Japan’s Crisis Management Struggles in the Time of COVID-19

Tokyo’s Battle Against COVID-19

As Japan continues to battle the COVID-19 pandemic, companies are facing a new set of challenges in managing corporate crises. A recent guideline issued by the Japan Federation of Bar Associations has restricted the ability of third-party committees to share evidence with companies, making it difficult for them to use strong evidence of fraudulent acts in their crisis management activities.

Challenges in Crisis Management

• The key challenge is to conduct an objective and independent fact-finding exercise while establishing appropriate investigative structures.
• The guideline aims to maintain the independence of third-party committees, but experts warn that this may hinder a company’s ability to effectively manage corporate crises.

Government Efforts Against Fraud

The Japanese government has been working to cope with the pandemic by implementing measures such as remote work arrangements and digital filing of claims. However, the country’s court system has been slow to adapt to the new normal, with many lawyers still commuting to their offices.

• The COVID-19 pandemic has led to a surge in fraudulent activities, particularly in relation to government-backed economic stimulus packages.
• In one recent case, two subsidiary companies of H.I.S. Group Co., Ltd. were found to have fraudulently applied for subsidies under the “Go to Travel Campaign” and received JPY 830 million.

Government Action Against Fraud

The Japanese government has vowed to recover illegally obtained money in relation to COVID-19 recovery funds, and those found guilty of fraud will face criminal sanctions as well as civil liabilities.

• We are working closely with law enforcement agencies to crack down on fraudulent activities.
• Those found guilty of fraud will face criminal sanctions as well as civil liabilities.

Cross-Jurisdictional Mechanisms

Japan has been working to strengthen its cross-jurisdictional mechanisms for asset recovery and tracing. In recent cases, the country has successfully recovered assets concealed outside of Japan through cooperation with foreign governments.

• One notable case involved the restoration of property worth JPY 2.9 billion transferred from Switzerland as part of a black-market financing scheme involving the Goryokai criminal organisation.
• The victims received restoration payments using the recovered property.

Conclusion

As Japan continues to navigate the challenges posed by the COVID-19 pandemic, companies and government agencies are facing new challenges in managing corporate crises and combating fraudulent activities. While there have been some successes in recovering assets concealed outside of Japan, more needs to be done to strengthen cross-jurisdictional mechanisms and prevent fraudulent activities from occurring in the first place.

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