Financial Crime World

Here is the rewritten article in markdown format:

Whistleblower Protection in Finance: Japan’s Act Falls Short Despite Recent Amendments

The landscape of whistleblower protection varies significantly around the world, with some countries boasting robust laws and procedures that yield substantial rewards for those who come forward. In contrast, Japan’s Whistleblower Protection Act, enacted in 2006, has been criticized for its toothlessness, failing to effectively protect whistleblowers despite its noble intentions.

Unresolved Issues

Despite some positive developments, such as the establishment of whistleblower reporting systems at large firms and efforts towards bolstering compliance-focused management, many issues with the legislation remain unresolved. According to Nobuhito Sawasaki, a partner at Anderson, Mori and Tomotsune:

  • Efforts to establish whistleblower reporting systems at small- and medium-sized firms have been insufficient.
  • Raising awareness of the Act among workers in general has also been lacking.

Consequences

These inadequacies have led to incidents where whistleblowing systems failed to function satisfactorily, resulting in misconduct that put citizens’ safety at risk or inappropriate responses from administrative agencies.

Recent Amendments

However, recent amendments proposed by Japan’s Consumer Affairs Agency aim to improve the viability of the reporting system and bring the Act’s shortcomings to an end. Key changes include:

  • Relaxing requirements for whistleblower disclosures
  • Expanding the definition of ‘whistleblower’
  • Broadening the scope of reportable facts

New Requirements

The amended Act also requires organizations with over 300 employees to develop systems necessary to ensure appropriate handling of whistleblowing reports, while those with fewer employees are obligated to “make an effort” to establish such systems.

Strengthened Protections

Whistleblower protection is strengthened by prohibiting organizations from claiming damages against whistleblowers on the grounds of their disclosures.

Comparative Analysis

While these changes strengthen protections for Japanese whistleblowers, they still lag behind robust whistleblower legislation seen in other countries. In the US, for instance:

  • The Securities and Exchange Commission’s Whistleblower Program has awarded over $500 million to whistleblowers over the last decade.
  • SEC enforcement actions have resulted in more than $2 billion in financial remedies.

Room for Improvement

For advocates pushing for expanded whistleblower protections, there is still room for improvement. According to Anora Wang, a litigation associate at Winston & Strawn LLP:

  • There is no mechanism for penalizing companies that retaliate against whistleblowers.

Conclusion

As the amended Act takes effect within two years of promulgation, organizations must prepare to comply with new protections and consult with experienced counsel to ensure implementation. The changes introduced will not only increase the scope of protection for whistleblowers but also deepen our understanding of Japanese corporate phenomena and behaviors.