White-Collar Crime 2024 Comparisons

Japanese law does not classify offences as misdemeanours and crimes, although there is a Minor Offences Act. The main piece of legislation is the Penal Code, but many statutes include criminal sanctions. The constituent elements of a crime are as follows:

• the act needs to correspond to the statutory definition of a crime; and
• the person who committed the act must have had mens rea – ie, they had the intention to commit a crime or acted negligently.

A crime must also be “illegal” (ie, excluding self-defence, emergency or other justifiable acts).

Attempted offences are only punished for types of crimes for which there is a provision punishing attempts.

Legislation

Main laws and regulation relevant to white-collar crime include the following.

• The Penal Code (PC) contains provisions on white-collar crime, including fraud, misappropriation, breach of trust and theft as basic categories of related crimes.
• The Companies Act (CA) contains provisions on special breaches of trust (a specific category of crime related to corporate fraud) committed by directors and other specified corporate officers. 
• The Financial Instruments and Exchange Act (FIEA) includes:
1. provisions on the requirements for proper disclosure of corporate affairs and the prohibition of misconduct in relation to securities transactions;
2. special civil law provisions concerning breaches of these rules; and
3. provisions on administrative dispositions and criminal punishment.
• The Act on the Punishment of Organised Crime and the Control of Criminal Proceeds (APOC) contains provisions on special categories of crimes by organised crime and on the concealment, receipt and confiscation of the proceeds of crimes.

Corporate Fraud Offences

Main offences relevant to white-collar crime include the following.

Fraud (Article 246, PC)

This involves defrauding someone and causing such person to deliver property. Many types of fraudulent acts qualify as crimes. Attempts are punishable.

Theft (Article 235, PC)

This consists of stealing property. Withdrawing money from ATMs using an illegally obtained cash card is a crime. Attempts are punishable. 

General breach of trust and special breach of trust (Article 247, PC)

This is committed by an individual responsible for the affairs of another for the purpose of promoting their own interest and/or the interest of third parties, or inflicting damage on someone or on someone’s property in breach of their duties. Certain forms of misconduct committed by officers and employees of financial institutions may constitute a breach of trust. When committed by directors, etc, such conduct may be a “special breach of trust” (Article 960, CA). Attempts are punishable.

Misappropriation (embezzlement during business activities) (Article 253, PC)

This entails embezzlement by one person of the property of another in the course of business. Certain forms of misconduct by officers and employees of financial institutions may constitute such a crime.

Misconduct in relation to securities transactions (Article 197, FIEA)

This includes the use of illegal means that can involve making false statements on important matters, spreading rumours and using fraudulent means, or other similar acts in relation to securities transactions. Companies can also be punished for this crime. Attempts are not punishable.

Infringement of trade secrets (Article 21, Unfair Competition Prevention Act)

Obtaining trade secrets through fraudulent acts to make wrongful gains and other related misconduct can constitute an offence. Certain attempts are punishable.

Unauthorised computer access (Articles 2–4 and 11, Act on Prohibition of Unauthorised Computer Access (APUCA))

Unauthorised computer access using another person’s ID and password without the permission of the administrator or authorised user can constitute an offence. Attempts are not punishable.

Providing or using a personal information database without permission for unlawful purposes (Article 179, Act on the Protection of Personal Information)

This occurs when a personal information database is provided or misappropriated/used without permission for unlawful purposes by a personal information-handling business operator. Attempts are not punishable.

Tax evasion (Article 159, Corporation Tax Act)

Tax evasion through wrongful acts can constitute an offence.

Misleading representation (Articles 5, 7 and 36, Act Against Unjustifiable Premiums and Misleading Representations)

Misleading the general public/consumers into believing that a product is significantly superior to other products or that the price or other terms are significantly more favourable than those of competitors (or than they actually are), and failing to comply with a cease-and-desist order, etc, from the supervisory authority, can constitute an offence. Attempts are not punishable.

Further Offences

Sanctions against white-collar crime also apply to the following offences:

• counterfeiting of private documents (Article 159, PC) involves the use of documentation in the name of a company without the necessary authority;
• false entries in original notarised deeds (Article 157, PC) involves making an application to register fake directors (or the filing of other matters subject to registration), which causes the registration office to register false information; and
• obstruction of business using fraudulent means (Article 233, PC) is punishable.

All said crimes require intent. To secure the conviction of a company or an individual, the public prosecutor must prove the occurrence of the criminal act and criminal intent beyond reasonable doubt.

The burden of proof lies with the prosecutors who must prove in court that the defendant has committed the crime – that is, a court will acquit the defendant unless the prosecutor proves beyond reasonable doubt that the defendant has committed the crime for which they were indicted (Article 336, Code of Criminal Procedure (CCP), and Article 31 of the Constitution). There is no statutory presumption mechanism beyond deductions and inferences through case-by-case fact-finding by the court.

With regard to administrative sanctions, an administrative disposition is valid unless rescinded by the court, so the person who received the disposition needs to file a lawsuit. There is no general rule regarding the burden of proof in administrative litigation, which is determined on an individual legal basis. The standard of proof has been expressed as the “certainty of veracity to such an extent that an ordinary person would not raise doubts.”

The limitation period depends on the type of crime and amount of statutory penalty (Article 250, CCP) and ranges from one to 30 years (except for offences punishable by death). The limitation period starts running when the criminal act stops (Article 253, CCP). Where accomplices are involved, the period starts from when the last criminal act committed by an accomplice has ceased (Article 253, CCP). If the offender is abroad, the limitation period is tolled during their time abroad (Article 255, CCP). 

Article 55 clarifies the calculation method for limitation periods under the CCP.

In general, laws and regulations do not apply to the activities of foreign companies outside Japan as their territorial scope should be limited to Japan. However, the PC provides that it may apply to a person who commits certain categories of serious crime outside Japan. If only part of the act or the result of a crime occurs in Japan, it is considered as a “crime occurring in Japan” and the PC may apply if a fraudulent act causes a damage to a resident of Japan.

By contrast, the extraterritorial application of administrative powers is generally not specified. Japanese administrative laws and regulations may generally apply to acts outside Japan if they affect, or have consequences for, persons and properties in Japan.

Co-operation

Evidence for criminal cases in Japan can be obtained from foreign countries based on a treaty or agreement regarding mutual legal assistance in criminal matters (eg, agreements with the USA, South Korea, China, Hong Kong, the EU, Russia and Vietnam, except for cases that do not constitute a crime under the laws of these countries). For foreign countries without a treaty or agreement, co-operation occurs through diplomatic channels based on the reciprocity principle (Act on International Assistance in Investigation and Other Related Matters).

Assets derived from criminal activities can be seized in a foreign jurisdiction based on treaties or agreements and through diplomatic channels. Japan has concluded and ratified the United Nations Convention against Transnational Organized Crime, which allows for requests for assistance relating to organised crime between authorities in signatory countries, without going through diplomatic channels.

Administrative authorities usually share information on a bilateral and multilateral basis.

Blocking Statute

No statute clearly and explicitly blocks the assertion of foreign jurisdictions within Japan, while the Act on International Assistance in Investigation and Related Matters lists matters in respect of which assistance is not provided (blocking statutes).

Extradition

The Japanese government has entered into extradition treaties with the USA and Korea. There are multilateral treaties with provisions on extradition to which Japan is a party, such as the United Nations Convention against Transnational Organized Crime and the United Nations Convention against Corruption.

