VIETNAM-JAPAN FOCUS ON OFFICIAL DEVELOPMENT AID - JTC EXECUTIVES CHARGED WITH BRIBING VIETNAMESE OFFICIALS
Further to our updates on this issue in May and June 2014, the Tokyo District Public Prosecutors Office (the "TDPPO") filed criminal charges against three officials of railway consulting company, Japan Transportation Consultants Inc. ("JTC") as well as against JTC itself. It has now been reported that the three JTC executives paid a total of around JPY 69.9 million (US$ 690,360) in cash to officials of state-run Vietnam Railways ("VNR") from December 2009 to February 2014 to secure an order for an Official Development Aid ("ODA") funded urban railway construction project in Vietnam. JTC has stated that it is taking the matter extremely seriously and will continue to co-operate fully with the investigations.
The JTC officials against whom criminal charges have been filed are the former president, former managing director in charge of overseas operations and a board member in charge of accounting. Each is facing charges of violating the Unfair Competition Prevention Act ("UCPA") which prohibits the provision of money or other benefits to foreign public servants and is intended to target overseas bribery and corruption by Japanese companies and nationals. Breach of the UCPA carries penalties of imprisonment of up to five years and/or a fine of up to JPY 5 million for an individual and a fine of up to JPY 300 million for legal entities. However, authorities in Japan have brought only four cases under the relevant provisions of the UCPA (including the JTC scandal).
INCREASED SCRUTINY OF JAPANESE ANTI-CORRUPTION MEASURES
June has proved to be a month of increased international scrutiny in respect of Japan's anti-bribery and corruption laws, with both the Organisation of Economic Cooperation and Development (the "OECD") and Financial Action Task Force (the "FATF") encouraging Japan to increase and improve existing countermeasures.
On 12 June 2014, the OECD Working Group on Bribery issued a warning that Japan’s new Action Plan in relation to bribery still lacks important details. The Action Plan was implemented in April 2014 and for the first time gives specialised investigation resources to police and prosecutors' offices to be able to proactively detect, investigate and prosecute cases of foreign bribery by Japanese companies. In particular, the Working Group on Bribery encouraged Japan to make clear that facilitation payments are a form of foreign bribery and provide in law for the confiscation of the proceeds of foreign bribes and punishment of those who launder money from bribery. The OECD's full statement can be accessed here.
Separately, on 27 June 2014, the FATF called on Japan to enact adequate anti-money laundering and counter terrorist financing legislation. The FATF has expressed concern regarding Japan's continued failure to remedy what the FATF considers are serious deficiencies initially identified in a 2008 FATF report on money laundering in Asia Pacific, despite Japan's high-level political commitment. The FATF has encouraged Japan to promptly address these deficiencies, including through the adoption of requisite legislation and has stated that it will continue to monitor Japan's progress in this regard. The FATF's statement in this regard can be found here.