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Overview of Regulations regarding Cross-Border Cooperation in Electronic Payments

Benjamin K. J. Li/Stanley Liu


The Act Governing Electronic Payment Institutions ("Act") was issued by the Executive Yuan to come into force on 3 May 2015. To accommodate Paragraph 2 of Article 14 of the Act that unless with approval from the Financial Supervisory Commission (FSC), nobody may cooperate with foreign institutions or assisting them in engaging in activities within the territory of the Republic of China (ROC) associated with the business of collecting and making payments for real transactions as an agent, the FSC issued the Regulations Governing Cooperating with or Assisting Foreign Institutions in Engaging in Activities Associated with Electronic Payment Institutions Business within the Territory of the ROC (Regulations) on 27 April 2015. The Regulations contain 24 articles and came into force on the same date as the Act. According to the Regulations,electronic payment institutions, banks not concurrently engaging in electronic payment business, financial information service enterprises (currently, the Financial Information Service Co., Ltd.) and data processing service providers duly certified by the Ministry of Economic Affairs (MOEA) may apply for FSC's approval to engage in cross-border cooperation in electronic payment services. According to MOEA official's oral advice, the MOEA no longer issues the Evaluation Qualification Certificate in accordance with the original Evaluation Directions for Data Processing Service Providers Entrusted with Handling Cross-Border Online Transactions since 3 May 2015. Subsequently the MOEA issued the Operation Directions for Data Processing Service Providers Recommended by MOEA in Engaging in the Service of Collecting and Making Payments for Cross-border Online Transactions (Operation Directions) on 4 June 2015. The Operation Directions contain 18 Points and came into force on the same date.
 
As of mid-November 2015, there are two domestic banks approved by the FSC to cooperate with electronic payment institutions of Mainland China to provide cross-border electronic payment services. The regulations on cross-border cooperation in electronic payment services are summarized as follows:
 
1.     The scope and modes of an approved institution cooperating with or assisting foreign institutions in engaging in activities associated with electronic payment business within the territory of the ROC are as follows (Article 4 of the Regulations):
 
(1)       Provide customers with the service of collection and payment of funds to be remitted in or out for cross-border online real transactions;
 
(2)       Provide recipient customers with the service of collecting funds paid by foreign individuals without residence in Taiwan through a foreign institution's payment account for real transactions conducted at physical channels (only electronic payment institutions may apply for approval);
 
(3)       Provide the service of collecting/paying funds withdrawn by a customer from a foreign institution's payment account and remitted into a deposit account at a bank in Taiwan under the name of the customer (only electronic payment institutions and banks not concurrently engaging in electronic payment business may apply for approval);
 
(4)       Provide customers with or accept customer's request to provide the service of foreign exchange settlement and foreign currency remittance for funds remitted in or out in association with services in the preceding three subparagraphs;
 
(5)       Provide financial institutions with the services of carrying out centralized payment process as well as system interfacing, data transmission and exchange with the interbank financial information network for inward or outward remittance of funds associated with services in Subparagraphs 1 to 3 hereof (only financial information service enterprises may apply for approval);
 
(6)       Other related activities approved by the competent authority.
 
Financial information service enterprises are not allowed to apply for approval to provide services under Subparagraphs 1 to 4 above. Where services under the subparagraphs above provided by an approved institution involve foreign exchange, rules and regulations of the Central Bank of the ROC (Taiwan) shall apply.
 
2.     When any institution applies for approval to engage in the above business, it shall not have been subject to any sanction or correction imposed by the competent authority due to violation of relevant regulations in the past year, or if there has been any sanction or correction, it shall have made improvements recognized by the competent authority. In addition, it shall meetthe following conditions (Article 7 of the Regulations):
 
(1)      electronic payment institutions shall have obtained the business license or the permit to engage concurrently in electronic payment business issued by the competent authority;
 
(2)      banks not concurrently engaging in electronic payment business and financial information service enterprises shall have no accumulated deficit as audited and certified by a certified public accountant in the year preceding the application;
 
(3)      data processing service providers shall have provided the service of collecting and making payment of funds for online real transactions as an agent or the third-party payment service for more than one year as well as having no accumulated deficit as audited and certified by a certified public accountant in the year preceding the application.
 
Subject to the conditions under Subparagraph 3 above, a data processing service provider shall comply with the following requirements as well (Points 3 to 7 of the Operation Directions):
 
(1)      be a company limited by shares or a limited company; a foreign company shall be recognized by the ROC government and complete the procedure of branch office registration in the ROC;
 
(2)      open a dedicated deposit account in a bank exclusively for handling payments for transactions of the payment service users;
 
(3)      agreements made and entered into by it and the payment service users shall be in compliance with the Mandatory Provisions to be Included in and Prohibitory Provisions of Standard Form Contract for Online Service of Collecting and Making Payment promulgated by MOEA;
 
(4)      be equipped with sound information security mechanisms and management practices;
 
(5)      comply with the Personal Data Protection Act and the rules and regulations promulgated by relevant competent authorities.

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