Japan is a common target for cyber-enabled fraud in the Asia-Pacific region. For multinational groups operating subsidiaries in Japan, recurring scenarios include business email compromise, spoofed vendor change requests, fraudulent wire-transfer instructions, and unauthorized access to online banking platforms.
Incidents frequently involve Japanese-language communications, multiple internal approvers, and complex transaction flows across time zones. Even where machine translation or AI tools assist with triage, boards and auditors typically expect a structured fact-finding process that produces a clear audit trail and a defensible narrative of what occurred, when it occurred, and which controls failed or were bypassed.
Immediate Priorities: Preserve Evidence and Stabilize Decision-Making
A common first step is to initiate an internal investigation and secure relevant records under an appropriate hold process. Preserving emails, chat logs, approvals, invoices, bank statements, device and access logs, and transaction metadata relating to the suspected transfer(s) can materially improve traceability and recovery options.
From a governance perspective, early engagement of external professionals may also support independence, privilege strategy, and the credibility of any board-facing report.
General Counsel will typically work with IT and finance to reconstruct the sequence of events, preserve key evidence, and identify control gaps, for example, payment approval workflows, vendor master changes, or authentication controls. Where appropriate, interviews may be conducted with local employees and management of the Japanese subsidiary, depending on the governance structure, relevant directors or officers.
The deliverable is often a board-ready narrative that addresses (i) timeline, (ii) loss and exposure, (iii) root cause and contributing factors, and (iv) remediation recommendations.
Key Decision Points Following Initial Findings
If the findings indicate external fraud and potential criminal conduct, time-sensitive decisions may be required. Early notification to the relevant bank is often critical to support tracing and to assess whether any holds, recalls, or other protective steps are available.
Depending on the facts and the company’s risk posture, notification to local law enforcement may also be considered, including to support investigative and recovery pathways. By way of example, Japan’s Act on Payment of Damage Recovery Benefits from Funds in Deposit Accounts Used for Crime provides a framework under which funds in certain deposit accounts used for criminal activity may be addressed, including procedures that can ultimately lead to victim recovery benefits.
If the investigation points to internal misconduct, including potential white-collar offenses involving an employee, officer, or director, boards and general counsel should consider the interplay between employment actions, civil liability, tort claims, and any director duties or reporting obligations under the group’s governance and compliance frameworks.
Once fact-finding is sufficiently advanced, the board and General Counsel should align on a response plan, including (i) immediate risk containment and remediation, (ii) communications to the parent company, auditors, insurers, and other key stakeholders if applicable, and (iii) external reporting, claims, and recovery steps where warranted.
Shingo Hattori
Founder & Managing Partner, Hattori Law +81 3 6447 5586
Daini Tokyo Bar Association
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Disclaimer: This article provides general information as of the time of drafting only and does not constitute legal advice. Specific advice requires review of transaction documents and facts.