JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
12.3 Responsibility for Losses The extent to which a fintech service provider is responsible for customer losses depends on the nature of the service, the applicable laws, and the contractual agreements between the provider and the customer. In principle, there are no special provisions under Japanese law that impose unique liability on fin - tech service providers solely because they operate in the fintech sector. Their liability is generally governed by standard legal principles, such as contract law, tort law and financial regulations. With that said, a fintech service provider may be held liable in the following situations. • Negligence or system failures – if a loss occurs due to a technical malfunction of a service provider’s systems, security breach or operational failure, and the provider failed to implement appropriate safeguards, the service provider may be required to compensate affected customers. • Regulatory compliance violations – if a provider fails to comply with financial regulations, such as the PSA, the APTCP, the APPI or consumer protec - tion regulations, and such failure leads to customer losses, the provider may face administrative penal - ties and be required to compensate customers.
carry out security audits through third parties when necessary.
12. Fraud 12.1 Elements of Fraud
There are no laws or regulations in Japan that relate specifically to fraud in the context of financial services or fintech. Under the current legal framework in Japan, there would be a finding of fraud if (i) an act of deception has been committed, (ii) the act causes another party to make a mistake and (iii) such other party deliv - ers goods or property benefits based on such mis - take (Article 246 of the Criminal Code), regardless of whether the fraudulent act was committed in the con - text of financial services, fintech or otherwise. 12.2 Areas of Regulatory Focus In recent years, there has been an increase in issues surrounding crypto-assets that are traded electroni - cally via the internet. In addition, there has been an increase in the number of cases where people have made investments in connection with the exchange of crypto-assets and suffered losses as a result. In this connection, the Consumer Affairs Agency of Japan (CAA), jointly with the Financial Services Agen - cy of Japan (FSA) and the National Police Agency of Japan (NPA), has issued a warning on matters that consumers should approach with caution. For example, the CAA has handled cases in which consumers have made investments based on prom - ises of “guaranteed profits” through seminars, SNS and the like, but ended up making losses, or were unable to get refunds or withdraw their funds.
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