Sean Liu, Doris Hsu and Lilian Hsu
Contactless transactions and online shopping have increased sales year by year in recent years. This trend accelerated during the COVID-19 pandemic, where people were less willing to step outdoor and more aware of pandemic prevention, leading contactless payment methods to become the primary channel in consumer purchases. Notably, the third-party payment service industry played a pivotal role in transforming and digitalizing consumption models.
Since a payment process involves the cash flow, in order to strengthen money laundry prevention system and enhance consumers’ confidence in third-party payment transactions, the Ministry of Economic Affairs announced on September 27, 110, the draft on “Money Laundry and Terrorist Financing Prevention for Third-Party Payment Services” (‘Draft’). After the Draft goes into effect, it’ll ensure that when the third-party payment services industry provides diversified payment channels for consumers, financial services are prevented from being used as a criminal tool. To achieve the above purpose and comply with the legal obligations, the third-party payment service industry should attend to the following requirements in the Draft.
Firstly, the third-party payment service industry shall confirm its client’s identity (Article 7 of the Draft). This duty shall be performed by identifying and verifying a client’s identity with reliable and independently sourced documents, data, or information, and the result of which shall be recorded and stored. Furthermore, when the clients are a legal person, organization, or trust, one should recognize the nature of their business and obtain any relevant information accordingly to verify their identity. Secondly, the third-party payment businesses shall conduct a continuous audit on their selling clients (Article 9 of the Draft). Such an audit shall be enforced regularly to check the sufficiency of the obtained information for client identification and ensure any such information is updated; this is relevant especially for clients of high-risk sellers, who shall be audited at least once every two years. Finally, these businesses shall report to the Ministry of Justice Investigation Bureau regarding any suspicious transactions (Article 12 of Draft), including situations like when a client fails to provide the reason for its transaction, fraudulent use of a client’s identity or client’s with multiple transactions whose amount is slightly lower than the audit threshold for no apparent reason.
The above regulations specify the methods of interaction between clients and third-party payment services. We suggest third-party payment services conduct list filtering, client auditing, and suspicious transaction detection via establishing appropriate procedures or anti-money laundry systems to strengthen consumers’ trust in third-party payment and corporate governance before the Draft goes into effect.