The maple leaves turning red in Arashiyama, Kyoto creates a pleasant, tranquil atmosphere. Scenic zones with admission fees each offer their own charm and effectively control visitor flows to prevent overcrowding. Their well-maintained layout contrasts sharply with many free tourist spots that often feel chaotic and unclean. This institutional design reflects the benefits of incentive alignment.
Banks have faced controversy over their preventive account-freezing measures, but the Financial Supervisory Commission (FSC) counters that its determination to combat fraud remains unchanged. The FSC has required financial institutions to introduce AI-based precision detection, establish dedicated hotlines for account unlocking, and provide 24-hour unfreezing mechanisms, steering financial services toward a more intelligent and efficient protection model. It notes that the number of account alerts declined for the first time in September 2025.
As fraud schemes continue to evolve, losses have reached alarming levels, peaking at NT$500 million in a single day in 2024. In response, the Legislative Yuan passed the Fraud Crime Prevention Act in July 2024, formally positioning financial institutions on the frontline of fraud prevention, a responsibility of significant weight. The Act strengthens the role of financial institutions and Virtual Asset Service Providers (VASPs) in fraud prevention and ex-ante detection, and imposes a duty of care on them in account monitoring.
As banks begin to feel the effects of this expanded responsibility, many are asking whether they should shoulder the cost of fraud prevention alone. After all, if law enforcement agencies do not always succeed in stopping fraud, can banks in the private sector truly be expected to possess the same judgment and tools? The public also questions this logic: banks do not have judicial authority, so do customers really have a duty to cooperate? Given that the use of a financial account is a personal right, how much control by banks is legitimate?
Account oversight is however critical to financial order, particularly in the fight against fraud. In the past, social governance focused on controlling flows of people and goods, and the corresponding legal frameworks were built accordingly, yet as networked technology has shifted daily life toward the relatively under-regulated domains of information and financial flows, risks have multiplied.
Scammers rely on large numbers of mule accounts to carry out the “layering” phase of money laundering, obscuring the origin and destination of illicit funds. Yet financial supervision has traditionally focused on the financial institutions themselves, most heavily on cross-border remittances.
Recognizing the importance of account controls, several Asian jurisdictions have begun taking bold action. In 2025, the Bank of Thailand and local enforcement agencies required banks to freeze dormant or suspicious accounts. In Vietnam, while not targeting fraud specifically, the government conducted a sweeping cleanup of 86 million accounts as part of its national digital ID initiative.
Account cleanups and suspicious account freezes are essential to combating fraud, but they provoke widespread discomfort, primarily because they create two new types of social cost that did not previously exist.
1. Fraud prevention costs for financial institutions
These costs far exceed the traditional “invisible” expenses associated with account opening and maintenance under financial inclusion policies. Under the Anti-Fraud Act, branches must scrutinize massive volumes of online and offline transactions each day and identify potential victims or money-mule activity. They must exercise judgment earlier than law enforcement agencies, yet still face misunderstandings, customer complaints, and public pressure.
These costs span investments in systems to detect mule accounts (including online banking, mobile banking, branch systems, and new detection modules; internal policies, procedural redesign, and staff training; manpower and workflows for handling disputes and customer complaints; and public relations and reputation risk management.
By 2024, nearly 150,000 accounts had been flagged, not counting derived accounts (held by the same user at other institutions) and pre-alert accounts (flagged by banks due to inactivity or anomalies before any police report). This illustrates the substantial burden banks are already bearing.
2. Cost to customers for unfreezing accounts
While the Anti-Fraud Act aims for early detection, in practice, scammers use accounts primarily for layering transactions. Banks, however, must make judgments based solely on account activity patterns, without the benefit of the investigative tools or procedural powers used by law enforcement agencies. As a result, contested freezes often require customers to submit additional information, which bank staff must then review manually.
The costs to customers include time and effort spent communicating with banks or visiting branches to provide documents; repeated trips due to insufficient information or communication gaps; temporary inability to use accounts, requiring them to borrow cash or make alternative arrangements; and urgent commercial or personal impacts (e.g., merchants may need to redirect customer payments). As banks increasingly enforce mandatory freezes, both categories of social cost grow relentlessly, like a rising tide.
These social costs are rooted in the structure of Taiwan’s financial inclusion. Financial services possess a public welfare dimension and serve as implementation tools for government policies from market stabilization to disaster relief, SME support, and industrial development. This is precisely why the industry requires licensing and intense supervision – yet finance is fundamentally a legal construct: it only functions optimally when guided by proper incentives and values. Inclusion is one such value; by enhancing the accessibility of finance, individuals can improve their lives and industries can grow.
However, Taiwan's financial sector is highly competitive, with limited product differentiation. As a result, financial inclusion has evolved into a public good: services are often provided without fees, and banks absorb many hidden costs of product design, risk control, and customer services. This differs significantly from Western markets, where financial services are explicitly priced. Over time, Taiwan’s public has come to view banking services as free public service, and awareness of responsibility for the financial order has been diminished.
When everything is framed as goodwill, the biggest piece missing from financial inclusion becomes shared responsibility for the financial order. Policies may center the public interest, but they become unrealistic without complementary incentive mechanisms.
In the context of fraud prevention, banks should not view investments in specialized teams, internal processes, detection systems, and post-freeze handling merely as good deeds. Likewise, consumers pay no fees to open or maintain accounts, but they should still bear responsibility for their use. Scammers exploit our system precisely because Taiwan allows free account opening with no maintenance fees, enabling large-scale acquisition of mule accounts at minimal cost.
The Anti-Fraud Act has shifted banks and consumers from beneficiaries of financial inclusion to bearers of substantial social costs. Yet the Act does not include corresponding requirements for bank resource allocation or user obligations, leaving both sides struggling to adapt. For financial inclusion to be sustainable, all stakeholders must share responsibility for financial order, supported by well-designed incentives. For banks, these may include rewards or penalties (e.g., approval of new business lines or fines), reputational incentives (public commendation or censure), and user-side mechanisms could include pricing or mandatory cooperation with investigations. Incentive structures are neither inherently good nor bad, but without them, values become empty slogans, and hidden social costs eventually resurface as heavier burdens or systemic problems.
Just as Arashiyama’s well-designed zoning and crowd-control measures deliver a high-quality visitor experience while attracting large numbers of tourists, true value emerges only when paired with appropriate incentives.
The author has previously served as a prosecutor at the Executive Secretary of the Executive Yuan’s Anti-Money Laundering Office, Vice President of Fubon Financial Holding Co., and founding member of the Hawk-Eye Anti-Fraud Alliance.