Financial Supervisory Commission Amends Anti-Fraud Statutes: VASP Included in Cross-Industry Notifications, Fraudulent "Virtual Currency" Can Be Sold and Returned to Victims

The Financial Supervisory Commission (FSC) has pre-announced amendments to the "Regulations Governing the Compliance Matters for Financial Institutions and Enterprises or Personnel Providing Virtual Asset Services to Prevent the Harm of Fraud Crimes." The four key points include establishing a cross-industry inquiry mechanism between financial institutions and VASPs, completing the cross-institutional anti-fraud platform regulations, deepening the cross-industry joint defense notification between deposit institutions, electronic payment institutions, and VASPs, and specifying that VASPs may sell off virtual assets in alert accounts and return the proceeds to victims. (Background: Far Eastern International Bank and the High Prosecutors Office signed an MOU: 95% of Taiwan's crypto fund flows incorporated into anti-money laundering and anti-fraud investigation framework) (Background supplement: FSC announces the first batch of 9 compliant virtual asset service providers, with 18 listed on the VASP blacklist permanently suspended) Key Summary - FSC amends 52 articles of anti-fraud subsidiary laws, adding a cross-industry inquiry mechanism between financial institutions and VASPs to accelerate the determination of whether accounts are involved in fraud - Cross-industry joint defense notification established among deposit institutions, electronic payment institutions, and VASPs to block fraudulent funds from flowing between fiat currency and virtual assets - VASPs can sell off virtual assets in alert accounts and return the proceeds to victims, solving the problem of victims without crypto accounts being unable to receive funds Taiwan's Financial Supervisory Commission (FSC) on May 28 pre-announced amendments to the "Regulations Governing the Compliance Matters for Financial Institutions and Enterprises or Personnel Providing Virtual Asset Services to Prevent the Harm of Fraud Crimes." This corresponds to the subsidiary law authorized by the "Fraud Crime Hazard Prevention Act" amended and promulgated on January 21 this year, with the purpose of formally incorporating VASPs (Virtual Asset Service Providers) into the cross-industry anti-fraud collaboration framework of the financial system. This amendment includes a total of 52 revisions and 3 additions. The scale of the amendment is relatively large among the FSC's anti-fraud regulations in recent years, and the core objective is to fill the joint defense gaps that previously existed between financial institutions and VASPs. Cross-Industry Inquiry and Joint Defense Notification Between VASPs and Banks The first key point of the amendment is the establishment of a "cross-industry inquiry mechanism," meaning that financial institutions and VASPs across different industries can proactively inquire with each other to check whether specific accounts or transactions are abnormal. The regulations specify the scope of inquiries that each industry may conduct, the cross-industry inquiry targets, and the data items that should be provided when receiving an inquiry, giving operators a more sufficient information basis when evaluating suspicious accounts, accelerating judgment, and taking control measures in real time. The second key point is the "Cross-Institutional Fraud Crime Prevention Platform." The amendment specifies the documents required for the institutions establishing the platform to apply for FSC approval, the operational items that participating institutions can handle through the platform, and the scope within which the platform may collect, process, and utilize customer information from participating institutions, drawing a clear legal boundary between personal data protection and fraud prevention. The third key point directly addresses previous problems, namely the "cross-industry joint defense notification" between deposit business institutions, electronic payment institutions, and VASPs. In the past, fraud groups would exploit the conversion between fiat currency and virtual assets to launder money. Once funds flowed from bank accounts into exchanges, the traditional financial alert mechanism lost its tracking ability. After the amendment, a joint defense notification mechanism is established among the three parties, aiming to plug this "joint defense gap between real and virtual fund flows." Fraudulent Virtual Assets Can Be Sold Off and Returned: The fourth key point of the amendment: some defrauded victims do not have virtual asset accounts at all and are unable to receive defrauded funds that have already been converted into virtual assets. Additionally, virtual asset values fluctuate with the market, and the longer it drags on, the more disadvantageous it becomes for victims. This amendment specifies that VASPs may sell off the remaining virtual assets in alert virtual asset accounts and then return the proceeds, allowing victims to recover funds in fiat currency. This solves two problems: first, victims do not need to open virtual asset accounts in order to recover defrauded funds; second, by timely selling off to lock in value, it prevents further losses due to market fluctuations during the waiting period for return. The FSC stated that this draft amendment will be published in the Executive Yuan Gazette, and the general explanation and comparison table of the amended articles will be published on the FSC website. All sectors may provide opinions at the FSC's "Regulatory Inquiry System" website within 30 days from the day after the draft pre-announcement is published in the gazette. Frequently Asked Questions What is the VASP cross-industry inquiry mechanism? Financial institutions and Virtual Asset Service Providers (VASPs) can proactively inquire whether specific accounts or transactions of the other party are abnormal, accelerating the determination of whether accounts are involved in fraud and taking control measures in real time. How are fraudulent virtual assets returned to victims? After the amendment, VASPs can sell off virtual assets in alert accounts into fiat currency and return them to victims, solving the problem of victims without crypto accounts being unable to receive funds, as well as asset value fluctuations with the market.