In order to strengthen the fraud prevention system, and effectively combat the high incidence of fraud crimes, on July 12, 2024, the Legislative Yuan passed the Fraud Crime Hazards Prevention Act (the “Act”), which was promulgated on July 31, 2024. It is worthwhile for the relevant industry players to note that in addition to filling the gaps in existing laws, increasing the penalties for fraud crimes, and extending the confiscation of unlawful profits, the Act further imposes fraud prevention responsibilities on relevant industry players through a multi-authority approach. The Act imposes fraud prevention obligations on seven key industries (i.e. financial institutions, virtual asset services, telecommunications, internet advertising platforms, third-party payment services, e-commerce industry, and the online game operators). The penalties for the enterprise violating relevant obligations vary according to the industry. The maximum fine is up to NT$100 million, which can be imposed consecutively, and the competent authority may also impose certain punishment measures such as traffic management, stopping resolution or restricting access.
The main obligations imposed on the abovementioned key industry players are briefly described below:
- Third-party payment services providers, financial institutions, and virtual asset services providers: For accounts or clients suspected of being involved in fraud crimes, these enterprises should strengthen the KYC process to confirm the client’s identity, establish follow-up control measures (including but not limited to deferred funding), and preserve relevant information and transaction records.
- Telecommunications enterprises: To implement a real name based system for subscriber registration, and to comply with the notice from the telecommunications authority or the judicial police to verify the identity of subscribers or to stop providing services to specific subscribers.
- Internet advertising platforms of a certain scale:
- To verify the identity of the advertiser and the funder.
- To disclose relevant information (e.g., advertiser and funder information) in advertisements.
- To formulate a fraud prevention plan and issue a fraud prevention transparency report annually.
- To take the initiative or cooperate with the competent authorities or the judicial police to implement fraud prevention measures such as removal or restriction of browsing.
- To establish a quasi business presence in Taiwan: If the enterprise and its representatives do not have a place of business or residence in the R.O.C and have not set up a branch company, a legal representative in the R.O.C should be appointed to assist the enterprise in implementing fraud prevention measures and complying with relevant laws and regulations. Therefore, a foreign internet advertising platform without any Taiwan presence, like a subsidiary or branch in Taiwan, may still be subject to this Act.
- E-commerce industry and online game operators: To comply with the notice of the competent authorities or the judicial police to suspend providing service to users involving fraud crimes.
In addition, internet advertising platforms, e-commerce industry and online game operators shall preserve relevant information sufficient for reconstructing users and individual transactions, and shall provide the relevant information within 3 days of receipt of the notification of access by the court, prosecutor’s office or the judicial police. Although the Act keeps silent on whether other industries have the obligations to provide information, equivalent or similar obligations in relation to other industries may be embodied in or regulated by other relevant laws (e.g. the Code of Criminal Procedure).
After the Act is promulgated, there are still a number of issues that need to be clarified by the relevant competent authorities in the form of further sub-laws to specify the regulated players (e.g. what kind of criteria to determine whether an internet advertising platform has reached “certain scale” and is therefore the subject governed by the Act), relevant standards and enforcement requirements, and it is worthwhile for the relevant industry players to continue to pay attention to the subsequent development.
If there are further questions regarding the impact of the Act on the relevant industries or other needs, please feel free to contact us.
(The article is originally in Chinese which can be found here.)