FSC Introduces New Anti-Fraud Bill Draft, Cryptocurrency Exchanges Required to Collaborate in Fraud Prevention

The Financial Supervisory Commission (FSC) of Taiwan announced that in order to prevent fraud, combat financial crimes, and protect the rights of victims, the Executive Yuan has formulated the "Prevention of Fraudulent Crime Act" (referred to as the "Anti-Fraud Act"), which was passed by the Legislative Yuan on July 12 this year and officially promulgated by the President on July 31. This law aims to protect the public from financial, telecommunications, and online fraud, with seven articles specifically related to financial institutions and Virtual Asset Service Providers (VASPs).

Financial Supervisory Commission (FSC) Formulates Four Sub-Laws, Financial Institutions and VASPs Required to Cooperate

The Financial Supervisory Commission (FSC) stated that in order to implement the relevant provisions of the "Anti-Fraud Act" related to financial fraud prevention, including Article 8 (fraud prevention measures), Article 9 (reporting mechanism), Article 10 (joint defense mechanism of the police and financial institutions), and Article 11 (return of fraudulently obtained funds to victims), from June to September, they have held discussions with representatives from the financial industry, industry associations, and relevant law enforcement agencies to draft four sub-law proposals to facilitate the smooth implementation of the Act. The specific contents are as follows:

• Sub-law of Article 8: Identification and Referral of Abnormal Account Accounts
  - Criteria for identifying abnormal account accounts.
  - Strengthening customer identification and ongoing review.
  - Specifies items for inter-institutional referrals and related operational procedures.
• Sub-law of Article 9: Data Retention and Management of Abnormal Accounts
  - Regulations on data retention of abnormal account accounts.
  - Procedures for reporting abnormal account accounts to judicial police agencies.
  - Measures for subsequent management and lifting of restrictions.
• Sub-law of Article 10: Reporting Mechanism and Asset Circulation
  - Joint defense reporting mechanism for flagged account accounts.
  - Procedures for circulating and lifting restrictions on fraudulently obtained funds or virtual assets.
  - Joint defense mechanism generated by financial institutions or VASPs upon receiving reports of fraud from the public.
• Sub-law of Article 11: Return of Remaining Funds or Assets
  - Procedures for returning remaining funds or virtual assets in flagged account accounts as notified by the original judicial police agency.
  - Conditions, application documents, and related operational procedures for financial institutions or VASPs to return remaining funds or virtual assets.

The FSC further explained that opinions collected during the draft notice period will be taken into consideration. They will promptly convene a meeting with law enforcement agencies to discuss the sub-law proposals, complete the relevant procedures with the Ministry of Justice and the Ministry of the Interior, revise the content of the sub-law proposals, and are expected to issue these authorized sub-laws by December 30th of this year to ensure the detailed implementation of the "Anti-Fraud Act" and enhance efforts to combat fraud crimes.