The Extradition Act serves as implementing legislation. It allows the Minister of Justice to decide on the extradition of fugitive criminals (even voluntarily) subject to review by the Tokyo High Court, except in prescribed cases.

In principle, only individuals are criminally liable under Japanese law, and most related crimes are covered by the PC without dealing with legal entities. A legal entity can only be held criminally liable if there is a specific statutory provision (Article 8, PC; the dual-liability provision).

A legal entity can be punished by a fine only after it has been proved that one of its officers or employees has committed a specific crime in connection with the business of that legal entity. While it is possible to punish legal entities only without punishing individuals (provided the individual’s offence is proven), there is no clear policy. In a merger context, it is understood that the criminal liability of the dissolving company cannot be assumed by the surviving company.

Administrative sanctions (eg, administrative monetary penalties) can be imposed on legal entities without a dual-liability provision (eg, under the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade, or AMA).

The court is responsible for setting the punishment within the parameters set by the applicable statutes at its discretion, taking into consideration various factors, such as:

• how the defendant committed the crime;
• the seriousness of the damage;
• the motive;
• the defendant’s criminal record;
• whether the defendant has compensated for the damage; and
• whether the defendant is remorseful.

The court may render suspended sentences if certain conditions are met – eg, if the defendant is a first-time offender and is sentenced to imprisonment of not more than three years (Chapter 4, PC).

Although the range of parameters is wide, there are no clear guidelines or standards. However, owing in part to the availability of sufficient data on past sentences, punishments in similar cases have so far not significantly varied in Japan.

As part of the sentencing procedure, after the examination of the evidence, the prosecutors must state their opinion, including the sentence, and the defendants and their attorneys can also state their opinions (Article 293, CCP). The court is not bound by these opinions, but in practice a more lenient sentence than that suggested by the prosecutor is often handed down.

There are no rules or guidelines governing the assessment of penalties if a deferred prosecution agreement, non-prosecution agreement or plea agreement is reached.

Civil Remedies

Victims of white-collar offences may seek remedies if the offender’s actions constitute a tort under the Civil Code (Article 709). Proceedings are generally initiated before the district court as the court of first instance, depending on the severity of the matter (otherwise, the summary court for petty claims). Civil proceedings are conducted separately from white-collar crime cases.

The Crime Victims Protection Act allows victims to inspect and copy case records after the first trial date until the conclusion of the case, unless the request is not justified. Theoretically, contractual liability and unjust enrichment can be pursued as civil remedies, but when the issue is whether a white-collar crime has been committed, it is usually sufficient to seek tortious liability. However, there are cases in which contractual liability should be pursued owing to the statute of limitations.

Remission Scheme Against Organised Crime

Property directly damaged by a crime and seized will generally be returned by the court or prosecutor’s office after the conclusion of the criminal case. However, it is difficult to return property that cannot be identified as belonging to the victim or others.

In principle, property extorted from a victim as a result of a crime or property derived therefrom is not confiscated (Article 19-2, PC; Article 13, APOC). However, when it is difficult to exercise the right to claim against the offender given the nature of the crime (eg, when committed in an organised manner such as by a gang), or when it is difficult to exercise the right to claim owing to disguised or concealed facts, confiscation of the stolen property (tangible or intangible) is permitted.

Under a restitution order system concerning the confiscation of the proceeds of crime and the collection of sums equivalent thereto, the prosecutor’s office can conduct procedures to issue remission payments to victims, etc, from confiscated or forcibly collected property, based on the Act on Issuance of Remission Payments Using Stolen and Misappropriated Property.

In addition, when a current deposit account used for criminal purposes is frozen, the DIC and the bank where such deposit account is opened may take the initiative of distributing the funds from such account to the victims (Act on Payment of Damage Recovery Benefits From Funds in Deposit Accounts Used for Crime).

Class Actions

US-style class actions are not available in Japan. However, certain consumer organisations certified by the Prime Minister (the Secretary-General of the Consumer Affairs Agency) may file actions against business operators to request injunctions to end or prevent violations of the Consumer Contract Act committed by business operators against many unspecified individuals.

Furthermore, those organisations that are specifically certified are entitled to file actions for the “confirmation of common obligations” and to take judicial action to ascertain the rights of such consumers. However, they cannot represent consumers without their individual consent.

Two main types of authorities are involved in the investigation and prosecution of white-collar offences and in the enforcement of sanctions. The enforcement powers of prosecutors and administrative authorities exist in parallel without hierarchy. However, the prosecutors generally wait for the administrative authorities to file an accusation before prosecuting violations of administrative laws and requesting sanctions.

Authorities With Powers Over Criminal Cases

The authorities with powers over criminal cases are the police and the public prosecutor’s office. They have the power to conduct compulsory investigations, but often make enquiries or interview suspects on a voluntary basis. On top of the principal sentence for a criminal offence, the courts may confiscate the proceeds of crime or collect the cash equivalent. Certain drug-related proceeds are subject to mandatory forfeiture or collection. The public prosecutor’s office has established special investigation departments in Tokyo, Osaka and Nagoya, and the police also have special divisions, though there is no special court for white-collar crimes.

Authorities With Powers Under Administrative Laws and Regulations

Ministries and agencies have authority under administrative laws and regulations.

White-collar crimes are often dealt with by the financial authorities. They have regulatory authority over financial institutions (including banks, insurance companies and securities companies) to ask questions, conduct site inspections and order the submission of reports and materials. They generally conduct investigations into financial institutions on a voluntary basis to compel them to improve their business procedures in accordance with applicable laws and administrative guidance. 

The Financial Services Agency of Japan (FSA) is responsible for ensuring the stability of the financial system, protecting investors and carrying out surveillance over securities transactions. The Securities and Exchange Surveillance Commission (SESC) is entrusted by the FSA with daily market surveillance, inspections of securities firms, inspections of disclosure documents and related activities.

The Japan Fair Trade Commission (JFTC, the Japanese competition watchdog) is also important as an administrative authority with respect to white-collar offences and cases involving infringements of the AMA.

Various ministries and agencies deal with money laundering, including the National Police Agency, the FSA, the Ministry of Finance and the Ministry of Justice.

The Consumer Affairs Agency has general regulatory authority over misleading labelling; and the competent authorities for individual laws regulating labelling and advertising in specific fields (eg, the Pharmaceutical Affairs Law) are also regulatory authorities.

For violations of administrative regulations, penalties are often prescribed instead of administrative sanctions. When the administrative authorities believe that a crime has been committed with respect to the laws and regulations under their jurisdiction, they must press charges with the investigative authorities.

Administrative Sanctions

Non-compliance with administrative regulations may give rise to administrative sanctions, including:

• cancellation of an entity’s business licence;
• suspension of all or part of a business;
• business improvement and reporting; and
• administrative fines (karyo) or surcharges (kachokin).

In general, the authorities mentioned in 2.1 White-Collar Enforcement Authorities have discretion to initiate an investigation. No specific law generally deals with the initiation of investigations, even though the Act on Prohibition of Private Monopolisation and the Maintenance of Fair Trade Act require the authorities to initiate an investigation when they accept a report (Article 45 of the AMA). The Administrative Procedure Act (eg, for notice hearings) does not apply to investigations directly aimed at gathering information.

