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MODA Holds Third-Party Payment Forum to Improve Regulatory Compliance and Prevent Money Laundering and Fraud

Aimed to enhance collaboration between third-party payment service providers and government agencies, and to prevent such services from being used for fraud and money laundering, a meeting was convened on July 28th by MODA Deputy Minister Lee Huai-Jen. The meeting brought together 10 major domestic third-party payment service providers and government entities including the Ministry of Justice, High Prosecutors Office, National Police Agency, and Investigation Bureau for discussions.

During the meeting, Prosecutor Zheng Zi-Wei from the Ciaotou District Prosecutors Office in Kaohsiung, who handled the first domestic case involving a third-party payment service provider engaged in fraud and money laundering for a gambling group, provided an overview of common crimes in the area. This was intended to raise industry awareness about fraud cases. The prosecutor shared challenges encountered during investigation and offered recommendations on fighting fraud with industry collaboration, such as strengthening customer identity verification for buyers and sellers, implementing financial transaction controls, and establishing real-time communication between prosecutors and industry players. The prosecutor also expressed support for MODA’s recently proposed measures, including the requirement for service providers to register their businesses and sign compliance statements, as well as working with the Financial Supervisory Commission (FSC) and banks for joint prevention schemes.

The third-party payment service providers present at the meeting also shared their fraud prevention efforts. Some mentioned that they rigorously verify the legitimacy of goods sold by the sellers to prevent fraud rings from exploiting their services. In addition to undertaking customer due diligence (CDD) during service applications, they monitor transactions for unusual activities, and alert each other about suspicious customers within affiliated companies. These efforts have been proven effective in reducing the likelihood of their services being used for fraud.

In response to the need for improved collaboration on fraud prevention by law enforcement agencies and industry participants, the MODA announced the following measures:
1. Establishing a collaborative platform for the 10 attending payment service providers to create an alert system for sellers engaging in suspicious transactions. This aims to prevent fraud rings from exploiting information disparities across different platforms.
2. Developing web-based detection tools that allow service providers to regularly monitor their seller customers' web activities for anomalies. This includes identifying cases where third-party payment services are covertly transformed into gambling platforms or channels for selling illicit goods.

Several service providers expressed their desire for similar access to the Joint Credit Information Center services as electronic payment institutions. This would help enhance their KYC measures and deter scammers from using third-party payment services for fraud. The MODA plans to coordinate with the FSC to explore this possibility.

Deputy Minister Li emphasized that the Ministry has devised specific measures in the areas of regulatory compliance, business operations, and administrative assistance, to prevent third-party payment services from becoming tools for money laundering and fraud. On regulatory compliance, the Ministry and FSC have reached an agreement, where the MODA will require designated service providers to register with the Administration for Digital Industries (ADI) under the Money Laundering Control Act (MLCA). Providers that fail to complete the registration might be considered high-risk for money laundering, and banks may terminate their virtual account services.

The Ministry urged third-party payment service providers to register with the ADI promptly, thereby becoming part of the anti-fraud collaborative system. The Administration will assist registered providers in implementing regulatory compliance measures, and providers are encouraged to proactively report suspicious transactions to the Ministry of Justice in accordance with the MLCA.

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