Financial Supervisory Commission revises anti-fraud regulations: VASPs are included in cross-industry briefings; scammers’ “virtual currency” can be resold, with proceeds refunded to victims

The Financial Supervisory Commission (FSC) has previewed an amendment to the “Regulations Governing Matters Financial Institutions and Businesses or Personnel Providing Virtual Asset Services Shall Follow in Preventing Fraudulent Crimes and Their Harm,” with four key focuses: establishing a cross-industry inquiry mechanism between financial institutions and VASPs, improving cross-institution fraud-prevention platform requirements, deepening inter-industry joint prevention and reporting between deposit-taking institutions, electronic payment institutions, and VASPs, and clearly stating that VASPs may liquidate virtual assets in flagged accounts and return the proceeds to victims.
(Background: Far Eastern Commercial Bank and the High Prosecutors Office sign an MOU: 95% of the crypto capital flows in Taiwan are brought under anti–money laundering and anti-fraud investigation frameworks.)
(Additional context: The FSC has announced the first batch of 9 compliant virtual asset service providers, and 18 entities have been listed as VASP blacklists for permanent suspension of operations.)

Summary of Key Points

• The FSC amends 52 anti-fraud provisions, adding a cross-industry inquiry mechanism between financial institutions and VASPs to accelerate determining whether an account is involved in fraud
• Establish inter-industry joint prevention and reporting among deposit-taking institutions, electronic payment providers, and VASPs to prevent scam funds from flowing between fiat currency and virtual assets
• VASPs may liquidate remaining virtual assets in flagged accounts and return the proceeds to victims, addressing the problem that victims without virtual asset accounts cannot receive payments

On May 28, Taiwan’s Financial Supervisory Commission (FSC) previewed an amendment to the “Regulations Governing Matters Financial Institutions and Businesses or Personnel Providing Virtual Asset Services Shall Follow in Preventing Fraudulent Crimes and Their Harm.” This is the corresponding amendment to the sub-regulations authorized under the “Fraud Crime Prevention Act” that was revised and promulgated on January 21 this year. The aim is to formally incorporate VASPs (virtual asset service providers) into the cross-industry anti-fraud cooperation framework within the financial system.

This amendment involves a total of 52 revised provisions and 3 newly added provisions. The scale of the legislative changes is relatively large among the FSC’s anti-fraud regulations in recent years. The core goal is to close the gaps in joint prevention between financial institutions and VASPs that existed in the past.

Cross-Industry Inquiry and Joint Prevention Reporting between VASPs and Banks

The first key focus of the amendment is to establish a “cross-industry inquiry mechanism.” This means that financial institutions and VASPs can proactively make inquiries to each other across industry segments to check whether a specific account or transaction is abnormal. The regulations specify the scope of inquiries permitted for each industry, the objects of cross-industry inquiries, and the specific categories of information that must be provided when a party is the subject of an inquiry. This gives industry participants a more solid information basis when assessing potentially suspicious accounts, allowing faster judgments and immediate adoption of control measures.

The second key focus is the “cross-institution fraud-prevention platform.” The amendment stipulates that the institution establishing the platform must apply to the FSC for approval, including the required documents. It also defines the operational matters participating institutions may handle through the platform, as well as the scope within which the platform may collect, process, and utilize customer information of participating institutions, thereby drawing clear legal boundaries between personal data protection and fraud prevention.

The third key focus directly targets a problem from the past: “inter-industry joint prevention reporting” among deposit-taking business institutions, electronic payment institutions, and VASPs. Previously, fraud syndicates took advantage of conversions between legal tender (fiat currency) and virtual assets to launder money. After funds entered exchanges from bank accounts, traditional financial alert and monitoring mechanisms lost the ability to trace further. After the legislative changes, the three parties will establish a joint prevention and reporting mechanism, with the intention of blocking this “gap in joint defense between real and virtual money flows.”

Liquidation and Return of Virtual Assets After Fraud in Flagged Accounts:

The fourth key focus of the amendment concerns a situation where some fraud victims do not have virtual asset accounts at all, meaning they cannot receive proceeds that have been converted into virtual assets after the scam. In addition, because the value of virtual assets fluctuates with market conditions, the longer the delay, the more disadvantageous it is for the victims.

Under this amendment, it is specified that VASPs may liquidate the remaining virtual assets in flagged virtual asset accounts and return the proceeds so that victims can recover the funds in legal tender. This addresses two issues: first, victims do not need to open virtual asset accounts in order to withdraw the fraud proceeds; second, by liquidating promptly to lock in the value, further losses can be avoided during the waiting period before the funds are returned due to market volatility.

The FSC stated that the draft amendment will be published in the Gazette of the Executive Yuan (Administrative Yuan Gazette), and the FSC website will post the general explanation and a table comparing the amended articles with the original provisions. Interested parties may submit comments within 30 days from the day after the draft announcement is published in the Gazette via the FSC’s “Regulation Inquiry System” website.

Frequently Asked Questions

What is the cross-industry inquiry mechanism between VASPs?

Financial institutions and virtual asset service providers (VASPs) may proactively query each other’s specific accounts or transactions to determine whether they are abnormal, speeding up the assessment of whether an account is involved in fraud and enabling immediate control measures.

How are fraudulent virtual assets returned to victims?

After the amendment, VASPs may liquidate the virtual assets in flagged accounts into legal tender and return the proceeds to victims, resolving the issues that victims without virtual asset accounts cannot receive payments and that asset values fluctuate with market conditions.