Power to Conduct Searches and to Compel Disclosure

In principle, in criminal cases, having obtained a warrant issued by a court (Article 218, CCP), the police or public prosecutors have the power to conduct the necessary searches (including obtaining evidence). The requirement is broad: “when necessary in connection with the investigation of a crime”. Requests for hearings and submissions can also be made on a voluntary basis (Article 197, CCP). Rejection of a request may trigger an arrest if there is any suspicion. Public offices or public or private organisations may be asked to make a report on necessary matters relating to the investigation. 

The administrative authorities of licensed enterprises (eg, the FSA) usually have the power to conduct on-site inspections. The requirement is broad, as in the case of criminal investigations (eg, an inspection of a bank “when it is deemed necessary to ensure the sound and proper operation of the bank’s business”). Administrative agencies cannot use force to conduct investigations, but any avoidance or prevention/blocking of an on-site inspection usually constitutes a crime.

It is often difficult for enterprises to file an action to revoke administrative dispositions, and an investigation cannot end until the court decides to revoke or suspend it. As an alternative to a compulsory investigation, the administrative authorities often ask the relevant enterprises to submit information on a voluntary basis, while a formal report submission order is issued in cases that have attracted public attention.

The administrative authorities can decide to conduct a dawn raid (a customary JFTC practice in cartel investigations), especially when they have concerns about the destruction or concealment of evidence.

Questioning Powers, etc

In criminal cases, the police or public prosecutors can interrogate suspects arrested or detained with a warrant issued by a court (Article 198, CCP). The requirement for arrest is “when there is probable cause to suspect that the suspect has committed a crime” (Article 199, CCP). They can also interview suspects on a voluntary basis (Article 197, CCP).

Plea bargaining (limited to cases involving the criminal conduct of third parties, as opposed to one’s own) was introduced relatively recently (Article 350-2 et seq, CCP) and prosecutors can grant immunity from prosecution to a witness, although the courts tend to scrutinise the credibility of their testimony and there have only been very few cases.

Arrest and detention are made to prevent escape and the destruction of evidence, and are a means of furthering criminal investigations. They are also used by the police and prosecutors to interrogate suspects and defendants.

The administrative authorities supervising licensed enterprises (eg, the FSA) usually have the power to ask questions and order the submission of reports. The requirements and sanctions for non-compliance are generally the same as for administrative inspections. The administrative authorities often interview and monitor enterprises on a voluntary basis.

In criminal cases, the suspects and the accused have:

• the right to remain silent (Article 198, CCP); and 
• the right to confidential communication with a defence attorney (Article 39, CCP). 

These rights are based on the Constitution. However, attorney-client privilege is not recognised under Japanese law in a criminal context, although attorneys have the right to object to the seizure of documents, etc, pertaining to their client. In practice, attorneys are not allowed to attend the interrogation of suspects during criminal investigations.

Unlawfully obtained evidence may be excluded by a court, taking into account the seriousness of the illegality and the necessity of preventing procedural violations and solving cases. Appeals against the retention or seizure of evidence can be filed with a court (Article 430, CCP).

Attorney-client privilege is not available throughout examinations conducted by the administrative authorities, with the exception of cartel matters under the AMA and related JFTC guidelines. In practice, the administrative authorities do not permit counsel to be present at such examinations.

Power of Arrest and Detention, and Relief

See Questioning Powers, etc above. An appeal may be filed against a detention order (Article 429, CCP). The period of arrest is up to 72 hours, and the period of detention is up to 20 days. There is no right to bail before indictment. When indictment takes place during detention, detention continues after the indictment and can be renewed if deemed necessary by the court. The same applies to cases in which a person is detained after indictment.

The defendant may be entitled to bail with limited exceptions, in particular when there is reasonable cause to suspect that the accused may conceal or destroy evidence (Article 89, CCP). A court can also allow a defendant to post bail on its own authority when it deems it appropriate (Article 90, CCP). In 2023, in order to prevent defendants on bail from absconding, the CCP was amended to include:

-penalties for failure to appear;

-reporting orders;

-the appointment of a supervisor; and

-orders to install GPS.

Not all these provisions have come into force.

Directors’ Duty of Care

There is no specific statutory or regulatory obligation to conduct an internal investigation under Japanese law, even if there is suspicion of wrongdoing. However, a director’s duty of care to a company could prompt senior management to commence internal investigations. Under the Companies Act, if a director fails to investigate despite being aware of the possibility of misconduct, the director may be found to be in breach of their duty to mitigate losses or damage suffered by the company.   

In addition, industry-specific statutes or regulations may indirectly compel a company to conduct investigations. For example, when a pharmaceutical company becomes aware of issues relating to the efficacy or safety of its pharmaceutical products, it must report the issue to the authorities, and an investigation (even preliminary) must be conducted.

Self-Regulated Organisations

Self-regulated organisations, such as the Japan Exchange Regulation (JPX-R) have established their own guidelines concerning the obligations of listed companies to try to conduct investigations when they become aware of misconduct.

Reports to the FSA

Most regulated firms supervised by the FSA (banks, insurance companies and securities companies) are required to file a report with the FSA when they become aware of a prescribed incident of misconduct, which must include a “summary of the incident”, “analysis of factors leading to occurrence”, “matters addressed” and “details of personnel action”.

Only public prosecutors have the authority to prosecute (Article 247, CCP). In most cases, prosecutors ultimately decide to prosecute criminal cases based on the results of a police investigation. However, prosecutors may proceed with investigations independently. If the administrative authorities become aware of the existence of a crime in connection with the relevant laws and regulations under their jurisdiction, they must file a complaint in relation to the crime with the police or the prosecutor’s office.

The prosecutor’s office decides at its discretion whether to prosecute by taking the following into consideration (for example):

• the possibility of proving the offender’s guilt;
• the severity of the damage; and
• the conclusion of a settlement or the chances of reaching one.

However, a criminal case will be commenced if the Committee for the Inquest of Prosecution resolves that the case should be prosecuted, even if the prosecutor has decided otherwise. 

There are no clear prosecution rules or guidelines.

Under the CCP, there is no deferred prosecution system or non-prosecution agreement scheme; however, see 4.3 Plea Agreements, Co-operation, Self-Disclosure and Leniency.

See 1.1 Criminal Offences. In addition to the offences covered by the PC and other laws, the CA also imposes sanctions against the fraudulent activities of corporate officers and employees. The CA specifies many types of corporate crime, including the following.

Special (Aggravated) Breach of Trust

A director can be criminally liable for aggravated breach of trust under the CA if they breach their duties for the purpose of unduly seeking their own benefit or in the interest of a third party, or to inflict damage on the company’s assets (imprisonment of up to ten years and/or a fine not exceeding JPY10 million).

Endangering a Company’s Assets

This includes:

• making false statements or concealing facts about the company’s capitalisation or subscription payments (imprisonment of up to five years and/or a fine of up to JPY5 million);
• acquiring shares unlawfully at the company’s expense;
• distributing a dividend in breach of the law; and
• disposing of corporate assets in speculative transactions outside the scope of the corporate objects.

Other CA Offences

These include:

• using false documentation;
• disguising capital contributions through borrowings; 
• providing consideration for the exercise of shareholders’ rights; and
• bribery (a director can be criminally liable for giving or accepting a bribe under the CA if they accept, solicit or promise to accept property benefits in connection with corporate duties in response to a wrongful request).

Fraud and embezzlement are covered by the PC.

