Evolution of Law against Payment Frauds

Christopher Chen is Associate Professor of Law at the College of Law, National Taiwan University.

‘This book deals with a timely and important subject matter to regulators, policy-makers, consumers, practitioners and society - i.e. payment fraud which, in the electronic age, has taken on new forms and accelerations. The book deals with a range of payment fraud chronicling fraud involving physical monies to today's electronic forms. It provides a well-researched and thorough legal discussion which will prove a very useful resource internationally.’Iris H Chiu, Professor of Corporate Law and Financial Regulation, University College London, U.K."In this excellent book, the author offers an in-depth account of how fraud occurs in payment systems and how technology is paradoxically both an enabler of, as well as an indispensable tool to, controlling fraud. Focusing on selected Asian jurisdictions, the book offers an excellent account of how legal institutions and the law adapt with changing market environment and innovation of fraudsters. The book is indispensable to academic scholars, practitioners, policy-makers and students in considering the best strategies to address fraud in the financial market." Professor WAN Wai Yee, School of Law, City University of Hong Kong.‘This book provides a comprehensive account of the evolution of law against payment frauds, covering a variety of payment methods such as cash, negotiable instruments, card-based payment, electronic payment and cryptocurrencies. It insightfully examines the interaction of law, technology and the payment services market, shedding important light on the various actors who have interacted to shape the relationship, particularly in the new era of Fintech. Highly recommended.’Robin Hui Huang, Professor of Law, Chinese University of Hong Kong‘It is impossible to be a banking and financial law expert without understanding the regulatory framework governing the payment system. It is equally impossible for anyone serious about the development of the contemporary banking and financial industry to research or practice without capturing how new technologies have reshaped the landscape. This book will prove to be an indispensable addition to the library of practitioners, policymakers, and academics in the field.’Han-Wei Liu, Senior Lecturer, Business Law & Taxation, Monash University, Australia

