Financial Crime World

Investigations: The Law and Practice in Japan

As part of its efforts to ensure the sound and proper operation of businesses, Japan’s administrative agencies have the power to conduct investigations into suspected wrongdoing. These inspections can be conducted on-site or through the submission of information by the subject enterprise.

Investigations Conducted by Administrative Agencies

In Japan, the administrative authorities have the power to ask questions and order enterprises to submit reports. Failure to comply with these requests can result in penalties. The authorities may conduct dawn raids if they suspect that evidence is being destroyed or concealed.

Criminal Investigations

In criminal cases, the police or public prosecutors have the authority to interrogate suspects and gather evidence. The requirement for arrest is “when there is probable cause to suspect that the suspect has committed a crime.” Suspects have the right to remain silent and the right to confidential communication with a defense attorney.

Limitations on Rights of Suspects

  • Attorney-client privilege is not recognized in Japanese law in criminal cases, except in certain cartel investigations under the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade.
  • In practice, attorneys are not permitted to attend interrogations of suspects during criminal investigations.

Japan has mutual legal assistance treaties with several countries, allowing for the exchange of evidence and cooperation in criminal investigations. The country’s laws also provide for the power to obtain evidence located abroad through international agreements.

Internal Investigations

While there is no statutory obligation to conduct internal investigations under Japanese law, companies may be prompted to do so by their directors’ duty of care to the company. Industry-specific statutes or regulations may also require companies to investigate alleged wrongdoing.

Examples

  • Pharmaceutical and medical device manufacturers are required to report issues related to the efficacy or safety of their products to the authorities and conduct an investigation before doing so.
  • Self-regulated organizations, such as the Japan Exchange Regulation, have established guidelines for listed companies to conduct investigations when they become aware of misconduct.

Power to Obtain Evidence Abroad

Japan has mutual legal assistance treaties with several countries, allowing it to obtain evidence located abroad through international agreements. The country’s laws also provide for the power to obtain evidence located abroad through diplomatic relations.

Practice

  • The administrative authorities may request corporations or branch offices to submit evidence on a voluntary basis or seek to collect evidence with the cooperation of foreign countries’ competent agencies in accordance with applicable mutual legal assistance treaties.

Conclusion

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Japan’s laws and regulations provide for a range of powers to conduct investigations into suspected wrongdoing. From on-site inspections by administrative agencies to criminal investigations by police and public prosecutors, Japan has a robust system in place to ensure that businesses operate fairly and lawfully. While there are limitations on the rights of suspects and defendants, including the lack of attorney-client privilege in criminal cases, the country’s laws also provide for important safeguards against abuses of power.

In the context of internal investigations, companies may be prompted to conduct their own investigations by their directors’ duty of care or industry-specific statutes or regulations. Self-regulated organizations have established guidelines for listed companies to conduct investigations when they become aware of misconduct.

Overall, Japan’s laws and regulations provide a framework for effective investigations into suspected wrongdoing, while also ensuring the rights of suspects and defendants are protected.