General

In Japan, various statutes prohibit bribery and classify it as a crime:

• the PC sets out the general prohibition on bribery of Japanese public officers;
• the CA prohibits bribery with respect to directors;
• the Unfair Competition Prevention Act (UCPA) prohibits the bribery of foreign public officers; and
• the Act on Punishment of Public Officials’ Profiting by Exerting Influence prohibits the bribery of members of parliament, the diet, etc.

In addition, the Political Funds Control Act and the Public Officers Election Act regulate political contributions. 

The National Service Act and the National Public Service Ethics Act regulate the conduct of national public servants and their receipt of benefits from certain persons and organisations. The National Public Service Ethics Board provides guidance in the code of ethics for national public officials regarding permissible gifts, hospitality and other business courtesies, and concerning facilitation payments in an administrative disciplinary context. 

Public Officials

The PC prohibits a public official from accepting, soliciting or promising to accept a bribe in connection with their duties. It also prohibits a person from giving, offering or promising to give a bribe to a public official. Employees of State-owned or State-controlled entities, such as the Bank of Japan, national universities and Japan Tobacco, are usually deemed to be public officials and are subject to the bribery provisions of the PC, or to similar provisions under special laws. Intention to commit the offence (awareness of the bribe) is required.

Unless otherwise provided, the maximum prison term for a person found guilty of bribery is 20 years under the PC. A public officer found guilty of receiving a bribe, excluding specified offences, may be punished with imprisonment with work for a term of not more than five years. For the specified offences, acceptance of a bribe on request by a public officer may be punished with imprisonment with work for not more than seven years, and if the public officer consequently acts illegally or refrains from acting in the exercise of their duty, the prison term will be aggravated by one to 20 years. A person found guilty of giving, offering or promising to give a bribe may be punished with imprisonment with work for not more than three years or a fine of not more than JPY2.5 million. 

A person who jointly commits the crime of bribery or induces another to do so may be punished as severely as the principal. A person who is merely an accessory to its commission is subject to a lesser punishment.

Foreign Public Officials

Japan amended the UCPA in 1998 (criminalising the bribery of foreign public officials in international business transactions) to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, to which Japan became a party in 1998.

The UCPA prohibits the payment of bribes to foreign public officials for the purpose of having them act or refrain from acting in a particular way in relation to their duties, or of having them use their position to influence another foreign public official to act or refrain from acting in a particular way to make illicit gains from international business transactions (Article 18(1)).

A violation of the UCPA is subject to imprisonment of up to ten years and/or a fine of up to JPY30 million. If an individual who violates the UCPA’s foreign bribery provision is an employee, agent, officer or director of a company and the bribe is made in connection with the company’s business, the company can be subject to a fine of up to JPY1 billion. 

The Ministry of Economy, Trade and Industry (METI) has published best practice guidelines entitled “Guidelines for the Prevention of Bribery of Foreign Public Officials”.

Private Commercial Bribery

No general law prohibits commercial bribery among private persons. However, bribery of board members of companies is a crime under the CA. Directors or statutory auditors are prohibited from accepting or soliciting property benefits in connection with their duties, and those who have provided, offered or promised to give such benefits will be punished. The CA also makes bribery or the provision or request of benefits regarding the exercise of shareholders’ rights a crime. 

Specific laws regulate the provision of advantages or benefits between private parties. For example, the FIEA generally prohibits Financial Instruments and Exchange Business Operators (FIEBOs), such as securities companies and banks, from providing property benefits to clients to make up for losses in securities or derivatives transactions.

The Cabinet Office Ordinance on financial instruments and exchange business restricts FIEBOs and their officers or employees from providing a special advantage to clients. The Ordinance also restricts the staff of registered credit-rating agencies (CRAs) from receiving, demanding or accepting an offer of money or goods that exceeds JPY3,000 per case from their clients in general. No criminal punishment sanctions these acts. However, FIEBOs or CRAs may be subject to administrative action by the regulator.

No statute imposes a specific obligation to prevent bribery and influence peddling. There is no obligation to maintain a compliance programme to prevent bribery. However, the CA requires the directors of a company to establish internal control systems, including a system to prevent unlawful conduct. Failure to do so constitutes a breach of a director’s duty of care. 

There is no systematic market practice in combating corruption and corporate crime. However, most, if not all, listed companies in Japan have established or strengthened their internal control systems and compliance procedures by, for example:

• rolling out in-house education and training courses;
• strengthening internal audit rules;
• increasing audit frequency; and
• setting up credible whistle-blowing systems and hotlines.

Insider Trading

The FIEA prohibits:

• insider trading (Articles 166 and 167);
• unfair trading (Article 157);
• spreading rumours, using fraudulent means and committing assault or intimidation (Article 158); and
• market manipulation (collectively referred to as “market abuse”) (Article 159).

Regulatory Authorities and Guidelines

The regulatory and supervisory authorities relevant to insider trading and market abuse are the FSA and the SESC (see 2.1 White-Collar Enforcement Authorities). 

The FSA and SESC periodically issue and update guidelines relating to the FIEA. Several self-regulatory organisations, such as the Japan Exchange Regulation (JPX), the Japan Securities Dealers Association (JSDA) and the Japan Investment Advisers Association (JIAA), publish self-regulatory guidelines for the prevention of insider trading.

Offences

Insider trading offences under the FIEA include the following.

Insider trading by a corporate insider (Article 166)

A person listed below (“Corporate Insider”) who has come to know of a “Material Fact” pertaining to the business or other matters of a listed company or a listed investment company (collectively, “Listed Company”), or of a subsidiary of a listed company or an asset management company of a listed investment company, and who makes a sale, purchase or other transfer for value or agrees to a transfer for value of shares of the Listed Company before the Material Fact is publicised, violates the FIEA insider trading rules.

“Corporate Insider” includes:

• 1) an officer, agent, employee or other worker (“Officer”) of the Listed Company (including its parent company and subsidiaries, as well as asset management companies or specified associated companies of a listed investment company) who has come to know of a Material Fact in the course of their duties;
• 2) a shareholder entitled to inspect accounting books of the Listed Company who has come to know of a Material Fact during an inspection;
• 3) an investor of the listed investment company or an investor of the parent investment company who is entitled to inspect accounting books of the listed investment company, who has come to know of a Material Fact during an inspection;
• 4) a person with statutory authority over a Listed Company who has come to know of a Material Fact in the course of the exercise of such authority (eg, a public officer with the statutory authority to grant permissions and initiate investigations or inspections);
• 5) a person who has concluded or is negotiating a contract with the Listed Company and who has come to know of a Material Fact during the conclusion, negotiation or performance of the contract;
• 6) an officer of a juridical person listed in item 2), 3) or 5), who has come to know of a Material Fact in the course of their duties; 
• 7) a person who has ceased to be a person listed in items 1) to 6) for less than a year;
• 8) a person who has received information on a Material Fact, from a person listed in items 1) to 7); and
• 9) an officer of a juridical person who has received information on a Material Fact in the course of their duties from a person referred to in item 8) belonging to the same juridical person. 

“Material Fact” includes:

• a decision by the organ of the Listed Company that is responsible for making decisions on the execution of the operations of the Listed Company  regarding certain important matters;
• the occurrence of certain important facts in the Listed Company;
• the existence of a significant difference with the latest publicised forecasts of sales, current profits, net income and dividend of the Listed Company; and
• any other important matters that would have a significant influence on investors’ decisions (catch-all clause).

