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Summary of Recent Amendments to Act Governing Electronic Payment Institutions



Summary of Recent Amendments to Act Governing Electronic Payment Institutions
 
In order to promote and improve the competitiveness and the certification system of the electronic payment industry, and to balance the interests of consumers and the stability of the financial market in Taiwan, the Legislative Yuan passed on January 3, 2023 the latest round of amendments to the Act Governing Electronic Payment Institutions (the "Act"), which will take effect after the President's announcement. The main points of these amendments are as follows.
 
I.       Application Documents including Trust Agreement and Performance Guarantee Agreement can be Certified by Attorneys
 
Before Article 11 of the Act was amended, an entity applying for the approval to engage in electronic payment business ("Applicant") must submit relevant supporting documents to the competent authority. Some of the supporting documents, including those describing the Applicant's clearing and settlement mechanism as well as its payment protection measures as well as relevant trust agreement and performance guarantee agreement, must be certified by a certified public accountant, and cannot be certified by an attorney.
 
Nevertheless, given that trust agreements and performance guarantee agreements pertain to matters of law and involve the interpretation and application of relevant laws and regulations such as those on electronic payment business, the Financial Consumer Protection Act, the Trust Act, the Trust Enterprise Act and the Civil Code, an Applicant could better ensure the legality of these documents by having a qualified attorney review them. Therefore, the Act is amended to allow Applicants to submit their attorneys’ legal opinions or memos on such trust agreements and performance guarantee agreements as supporting documents. This means that Applicants not only satisfy the requirements of the competent authority but also have legal professionals' opinions to ensure the completeness and appropriateness of the relevant contracts as well as the legality of their business activities and internal control measures (Subparagraph 12, Paragraph 1, Article 11 of the Act, as amended).
 
II.     Strengthened Supervision over Financial Soundness and Solvency of Electronic Payment Institutions
 
Before Article 38 of the Act was amended, if an electronic payment institution violates the law or its articles of incorporation or if its conduct compromises the soundness of its operation, the competent authority could only impose restrictions on the institution's business activities that are subject to the competent authority's approval, discipline the relevant personnel and implement other necessary measures. The Act did not expressly allow the competent authority to order the institution to set aside a certain amount of reserve or implement a capital increase to help enhance its solvency as provided under Article 61-1 of the Banking Act or Article 149 of the Insurance Act.
 
In this regard, since electronic payment institutions' business activities mainly include collecting and making payments for transactions, accepting deposits of funds as stored value funds, and domestic and foreign small-amount foreign exchange, such activities not only involve the temporary custody of consumer funds but also pertain to the business of foreign exchange, which is closely connected to the interests of consumers and the stability of the financial market. Therefore, with reference to the above-mentioned provisions of the Banking Act and the Insurance Act, the amendment to the Act expands the scope of authority of the competent authority, granting it the power to require electronic payment institutions to set aside a certain amount of reserve or implement a capital increase, thereby strengthening the financial integrity and solvency of electronic payment institutions through the competent authority's exercise of its ex officio duties (Subparagraph 5, Paragraph 1, Article 38 of the Act, as amended).
 
These amendments to the Act are expected to further enhance consumer protection and improve the health of Taiwan’s financial system. Those that decide to engage in electronic payment businesses may consider engaging an attorney to issue legal opinions on the relevant trust agreements and performance guarantees in order to ensure the legality thereof. Furthermore, electronic payment institutions should ensure their financial soundness and solvency when operating related businesses so as to avoid being required by the competent authority to set aside a certain amount of preserve or implement a capital increase.
 
Lee and Li's Digital, TMT and Data Privacy practice group offers planning and consultation services on issues relating to electronic payments, third-party payments and e-commerce. If you have any questions on the amendments to the Act Governing Electronic Payment Institutions or you are planning to operate an electronic payment business, please do not hesitate to contact us.
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