circumstances mentioned above, Third-Party Payment Service Providers shall retain the data and transaction records obtained from the customer identity verification process, and may report the circumstances to the judicial police authorities. Upon receiving such reports, the judicial police authorities shall notify the Third-Party Payment Service Providers within a reasonable period in relation to the subsequent control or release of control on the aforementioned deferred payments. (Articles 34 and 35)
2. Administrative fines on Third-Party Payment Service Providers that violate relevant obligations. (Article 41)
ii. Draft Amendment of AML Act
1. Third-Party Payment Service Providers shall complete the "Anti-Money Laundering Registration and Service Capability Registration" with the central competent authority before they may provide the services; additionally, add the requirement that offshore Third-Party Payment Service Providers shall set up a company or branch office in accordance with the Company Act and complete the aforementioned "Anti-Money Laundering Registration and Service Capability Registration" before providing relevant services within Taiwan. Anyone who violates the above provisions may be sentenced to imprisonment for not more than 2 years, detention, or in lieu thereof or in addition thereto a criminal fine of not more than NT$5 million. Furthermore, in addition to punishing the perpetrator, if a juristic person is the actor, such juristic person shall also be subject to a criminal fine. (Article 6)
2. Raise the upper limit of administrative fines applicable to the non-financial enterprises or persons such as Third-Party Payment Service Providers under the AML Act, and add provisions that allow for administrative fines to be imposed for non-compliance per violation. (Articles 7, 8, 10, 12, and 13)