Decisions, occurrences, differences in settlement of account information, and the matters covered by the catch-all clause (similar to the above) with respect to the subsidiaries of the Listed Company, and decisions and occurrences with respect to the asset management company of a listed investment company, also constitute Material Facts.

Insider trading in connection with a tender offer (Article 167)

The same punishment for insider trading by a Corporate Insider will be imposed on a person who has come to know of a fact concerning the launching or suspension of:

• a tender offer; or 
• the purchase of 5% or more of the voting rights of a Listed Company (collectively, a “Tender Offer”). 

Communicating information and advising on transactions (Article 167-2)

A Corporate Insider aware of a Material Fact must not inform another person of such Material Fact and must not advise another person to sell or purchase stock of the subject listed company, for the purpose of allowing such other person to make profits or avoid losses, before such Material Fact is publicised. If such other person commits insider trading after receiving said information or advice, the person who provided information on such Material Fact or the advice will be punished.

Insider trading offences are not strict liability offences in terms of criminal liability. Criminal intent by the person who has committed the insider trading offence must  be established. Attempts to commit insider trading are not punishable. Insider trading actions can be brought against individuals and corporate bodies.

Penalties

Insider trading can lead to imprisonment of up to five years and/or a maximum fine of JPY5 million (Article 197-2(13), (14) and (15)). The property/earnings gained through insider trading will be confiscated and any shortfall will be collected from the offender (Article 198-2). If committed by its representative, agent or employee, a company can be punished with a maximum fine of JPY500 million (Article 207(1)(ii)). 

The FSA may order a person who commits insider trading or a person who violates the above-mentioned regulation regarding the communication of information to pay an administrative surcharge (Article 175-1 and 175-2).

Market Abuse

The FIEA (Article 157) prohibits:

• the use of wrongful means, schemes or techniques regarding the sale and purchase of securities or other securities transactions, etc; 
• the acquisition of money or other property by misrepresenting important matters or omitting important matters necessary to avoid a misunderstanding regarding the sale and purchase of securities, other securities transactions, etc; and
• the use of false quotations in order to induce sales, purchases or other securities transactions, etc.

Article 158 prohibits spreading rumours or using fraudulent means, assault or intimidation for the purpose of:

• carrying out sales and purchases of securities or other transactions regarding securities; or
• causing quotations to fluctuate.

The FIEA prohibits market manipulation. The main acts prohibited as such (Article 159) include the following.

• Conducting a series of trades that mislead other investors into thinking that the trading of a listed security is active, to create an environment in which other investors want to trade in said security (“intention to solicit”). Also, conducting a series of trades to influence the market price of the security for the same purpose is prohibited.
• Making trades without intending to effect a transfer of rights (“wash sales”) or conspiring with others on certain trades (“collusive trading”) for the purpose of misleading other investors regarding the overall trading environment, such as leading them to believe trading is active.

Penalties

A person who commits market abuse can be punished by imprisonment of up to ten years and/or a maximum fine of JPY10 million (Article 197(1)(v)).

A person who commits market abuse and sells or purchases securities at prices that are the result of market abuse, with the intention of making economic gains, can be punished by imprisonment of up to ten years and a maximum fine of JPY30 million (Article 197(2)).

The property/earnings gained through market abuse will be confiscated and any shortfall will be collected from the offender (Article 198-2). If the violation is committed by its representative, agent or employee, a company can be punished with a fine of up to JPY700 million (Article 207(1)(i)).

In addition, the FSA may order a person who commits administrative market abuse to pay a fine under the FIEA (Article 174-1 and 174-2).

Tax evasion is punishable under the law applicable to each type of tax. If a taxpayer under-reports its payable tax amount, fails to file a tax return or fails to pay withholding tax by the due date, the tax authorities can impose additional tax collected as an administrative penalty. Delinquent tax can also be applied.

Under-Reporting

The penalty tax for under-reporting is 10% of the tax increment (difference between the unreported and reported taxes) resulting from a correction or an amended return when the original final return was filed on or before the due date. If the tax increment exceeds the tax amount of the original tax return filed by the due date or JPY500,000 (whichever is greater), 15% additional tax is applied to the excess amount.

Notwithstanding the general rules, where a taxpayer who has not been notified of the commencement of a tax audit files an amended tax return voluntarily, additional tax is not applied. If a voluntarily amended return is filed by a taxpayer who has been notified of the commencement of a tax audit without awareness of the possible correction based on the audit, 5% additional tax is applied. If the tax increment exceeds the tax amount of the original tax return filed by the due date or JPY500,000 (whichever is greater), 10% additional tax is applied to the excess.

Failure to File

In the case of failure to file a tax return, the extra tax is 15% of the principal amount of tax determined by the tax office or set out in a final or amended return when the final tax return was filed after the statutory due date. Where the principal amount exceeds JPY500,000, the additional tax rate becomes 20% of the excess, and, for taxes for which returns are due on or after 1 January 2024, where the principal amount exceeds JPY3 million, the additional tax rate becomes 30% of the excess. An extra 10% is added to those rates if extra tax for failure to file or a heavy additional tax has been imposed within five years regarding the tax in question.

Notwithstanding the general rule, where a taxpayer who has not been notified of the commencement of a tax audit files a tax return voluntarily after the statutory due date, 5% additional tax is applied. If a taxpayer who has been notified of the commencement of a tax audit files a return voluntarily without any awareness of the possible correction or determination based on the audit, 10% additional tax is applied (15% to the excess of the principal tax over JPY500,000).

Withholding Tax

Regarding additional tax for failure to pay withholding tax, 10% of the unpaid amount of the principal tax is added in the case of payment notification after the deadline. However, where a taxpayer voluntarily pays the tax after the due date, the rate of extra tax is reduced to 5%. 

Tax Evasion

In the case of tax evasion, additional penalty tax applies at the rate of 35% for under-reporting tax and for failure to pay withholding tax, and 40% for failing to file a tax return. Moreover, an extra 10% is added to these rates if either an additional tax for failure to file or a heavy additional tax is imposed within five years regarding the same tax.

In addition, a tax offender may be subject to imprisonment of up to ten years and/or a fine not exceeding the evaded tax.

Obstruction

In the case of audit by the tax authorities, a taxpayer is punishable by imprisonment of up to one year or a fine of up to JPY500,000 if they do not answer, provide false answers or obstruct the audit. 

Corporate Duties

A company may be liable to a criminal fine if an officer or employee is found guilty of a corporate income tax offence.

The Companies Act

According to the Companies Act (CA) and its implementing regulations, joint stock companies and limited liability membership companies must timely prepare accurate accounting books (Articles 432 and 615, CA), and joint stock companies must publish their balance sheets and, where applicable, their profit and loss accounts (Article 440).

According to the CA and its implementing regulations, the director (or other relevant person; the same hereafter) of a company who fails to prepare accounting books or record balance sheets properly will be subject to a maximum administrative fine of  JPY1 million (Article 976, CA). In addition, when the director, in soliciting subscribers for shares of the company, uses documents containing false statements about important matters, the director may be subject to imprisonment with labour for up to five years and/or a maximum fine of JPY5 million (Article 964). 

The Financial Instruments and Exchange Act

According to the Financial Instruments and Exchange Act (FIEA) and its implementing regulations, a person who conducts a public offering of securities must prepare financial and accounting documentation in accordance with the rules governing terms, format and preparation methods applicable to financial statements (Article 193). These documents must be submitted to the FSA as part of the securities registration statement at the time of the public offering, and annual securities reports and semi-annual securities reports must also be drawn up and disclosed to the public.

