The G7 announced the creation of a new Enforcement Coordination Mechanism “to bolster compliance and enforcement of our measures and deny Russia the benefit of G7 economies” on the one-year anniversary of Russia’s invasion of Ukraine.
Having focused on the enforcement of sanctions by the United States, United Kingdom, the European Union, Germany, France, Italy, and Canada in the past weeks, we continue our overview with enforcement trends in Japan.
1. What are the recent sanctions enforcement trends in Japan?
Japan has been collaborating with other nations with respect to sanctions against the Russia Federation. With respect to the sanctions against other nations, regions, entities, or individuals, Japanese government has been following the sanctions decided by the United Nations Security Council Resolutions. Before the Japanese government implemented sanctions measures against Russia, the Japanese government’s approach to imposing sanctions has been modest so that the measures would not typically prevent international transactions.
In addition to the sanctions measures taken by the Japanese government following the United Nations Security Council Resolutions, Japan has specific sanctions measures against North Korea, the Russian Federation and Belarus.
Japanese sanctions targeting North Korea have gone further than measures taken by United Nations member states based on United Nations Security Council Resolutions. The Japanese measures against North Korea involve an almost a complete ban on transactions with North Korea. There are cases in which parties have been under criminal investigation after being suspected of exporting certain products to North Korea via intermediate parties.
The sanctions measures against Russia and Belarus have been taken by Japanese government since February 28, 2022. Japan continues to gradually impose new sanctions.
Japan and the Russian Federation had a long time relationship of trade and various Japanese entities or organizations had made investment in the Russian Federation in various industries including oil and energy sectors. Therefore, Japanese government has likely considered the effects of sanctions measures on various industries, including how to impose sanctions measures and the timing of taking the measures.
G7 foreign ministers recently met in Japan where a session on Ukraine and the sanctions targeting Russia took place. In a communique following the meeting, the G7 foreign ministers called on third parties cease assistance to Russia’s war or “face severe costs.”
The Japanese government strictly interprets the sanctions. For example, when the Ministry of Economy, Trade and Industry (“METI”) announced a ban of certain exports to the Russian Federation, it indicated that export licenses would likely not be granted. From an enforcement perspective, historically it has been rare for the Japanese government to impose penalties for violation of the sanctions regulations. Penalties are limited to malicious cases. With the increase focus on sanctions enforcement and enforcement coordination, we expect increased enforcement activity in Japan.
2. What are the maximum penalties for violation?
An individual who violates the provisions of the Foreign Exchange and Foreign Trade Control Law regarding security trade control may be imprisoned for up to 10 years, fined up to 30 million yen or five times the value of the object, or both. Entities are also subject to the dual penalty provision and may be fined up to 1 billion yen or up to five times the value of the object.
An individual who violates an export ban may be imprisoned for up to five years, fined up to 10 million yen or five times the value of the object, or both. A fine up to 500 million yen or five times the value of the object, may also be imposed on an entity.
An individual who violates the prohibition on the provision of technology may be imprisoned for up to three years, fined up to 1 million yen or three times the value of the subject matter, or both. A fine of the same amount may also be imposed on an entity.
Other administrative penalties may be imposed, including: (i) export ban up to three years for violating provisions of the Foreign Exchange and Foreign Trade Act regarding security trade control or an export ban sanction regulations; (ii) an individual may be prohibited to serve as directors, etc., of an entity engaged in violative exports for the same period of time; (iii) prohibition on providing technologies up to one year on the violation of the prohibition on the provision of technologies.
Violations are disclosed to the public, which is a critical issue for the reputation of companies.
3. Is there a mechanism by which companies can submit a voluntary self-disclosure of possible violations to mitigate penalties?
There is no system that allows the waiver of prosecution or the reduction of punishments for parties that submit a voluntary self-disclosure of possible violation.
However, the METI encourages and accepts voluntary self-disclosures and makes it clear that penalties may be mitigated for companies that submit a voluntary self-disclosure of possible violations.
Penalties are imposed only in malicious cases, where companies are trying to disguise or misrepresent problematic aspects of transactions in connection with violations of sanctions regulations. If companies submit a voluntary self-disclosure, it is likely that the Japanese authority would provide a recommendation or warning to encourage a company to be compliant with the sanctions regulations. When the companies do not follow the advice or instructions of the authority, then penalties may be imposed.
4. What do you think the G7 Enforcement Coordination Mechanism means for sanctions enforcement in Japan?
Sanctions measures taken by Japanese government basically follow the United Nations Security Council Resolutions, as well as measures other major nations. Because sanctions measures against the Russian Federation will not be resolved in the United Nations Security Council, the G7 Enforcement Coordination Mechanism means certain resolution based on the international agreement among major nations, which would reinforce the reasoning for the sanctions enforcement in Japan. Since World War II, the Japanese government has been trying to examine and make decisions based on various aspects of international law. While the United Nations is not able to pursue its functions of coordinating member states and avoiding international war in the Russia-Ukraine context, the G7 is a useful and helpful framework in which leading nations have an initiative and leading other nations.
5. What is one thing that you would recommend companies do now to get ready for enforcement in Japan and increased coordination with the other G7 members?
We recommend that companies stay updated on sanctions regulations and confirm whether any updated regulations may affect ongoing business practices. Companies may need to change or stop some business practices to comply with updated regulations and avoid reputational harm if they fail to do so.
