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Company’s Review of Compliance System Cited as Factor in Favor of Defendant in Criminal Penalty Determination
In a recent court decision, the review and implementation of a compliance system by a Japanese company played a significant role in determining the criminal penalty for its officers and employees.
The Case
The case involves a prominent Japanese corporation that was accused of falsifying inspection data for products. An investigation revealed that the company’s management style had prioritized profitability over compliance, leading to a breakdown in the corporate governance structure. The company subsequently conducted a thorough review of its compliance system and implemented preventive measures to prevent similar incidents from occurring in the future.
Mitigating Factor
In determining the criminal penalty for the company’s officers and employees, the court took into account the company’s efforts to strengthen its compliance system as a mitigating factor. This suggests that Japanese courts are beginning to recognize the importance of corporate compliance programs in preventing and detecting illegal activities.
Recent Cases Highlight Importance of Corporate Risk and Compliance Management
The case is part of a growing trend of recent cases involving non-compliance by Japanese companies, including accounting fraud and falsification of quality standards. In many of these cases, the lack or inadequate operation of an efficient compliance program has been identified as a contributing factor.
Examples
- Kobe Steel’s recent scandal involving the falsification and fabrication of inspection data for products drew widespread attention in Japan and globally.
- Another high-profile case involves Nissan’s former CEO Carlos Ghosn, who was accused of misconduct, including misstatements in security reports and unauthorized use of company assets. The company attributed these acts to inadequate corporate governance.
Government Obligations
While there are no specific compliance management obligations for government agencies and state-owned enterprises under Japanese law, public officials are subject to the National Public Service Ethics Act and Code, which provide rules on prohibited conduct and reporting obligations. State-own enterprises may also be regulated by special acts that deem their officials as public officials.
Digital Transformation
Japan has recognized the importance of digital transformation and is subject to various regulations and guidelines covering artificial intelligence, blockchain, and digital platform operators. However, there is no comprehensive risk and compliance governance framework for digital transformation under Japanese law.
Conclusion
In conclusion, the recent court decision highlights the importance of corporate compliance programs in preventing and detecting illegal activities. As Japan continues to grapple with non-compliance issues, companies would do well to prioritize the development and implementation of effective compliance systems to mitigate risks and prevent similar incidents from occurring in the future.