Under the FIEA, failure to submit any required financial statement or report is subject to a penalty, depending on the type of document. For example, a person who conducts a public offering before a securities registration statement has been accepted, or who fails to submit an annual securities report by the prescribed time, will be subject to imprisonment with labour for up to five years and/or a maximum fine of JPY5 million (Article 197-2). Also, a person who has made false statements about important matters regarding those documents will be subject to imprisonment with labour for up to ten years and/or a maximum fine of JPY10 million (Article 197-1). 

In addition, if the FIEA violation is committed by an officer or employee of a company, the company will also be fined:

• for a violation of Article 197-1, a maximum fine of JPY700 million; and
• for a violation of Article 197-2, a maximum fine of JPY500 million (Article 207).

Furthermore, the violation will be subject to a separate order by the FSA to pay a surcharge of a prescribed amount, depending on the type of violation (Article 172-1 to 172-4).

Cartels

The Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (AMA) governs cartels (including bid-rigging). Cartels are prohibited as an “unreasonable restraint of trade”, defined as follows (Article 2(6), AMA):

“[B]usiness activities, by which any enterprise, by contract, agreement or any other means irrespective of its name, in concert with other enterprises, mutually restrict or conduct their business activities in such a manner as to fix, maintain or increase prices, or to limit production, technology, products, facilities or counterparties, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade.”

The JFTC is the agency responsible for enforcing the AMA, and can conduct primary investigations as well as impose cease-and-desist orders and administrative fines (surcharge payment orders).

The surcharge amount is 10% of:

• the sales or purchase amounts of goods or services in question; and
• the amounts of sales or purchase of the closely connected trade, during the violation period (up to ten years from the investigation date).

Financial gains made for not supplying the goods or services subject to the violation are added to these amounts. In addition, the maximum surcharge amount imposed can be increased by 50% for repeat offenders and those who play a proactive role in its commission/ringleaders. A leniency programme allows the JFTC to factor in the order of leniency applications received and the degree of co-operation, and to award a corresponding discharge of, or discount from, the administrative fines.

Criminal Sanctions

In addition to administrative dispositions, enterprises and individuals can face criminal sanctions for cartel violations. The filing by the JFTC of a criminal accusation to the Prosecutor General is the exclusive means by which a criminal prosecution can be brought against enterprises and individuals for cartel violation of the AMA (Article 96(1)). Cartel violations may result in a maximum fine of JPY500 million for enterprises, or imprisonment of up to five years and a fine of up to JPY5 million for individuals.

Others

The JFTC imposes administrative fines (pursuant to surcharge payment orders) if an enterprise is found to be engaged in “private monopolisation” or certain unfair trade practices under the AMA. Surcharges are calculated by applying certain rates to the sales of relevant goods or services during the violation period (up to ten years). In the case of control-type private monopolisation, the calculation method is the same as for cartels. The sales calculation methods and surcharge rates differ according to the type of conduct, as follows.

• For control-type private monopolisation, 10% of sales (increased by 50% if the enterprise has been ordered to pay surcharges or subject to a similar order for private monopolisation or restraint of trade during the past ten years). For exclusionary-type private monopolisation, 6%.
• For unfair trade practices (concerted refusal to deal, discriminatory pricing, unjust low price and resale price maintenance) corresponding to a repeat violation within ten years, 3% of sales. A rate of 1% and a different calculation method apply to abuses of superior bargaining position, for which a payment order can be imposed for the first violation.

Criminal sanctions may apply for private monopolisation under the AMA, but have so far never been imposed. Enterprises face a maximum criminal fine of JPY500 million.

The Penal Code

A person who defrauds another person of property can be punished by imprisonment of up to ten years (Article 246, PC).

The Act on Specified Commercial Transactions

The Act on Specified Commercial Transactions (ASCT) regulates transactions involving:

• door-to-door, mail order and telemarketing sales;
• multi-level marketing transactions;
• provision of specified continuous services; and
• business opportunity sales transactions and door-to-door purchases.

Taking door-to-door sales as an example, making misrepresentations about the performance or value of a product is prohibited. Violators may face business improvement, business suspension or business prohibition. They may also be subject to imprisonment of up to three years or a maximum fine of JPY3 million.

The Act Against Unjustifiable Premiums and Misleading Representations

The Act Against Unjustifiable Premiums and Misleading Representations (AUPMR) regulates premiums and representations in connection with transactions of goods and services to ensure fair competition and to protect the interests of general consumers. It prohibits certain acts, including the following misrepresentations, punishable by an administrative fine pursuant to orders for action and surcharge payment orders (Article 5):

• representations where the quality, standard or any other content of goods or services is portrayed to consumers as being much better than that of the actual goods or services, or much better than those which other businesses supply, contrary to fact; and
• representations by which the price or other trade terms of the goods or services could be misunderstood by consumers to be much more favourable than the actual goods or services supplied, or to be much more favourable than those of other businesses that supply the same kind of or similar goods or services.

Cease-and-desist orders can be issued to stop the misrepresentations and prevent recurrence. The administrative fine is 3% of sales made during the misrepresentation period. If the business can prove that it did not know the representation was misleading and that it has seriously considered whether it was misleading, the fine is not imposed. If the business reports the misrepresentation before an investigation is started, the fine is reduced by half. If the business makes a plan to refund consumers to compensate for the misrepresentation, and if the plan is approved by the Consumer Affairs Agency and carried out by the business, it is reduced or eliminated.        

Cybercrimes and Computer Fraud

The PC prohibits the creation, provision, release, acquisition and storage of malware with the intention of applying or using such malware in the electronic device of another person. Offenders risk imprisonment with work for up to three years or a fine of up to JPY500,000, or two years’ imprisonment with work or a fine of up to JPY300,000, for acquisition and storage (Article 168-2 and 168-3).

In the case of unauthorised acquisition, use or disclosure of trade secrets (including electronically stored), the UCPA imposes imprisonment with work for a maximum of ten years, a maximum fine of JPY20 million, or both (Article 21) (see below).

In the case of phishing and unauthorised access to identifying information, the APUCA imposes imprisonment with work for up to one year or a maximum fine of JPY500,000 (Article 12); unauthorised access, including hacking, is punishable with imprisonment of up to three years or a maximum fine of JPY1 million.

The following are also relevant:

• the Act on the Protection of Personal Information, on data protection;
• the Telecommunications Business Act, which seeks to protect the secrecy of communications; and
• the Act on the Punishment of Activities Relating to Child Prostitution and Child Pornography, and the Protection of Children, which prescribes severe punishment in relation to child pornography and related offences in Japan.

Protection of Company Secrets

The UCPA protects trade secrets and shared data with limited access (Article 2). A trade secret is technical or business information useful for commercial activities controlled as a secret and not publicly known. Shared data with limited access means technical or business data that is handled as data to be provided to specific persons on a regular basis, and that is accumulated in substantial quantities by electronic, magnetic or other methods which cannot be recognised by human senses alone (excluding information kept secret).

According to Article 21, a person who uses or discloses a trade secret acquired by the following means can face imprisonment of up to ten years and/or a maximum fine of JPY20 million:

• fraud (the act of deceiving, assaulting or intimidating a person);
• asset theft;
• breaking into facilities;
• using unauthorised access under the APUCA;
• misappropriating a recording medium containing trade secrets (document, drawing or a recording medium on which trade secrets are described or recorded); and
• other unlawful means.

