PROPOSALS FOR STRENGTHENED ANTI-CORRUPTION LAWS FOLLOWING INCREASED INTERNATIONAL SCRUTINY
On 10 October 2014, Japan’s cabinet approved bills aimed at improving legislation combatting money laundering and terrorist financing. The government hopes to be able to pass the bills by the end of the current session on 30 November 2014.
The bills are reported to have been proposed in an effort to work together with the international community to fight terrorism, and follow concerns expressed by the Financial Action Task Force (the “FATF”) in June 2014 in respect of Japan’s continued failure to remedy several serious deficiencies identified by FATF in their report on money laundering in October 2008. The approval of the bills has therefore been seen as an attempt to avoid Japan being put on the FATF "grey list" of high-risk jurisdictions (including Afghanistan and Iran) when FATF's members meet in October and February 2015.
The proposed "Bill on Freezing Assets of International Terrorists" proposes stronger scrutiny of domestic transactions conducted by individuals identified on the basis of UN Security Council resolutions as international terrorists. The bill proposes penalties including custodial sentences and fines for violation of the offences set out therein.
However, doubts as to whether Japan will be able to avoid FATF's list of high-risk countries remain as a key bill criminalising conspiracy has failed to be presented, reportedly due to resistance from some lawmakers and the Japan Federation of Bar Associations, who were concerned it may be applied arbitrarily. Concerns have also been raised about existing loopholes which have not been addressed, including the inability to freeze transfers of terrorist funds within Japan and ongoing inadequate scrutiny of client transactions by Japanese banks.
SEC WINS RULING AGAINST LAS VEGAS EXECUTIVE IN PONZI SCHEME TARGETING JAPANESE INVESTORS
Following an action brought by the U.S. Securities and Exchange Commission, Edwin Fujinaga, a Las Vegas resident, his company, MRI International Ltd ("MRI"), were found to have raised more than $800 million from over 8,000 investors by operating a "classic ponzi scheme". This SEC action followed a recommendation by the Japanese Securities and Exchange Surveillance Commission in April 2013 to the Japanese FSA that administrative action be taken against MRI.
MRI operated from offices in Las Vegas with a sales office in Tokyo and many investors were from Japan. Investors were reportedly told that their money would be used to buy medical accounts receivable from U.S. medical providers at a discount, which would then be recovered in full from insurers. Instead, the Las Vegas court found that earlier investors were repaid from the funds obtained from subsequent investors and Fujinaga used investor funds for his own purposes, including purchasing property and luxury cars.
The Nevada court found that there was sufficient evidence to grant summary judgment on liability in favour of the SEC. A trial on the appropriate relief will follow: the SEC is seeking disgorgement of "all misappropriated investor funds and other ill-gotten gains" together with civil monetary penalties and appropriate equitable relief.
FORMER SHOWA CORPORATION EXECUTIVE INDICTED IN THE US FOR CONSPIRING TO FIX PRICES
In a further development of the ongoing U.S. federal antitrust investigation into anticompetitive conduct in the automotive parts industry, a former executive of Saitama-based automotive parts manufacturer and retailer Showa Corporation, an affiliated company of Honda, was indicted by a federal grand jury in Cincinnati, Ohio on charges of conspiring to suppress and eliminate competition in the automotive parts industry.
Mr Akira Wada is charged with conspiring to allocate markets, and to fix, stabilise and maintain the prices of pinion-assist type electric powered steering assemblies sold to Honda in the United States and elsewhere. He and his co-conspirators were alleged to have met and discussed market allocation schemes and submitted price quotations to Honda on this basis from at least 2007 until September 2012.
In June 2014, Showa Corporation pled guilty to its part in the conspiracy and agreed to pay a $19.9 million criminal fine. The current action is against Mr Wada as an individual with Bill Baer, Assistant Attorney General for the Antitrust Division stating "yesterday’s indictment again demonstrates that antitrust violations are not just corporate offenses but also crimes by individuals".
Mr Wada is one of 44 individuals to have been charged in the US government’s ongoing investigations.