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Anti-Fraud: Digital Economy

In response to the increasingly severe issue of fraud, Taiwan announced the draft "Fraud Prevention and Control Bill" on May 9, 2024, co-drafted by various ministries (hereinafter referred to as the "Anti-Fraud Bill"). The most notable aspect of this Bill is the introduction of various legal compliance and law enforcement cooperation requirements for the digital economy industry. The Anti-Fraud Bill specifically addresses four major sectors: "Internet Advertising Platforms," "Third-Party Payment Services," "E-Commerce," and "Online Connection Games." This article will elucidate the relevant rules each industry must adhere to.


 Who Will Be Classified as an "Internet Advertising Platform Operator"?


In the future, any platform that provides paid advertising placements or push notifications on end-user internet platforms (i.e., platforms accessible to the general public), even if only providing partial advertising space, will be classified as an "Internet Advertising Platform Operator." However, the Anti-Fraud Bill considers that internet advertising platforms must have a certain scale to pose systemic risk; thus, only those reaching a specific scale will be subject to the Bill. The exact scale required will be detailed in future implementation rules set by the relevant authorities.


 Compliance Requirements for Internet Advertising Platform Operators


Disclosure of Operator Information 

Internet advertising platform operators must publicly disclose basic information such as the name, business address, telephone number, and email address.


Advertising Content Disclosure 

To provide the public with a basis for judging the authenticity of advertisements, platform operators must label advertisements with "Advertisement," "Information about the Advertiser or Sponsor," "Approval Number (if any)," and "Personal Image Using Deepfake or AI Generation (if any)" when posting or pushing ads.


Designated Representative 

If an internet advertising platform operator does not have a place of business, residence, or branch office in Taiwan, it must designate a legal representative within Taiwan and report the representative's name, address, office, business location, telephone, and email to the competent authority. The legal representative will act as the operator's contact for service of process, notifying, assisting, and accepting commissions to implement anti-fraud compliance measures.


Identity Verification Mechanism 

Internet advertising services should verify the identity of advertisers or sponsors using digital signatures or other identification mechanisms to prevent fraudulent activities. If the advertiser or sponsor is verified and not from a high-risk industry, the platform operator's "Advertising Content Disclosure" requirements can be simplified.


Fraud Prevention Plan and Transparency Report 

Platform operators must annually publish a transparency report on fraud prevention, analyze and assess fraud crime risks, and propose preventive plans. Details on the transparency report, prevention plans, and identification techniques will be specified in future implementation rules.


Immediate Action upon Awareness 

If a platform operator becomes aware that an advertisement clearly involves fraud or is notified by the relevant authorities that it might involve fraud, the operator must take necessary actions such as removal, restricting access, stopping broadcasting, or suspending services within the notified time frame. Additionally, platform operators must provide law enforcement with the advertiser's or sponsor's identity information and related communication software accounts or phone numbers.


Non-compliance, such as failing to remove fraudulent ads or provide information within the time limit, leading to victimization, will result in the platform operator being jointly liable with the advertiser or sponsor for compensation.


Data Retention Obligations 

Platform operators must retain electromagnetic records, user identities, connection records, and transaction records for a specified period, provided it is technically feasible. If required for fraud crime investigation, operators must provide relevant data within three days and retain such data for several months or even years.


Good Samaritan Clause 

While implementing anti-fraud measures under the Anti-Fraud Bill, platform operators are not bound by confidentiality obligations and are not liable for damages to users or third parties when cooperating with enforcement authorities.


 What Are the Penalties?


The Anti-Fraud Bill imposes penalties on internet advertising platform operators for non-compliance, with fines ranging from NT$200,000 to NT$25 million. If the designated representative is negligent, or the operator fails to act upon awareness of fraud, the most severe penalty could be traffic restriction imposed by the competent authority, and public disclosure of the negligent operator's name. Additionally, even without legal violations, the competent authority or law enforcement can stop domain resolution or restrict access to prevent public exposure to fraudulent websites without court authorization.




Editor: Doris Lin, Harvey Huang

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