Persons to be punished include:

• a person who was an officer or employee of the trade secret holder, to whom the trade secret holder had disclosed trade secrets, and who, for the purpose of wrongful gain or causing damage to the trade secret holder, has offered to disclose the trade secrets; or
• a person who receives a request to use or disclose the trade secrets, while holding that position, in breach of their legal duty regarding the management of the trade secrets, and who uses or discloses the trade secrets after leaving that position. 

The Foreign Exchange and Foreign Trade Act

The Ministry of Finance (MOF) and the METI have the authority to impose financial/trade sanctions under the Foreign Exchange and Foreign Trade Act (FEFTA). Japanese authorities exercise trade control by way of appropriate implementation of measures that comply with the FEFTA, such as:

• screening for importation/exportation permission and approval; and
• on-site inspection and disposal of illegal exports.

Furthermore, Japan actively exchanges information with other countries and collects information concerning the circumventing of exports to countries of concern and relevant sensitive technology that may be targeted for circumventing exports, to increase trade control efficacy. 

Export Control

The legal structure of Japan’s export control system is a complicated mix of primary and secondary legislation:

• the FEFTA provides the legal basis for export control;
• the Export Trade Control Order specifies the controlled goods under Article 48(1), FEFTA; and
• the Foreign Exchange Order specifies controlled technology under Article 25(1), FEFTA.

The FEFTA defines the basic framework and principles of the control of exports of weapons and dual-use items, as well as technology transfers and the need for a METI licence. Any person conducting a transaction subject to Article 25(1) or 25(4), without obtaining a licence as required therein, faces criminal penalties (Article 69-6).

Any person who meets either of the following conditions will be punished with imprisonment of up to seven years and/or a maximum fine of JPY20 million (in some cases, five times the value of the items involved exceeding JPY20 million):

• any person who conducted a transaction subject to the provisions of Article 25(1) or 25(4) without a licence; or
• any person who exported goods subject to Article 48(1) without a licence. 

Imprisonment of up to ten years and/or a fine of up to JPY30 million applies to exports of specific technology designated by Cabinet Order as being:

• used for the development, manufacture or use of nuclear weapons;
• chemical or bacterial substances for military use;
• equipment used for spraying such substances;
• rockets or unmanned air vehicles used for delivering such substances; or
• specific kinds of goods stipulated in Article 48(1) but identified in the Cabinet Order as used specifically for nuclear weapons or for the development of such weapons, etc.

Foreign Direct Investments

Depending on the type of business in which the target entity is engaged or the nationality of the foreign investor, the FEFTA requires a foreign investor to submit a prior notification and/or a post-transaction filing through the Bank of Japan to the MOF and relevant ministries. The FEFTA prohibits certain investments in foreign companies by Japanese investors without the prior approval of the authorities. The violation of such requirements or prohibitions is subject to administrative and criminal penalties.

The Customs Act

Under the Customs Act, the following are subject to administrative and criminal penalties:

• exporting or importing prohibited items, being exempted from customs duties through deception or other acts of falsification;
• exporting or importing goods by making a false declaration or producing falsified documents; and
• other acts.

Harbouring Criminals and Suppressing Evidence

A person who harbours or enables the escape of another who has committed a crime punishable with a fine or harsher punishment, or who has escaped from confinement, will be punished by imprisonment of up to three years or a fine not exceeding JPY300,000 (Article 103, PC).

A person who damages, forges, counterfeits or alters evidence relating to the criminal case of another, or who uses counterfeit or altered evidence, will be subject to the same sanctions (Article 104, PC).

Regarding perjury, a sworn witness who gives false testimony can be punished with three months to ten years in jail (Article 169, PC). 

The APOC contains provisions on special categories of crime by organised crime and on the concealment, receipt and confiscation of the proceeds of a crime.

Under the PC, two or more persons who commit a crime together are deemed to be principals, and a person who induces another to commit a crime may be treated in sentencing as a principal (Articles 60 and 61). An accessory (who aids a principal) is also punishable, but the punishment is less than that of the principal (Articles 62 and 63).

Laws prohibiting or restricting money laundering include the following: 

• the APOC;
• the Act on Prevention of Transfer of Criminal Proceeds (APTCP); and
• the FEFTA.

These are supplemented by the Guidelines on Anti-Money Laundering and Combating the Financing of Terrorism and the related Frequently Asked Questions issued by the FSA.

JAFIC, within the National Police Agency (NPA), is the relevant financial intelligence unit (FIU) under the Financial Action Task Force on Money Laundering (FATF) regime, collecting and analysing information on money laundering.

The APTCP and FEFTA impose obligations on financial institutions to use certain measures to prevent money laundering and terrorist financing, including:

• know-you-customer (KYC) (customer identification);
• record-keeping of customers’ transactions; and
• reporting suspicious transactions to the authorities.

Non-compliance can lead to administrative sanctions by the relevant authority.

The APOC prohibits certain conduct, as follows. 

• Concealing or attempting to conceal facts relating to the acquisition and disposal of the proceeds of a crime, or concealing or attempting to conceal their source. Violators are subject to imprisonment of up to ten years and/or a fine of up to JPY5 million.
• Accepting the proceeds of a crime. Violators are subject to imprisonment of up to seven years and/or a fine of up to JPY3 million. 
• Planning to carry out criminal acts for a criminal organisation, terrorist group or organised crime group involving two or more persons, with one or more conducting preparatory acts such as securing funds or goods or inspecting locations in advance of carrying out crimes in accordance with a plan. Violators risk imprisonment with or without labour for up to five years.

Obtaining bank books or cash cards with the intention of receiving banking services by passing off as another is punishable under the APTCP.

Passing off as another to receive, transfer or solicit a transfer of deposits or savings is punishable under the APTCP.

Terrorist Financing

Laws combating the financing of terrorism (collectively, the “CFT regulations”) include the following: 

• the Act on Punishment of the Financing of Criminal Activities for the Purpose of Intimidation of the General Public and of Governments (the “Terrorist Financing Suppression Act”); 
• the APTCP;
• the FEFTA; and 
• the Act on Special Measures concerning the Freezing of Terrorist Assets (ASMFTA) under UN Security Council Resolution 1267.

These are supplemented by the Guidelines on Anti-Money Laundering and Combating the Financing of Terrorism and the related Frequently Asked Questions issued by the FSA.

JAFIC is also the relevant FIU under the FATF scheme. JAFIC collects and analyses information on the financing of terrorism. 

Furthermore, the MOF is also in charge of the CFT regulations. It has the authority to supervise, monitor and inspect suspicious cross-border financings which may be associated with terrorism under the FEFTA.

There are no special defences for white-collar offences. In criminal cases, the prosecutor bears the burden of proving all elements of a crime, such as:

• the identity of the offender;
• fulfilment of criminal legal requirements;
• illegality; and
• intent.

There is no general rule regarding the burden of proof in administrative litigation, which is determined on an individual law basis. Aside from simple crimes, defendants often claim that their conduct was legitimate and based on a legitimate business purpose. These claims may be rebutted depending on the presence of said elements.

Lack of Intent

All crimes listed in 1.1 Criminal Offences require intent. To secure the conviction of a company or an individual, the prosecutor must prove the occurrence of a criminal act and sufficient criminal intent, beyond reasonable doubt. A possible defence could be lack of intent. 

