A controversy over a contractor backed by Chinese capital upgrading Cathay United Bank’s core credit card system has again stirred concerns about Taiwan’s financial security. The incident not only exposes the weaknesses in how domestic financial institutions vet contractors, but also challenges the government’s regulatory mechanism for overseeing companies in Taiwan backed by Chinese capital.
Last month, local media reported that Any Technology Pvt Ltd (AnyTech) set up a subsidiary in Taiwan and was commissioned by Cathay United to upgrade the bank’s core credit card system. It was later revealed that AnyTech is a Chinese-funded enterprise with a relationship with the Chinese Ministry of Finance.
Cathay United initially dismissed concerns that contact with AnyTech would put clients’ personal information at risk. However, after weeks of revelations about the background of AnyTech and its close ties with Chinese financial institutions and Huawei Technologies Co, the bank on Feb. 24 notified AnyTech that it was terminating their contract early.
Last week, Democratic Progressive Party Legislator Michelle Lin (林楚茵) raised the issue at the legislature, saying that AnyTech posed a major national security risk if it had access to Taiwan’s credit card systems and engaged with local credit card and life insurance businesses.
Minister of Economic Affairs J.W. Kuo (郭智輝) said the ministry would fine AnyTech NT$2.17 million (US$65,682) over national security concerns, pursuant to the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area (台灣地區與大陸地區人民關係條例).
Although Cathay United terminated its contract with AnyTech and said that it had not used its services, it is unclear whether terminating the contract is enough to restore consumers’ confidence in the bank. The core credit card system is highly sensitive infrastructure that involves a large amount of personal information and transaction records. Once the system is accessed by foreign-backed entities, especially companies linked to Chinese government agencies, it would not only affect Taiwanese consumers’ financial security, but also risk leaking financial behavior data.
That type of information is of great strategic value to the Chinese government, should it maliciously attempt to influence Taiwan’s economic order and financial stability. If Beijing were to use the data for financial surveillance or economic warfare, the consequences would be devastating. What raises more worries is the potential that malicious software, such as backdoor programs, could be installed into Cathay United’s core credit card system, allowing it to be controlled remotely by hostile actors.
While the ministry fined AnyTech, that might not be a severe enough penalty, considering that national security and personal information might be compromised. Although companies with ties to the Chinese government or military are barred from investing in Taiwan’s key infrastructure sectors, many such firms are able to circumvent those restrictions. That shows that the review mechanism still has deficiencies.
The government should amend the law to raise the standards for reviewing companies involved in critical infrastructure projects. It must bolster its review mechanism to trace the origins of overseas companies investing in key technology and information systems. It also needs to conduct more stringent scrutiny of firms’ shareholders and capital sources.
The AnyTech incident is not only an issue facing Cathay United, but also a wake-up call for all Taiwanese financial institutions to enhance cybersecurity, establish more complete review mechanisms for contractors and ensure their external partners meet cybersecurity standards, to safeguard consumer rights and national security. The government and businesses must face up to the issue seriously and avoid repeating the same mistakes.
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