• List of Abbreviations 1 Introduction: The Interaction of Law, Technology and the Payment Services Market Prologue I. General Framework: Technology, Market and Institutional Change II. An Overview: The Interaction of Technology, Financial Services and Fraudulent Activities in the Payment Market A. Payment Process and Payment Services B. Technology and Provision of Payment Services: From Physical to Digital 6C. Technology and Fraud D. Legal Institutions on Payment Services and Fraud E. Summary III. Interested Parties in Adopting Payment Technology and Countering Fraud A. Regulators and Lawmakers B. Financial Institutions C. Telecommunication Firms and Internet Service Providers D. Other Technology Firms and Start-Ups E. End Users and Fraudsters IV. Map of the Book Reference 2 An Overview of the Evolution of Payment Services and Fraud I. Introduction II. Overview of Payment Instruments and Services A. Basic Scenario B. Cash: Coins and Notes C. Negotiable Instruments D. Card-Based Payment E. Wire or Inter-Bank Transfer F. Informal Money Transfer G. Electronic Payment Services H. Cryptocurrencies I. Obstacle to Cross-Border Payment J. Summary III. Payment Fraud: A Broad Overview A. Defining Fraud B. Why Is Fraud Wrong? C. Mechanics of Payment Fraud IV. Chapter Summary Reference 3 From Metal to Paper: Fraud Related to Cash Notes and Coins I. Introduction II. Cash Payment Fraud A. Producing Counterfeit Money B. Using Counterfeit Money III. Legal Institutions Against Cash Fraud A. Criminal Sanctions Related to the Production of Counterfeit Money 1. Criminal Sanctions for the Production of Counterfeit Money 2. Possessing or Making Tools or Materials for Counterfeit Money B. Criminal Sanctions Related to Possession, Transport and Use of Counterfeit Money C. Control Over the Issuance of Money and Security Features IV. Summary and Reflection Reference 4 Fraud in Paper-Based Negotiable Instruments I. Introduction II. Types of Fraud Related to Negotiable Instruments A. Forgery or Alteration of Negotiable Instruments B. Imposters: Unauthorised Issuance or Transfer of Negotiable Instruments 1. Unauthorised Issuance of a Cheque 2. Unauthorised Use of Personal Stamps 3. Fake Signature of Issuer 4. Fake Signature for Endorsement C. Using Fake Negotiable Instruments D. Issuance of Cheques With Insufficient Funds in a Bank Account 1. Issuing a Blank Cheque With No Intention to Meet Payment 2. Making a Payment With a Genuine Cheque but With Low Credibility G. Summary III. Legal Institutions Against Fraud Related to Negotiable Instruments A. Criminal Sanctions for Forgery or Alteration of Negotiable Instruments 1. Forgery 2. Making or Possessing Tools or Materials to Forge or Alter a Negotiable Instrument 3. Criminal Sanctions for Using or Possessing Forged Negotiable Instrument Documents 4. Summary B. General Fraudulence: Penalties for Issuance of a Negotiable Instrument With Insufficient Funds C. Control Through the Banking and Clearing System 1. Customer or Chequing Account Agreement 2. Automated Clearing of Cheques 3. Security Features on Cheques D. Civil Laws Regarding Negotiable Instruments 1. Signature by the Issuer 2. Crossing Out or Parallel Lines IV. Summary and Reflection Reference 5 The Evolution of Fraud Related to Card-Based Payment I. Introduction II. Types of Fraud Involving Cards A. Counterfeit Cards 1. Cloning a Credit or Debit Card 2. Forgery or Alteration of Stored-Value Cards 3. Acquiring Counterfeit Cards and Forging Signatures B. Using a Counterfeit Credit Card C. Unauthorised Use of Cards 1. Unauthorised Use of a Person’s Credit Card With Correct Information 2. Unauthorised Use of Another Person’s Card With a Forged Signature 3. Unauthorised Use of Another Person’s Stored-Value Card D. Acquiring a Credit Card With False InformationE. Fraud in Relation to Card SystemsF. SummaryIII. Legal Institutions Countering Card Fraud A. Criminal Sanctions on Payment Card Fraud 1. Criminal Penalty for Forgery of Cards 2. Criminal Sanctions for Using Forged or Altered Cards 3. Criminal Sanction on the Illegal Acquisition of Card Information B. Anti-Fraud Mechanisms Adopted by Card Issuers 1. Security Measures by Card Associations 2. Banking Regulation on Credit Card Fraud Control3. Self-Regulatory Rules on Banks’ Conduct 4. Regulation for Stored-Value Cards C. Responsibility of Cardholders 1. General 2. Terms and Conditions for Credit or Debit Cards 3. Terms and Conditions for Stored-Value Cards IV. Summary and Reflection Reference 6 From Physical to Digital: Fraud Related to Inter-Bank Transfer and Electronic Payment I. Introduction II. Types of Fraud Related to Electronic Payment A. Imposters: Unauthorised Inter-Bank Transfer 1. Unauthorised Bank Transfer in a Bank Branch 2. False Payment Instruction Made Remotely B. Imposters: Unauthorised Remote Payment With Payment Cards or e-Wallets 1. Unauthorised Transfer by Bank Card 2. Unauthorised Use of Credit Cards Electronically3. Unauthorised Access to e-Wallets 4. Unauthorised Transfer by Misusing ComputerRecords C. Insufficient Fund D. Fraud by Unauthorised Payee E. Fraud for Informal Money Transfer F. Summary III. Legal Institutions Countering Payment Fraud Involving Electronic TransferA. Criminal Sanction Against Abuse of Electronic Payment System B. Regulation of Banks, Payment Services Providers and Payment Systems 1. Banking Regulation on Wire Transfer Regarding Fraud 2. Regulations Specifically for Non-Bank PSPs C. Contractual Approach to Control Fraud 1. Regulating End Users’ Conduct 2. Regulating Merchants’ and Payment Services Providers’ Conduct 3. Contractual Arrangements for Losses due to Fraud 4. Liability Rule and Fraud IV. Summary and Reflection Reference 7 The Future: Payment Fraud in Digital Payment Tokens I. Introduction II. Crypto Payment Fraud A. Counterfeit Digital Payment Tokens B. Unauthorised Transactions C. Fraud by Unauthorised Payee D. Insufficient Funds? E. Summary III. Legal Institutions: Evolution for Digital Payment Tokens A. Potential Criminal Sanctions Against Fraud Regarding Digital Payment Tokens1. Misuse of Computers 2. Forgery and Counterfeit: Recharacterisation of Digital Payment Tokens B. Regulation of Payment Service Providers for Digital Payment Tokens 1. Self-Regulation or On-Chain Governance 2. Regulation of Crypto-Wallet ProvidersC. Contractual Arrangements and Fraud IV. Summary and Reflection Reference 8 Reflection and Conclusion: A Shifting Trend of Anti- Fraud Legal Institutions Recap of Previous Chapters I. Reflection I: Trends in the Interactions of Technology With Payment Services and Fraud II. Reflection II: The Evolution of Legal Institutions Against Payment Fraud A. From Sanction to Monitoring B. From Forgery to Computer and Data Misuse C. Actors of Institutional Change Epilogue Index