Dual Liability

In principle, only individuals are criminally liable, but a legal person can be held criminally liable if a specific statutory provision exists. A company’s liability could be discharged or mitigated if it can show that it has exercised due care in its appointment and oversight of the individual who may be criminally liable. 

Compliance Programme

Regarding the company’s liability in a dual-liability context, the existence of a compliance programme or in-house training could be important to prove the absence of negligence. Moreover, the fact that a company implements such a programme or training may be viewed favourably by the prosecutors or courts. However, very few court cases have involved the granting of an exemption.

There are no exempt industries and/or sectors for the crimes described in 1.1 Criminal Offences.

Bribery of Domestic Officials

There is no definition of a bribe in the PC. However, it is generally interpreted as an advantage given to a public official to influence the performance of their duties. A bribe is not limited to a monetary or property benefit and can include the satisfaction of a demand or desire of the official. Gifts, travel, meals, entertainment or free lease of property are generally viewed as an advantage.

Gifts, gratuities, etc, within the scope of social courtesy are not deemed to be bribes, though the criteria are unclear.

Bribery of Foreign Officials

The UCPA does not expressly allow small facilitation payments. There is no clear “safe harbour” rule for such small payments under the UCPA or the METI guidelines on bribery of foreign officials, and provided the prerequisite “to obtain illicit gains in business with regard to international commercial transactions” is satisfied, such payment will constitute a bribe under the UCPA. However, the following acts are less likely to be regarded as bribery:

• providing promotional products for general distribution (eg, calendars and  widely distributed souvenirs); 
• providing sweets and drinks at business meetings;
• use of company cars when foreign officials visit the company on business  when necessary for transportation purposes; 
• providing inexpensive seasonal gifts according to local customs; and
• providing travel and meal expenses based on the company’s own standards in accordance with local laws and regulations, when the inspection of a factory and laboratory is needed, and where their display is not sufficient to gain understanding of a company’s products, services and quality.

Safe Harbours and Insider Trading

Certain transactions that are not considered to undermine the fairness and credibility of a securities market are exempt from the FIEA insider trading regulations. These include:

• over-the-counter or negotiated transactions conducted between specific persons who have unpublished material information pertaining to a listed company;
• the acquisition of shares through the exercise of share options; and
• transactions based on contracts or plans made before becoming aware of material information.

Plea Agreements

The plea-bargaining system allows a suspect and a defendant to enter into negotiations with prosecutors in the presence and with the consent of their attorneys. Evidence of criminal conduct by, or testimony on the criminal conduct of, third parties (individuals or companies) can be provided in return for:

• the absence or withdrawal of prosecution;
• the limitation or change of facts or offences to be prosecuted; or
• the setting of a specific sentence required by the prosecutor, etc.

The system covers white-collar crimes such as fraud, bribery, embezzlement and antitrust offences, as well as certain offences relating to taxation and trading in financial products and instruments.

There are various ways in which an individual or a company can co-operate with prosecutors in relation to third-party suspects, including:

• assisting with the collection of evidence;
• responding truthfully to interrogation; and
• providing full disclosure of information in the authorities’ investigation or in a court trial.

To prevent a co-operating party from providing false information on a third-party suspect in the hope of a reduced penalty, the provision of false information may be subject to criminal sanctions, including imprisonment of up to five years.

Surrender Under the PC

The punishment of the perpetrator of a crime who has denounced themselves before being exposed as a suspect by an investigative authority may be reduced. This rule also applies with respect to a crime that cannot be prosecuted without a criminal complaint, and to a person who turns themselves in to a person who has the right to make a criminal complaint (Article 42, PC).

Leniency Under the AMA

Cartels and bid-rigging are caught by Articles 3 and 6 of the AMA, which prohibits unreasonable restraints of trade.

The AMA  leniency programme operates as a system whereby administrative surcharges are waived or reduced on the condition that the enterprises that have been involved in cartels or bid-rigging voluntarily report these activities to the JFTC. The sooner they report their activities to the JFTC before it initiates an investigation, the more surcharges they will be exempt from. Under the current system, the following applies.

• All enterprises can co-operate in the JFTC’s investigations voluntarily.
• Before an investigation starts:
1. the first enterprise to report its involvement in a cartel to the JFTC is entitled to full exemption from administrative surcharges;
2. the second enterprise that reports a violation is entitled to a 20% reduction in administrative surcharges;
3. the third, fourth and fifth enterprises that report a violation are entitled to a 10% reduction in administrative surcharges; and
4. the sixth and any other enterprises that report a violation are entitled to a 5% reduction in administrative surcharges.
• After a dawn raid takes place and within 20 days thereafter, enterprises that report a violation are entitled to:
1. a 10% reduction in administrative surcharges, provided not more than five applicants applied before and after the dawn raid – the number of eligible beneficiaries is limited to three after the dawn raid; or
2. a 5% reduction in administrative surcharges.

In addition, a further discount rate may apply according to the degree of co-operation with the investigation at a rate depending on the timing of the application. Enterprises reporting a violation before a dawn raid are entitled to a reduction in administrative surcharges of up to 40%, while those applying thereafter are only entitled to a reduction of up to 20%.

Guidelines issued by the JFTC clarify how it assesses an applicant’s level of co-operation.

When more than one enterprise of the same group commits an infringement, group enterprises can file a single joint application, in which case the same leniency status/pecking order is granted to all group enterprises named as applicants on the form.

To be eligible for a reduction, applicants must not be involved in illegal activities after the JFTC has commenced its investigation.

Other Co-operation or Self-Disclosure

The administrative authorities, prosecutors or courts may also consider co-operation and self-disclosure as a factor to reduce or control (as applicable) administrative dispositions, surcharges, criminal charges or punishment.

The Whistle-Blower Protection Act provides that a business operator is not authorised to dismiss or treat a worker (including retired employees and officers) unfavourably based on the worker’s whistle-blowing, or to claim damages against them for damage suffered by the business operator because of the worker’s whistle-blowing, where both: 

• the whistle-blowing is made to a prescribed reporting destination about a reportable fact (ie, any prescribed criminal act, prescribed act for which a civil fine can be imposed or act subject to an administrative disposition under which the violation is punishable or for which a fine may be imposed) that has occurred, or is about to occur, in a business operator’s organisation where said worker works; and
• the whistle-blowing meets the prescribed requirements (eg, the absence of malicious or wrongful purpose, or in the case of whistle-blowing to an administrative body, believing in the occurrence of the reportable fact and submitting a written document about the prescribed matters).

Companies must establish a system to appropriately respond to whistle-blowing (an efforts obligation for companies with fewer than 300 employees).

Detailed guidance on how business operators should establish whistle-blowing systems (Guidelines for Appropriate and Effective Implementation of the Whistle-Blowing System) has been issued by the Consumer Affairs Agency, together with commentaries on the Guidelines. The requirements include having:

• a proper policy;
• a helpline that is free from conflict;
• disciplinary sanctions in the case of breach of the internal whistle-blowing rules;
• rules prohibiting retaliation and the inappropriate treatment of whistle-blowers;
• measures for ascertaining whether whistle-blowers are being treated inappropriately; and
• rules dealing with confidentiality and information leakage.

The fact that such an internal whistle-blowing system is established is not a safeguard.

There are no special incentives for whistle-blowers.