FRONTEO Co., Ltd. (Headquarters: Minato-ku, Tokyo, President and CEO: Masahiro Morimoto, hereinafter referred to as FRONTEO) recently conducted a survey on the current state of fraud countermeasures in Japanese companies and published the results on its website.

[Survey outline]
Survey implementation period: October 2023-10, 5
Survey target: FRONTEO legal platform “FRONTEO Legal Link Portal”^{* 1} Registered member
Survey method: Internet survey
Number of valid answers: 224
Research subject: FRONTEO
*1: One of the largest membership-based legal platforms in Japan that connects corporate legal affairs/intellectual property managers and administrative department managers with domestic and international lawyers and experts who are active on the front lines.https://legal.fronteo.com/fllp/). Opened in June 2020.We provide online seminars and video content, and as of November 6, we have over 2023 registered members, over 11 posted videos, and over 1 lecturers.

　Of the respondents, 24.6% said that "fraud" that required an external investigation had occurred within the company within the past five years.(Figure 1).Regarding the type of fraud that occurred (multiple answers allowed), "labor/harassment" was the most common at 36.4%, followed by "embezzlement/kickbacks" and "quality fraud" at 32.7%, "information leakage/information taking out" and "accounting fraud/deception". “Settlement of accounts” rose to 18.2%.(Figure 2).

　Looking at the fraud incidence rate by annual sales size, the fraud incidence rate is over 100% for companies with annual sales of less than 10 billion yen, while it is in the 100% range for companies with annual sales of 20 billion yen or more, and even more so for companies with annual sales of 1000 billion yen or more. rose to the 30% range, indicating that the incidence of fraud tends to increase as the annual sales scale increases.(Figure 3).

　Of the companies to which respondents answered that a fraud requiring an external investigation had occurred, 76.4% conducted a law firm or audit firm, and 36.4% conducted a forensic investigation in order to investigate and clarify the cause of the fraud when it was discovered.^{* 2}I answered that I used the company.
*2: Mainly to investigate, analyze and preserve records of digital devices and use them as legal evidence.

　As for measures to detect fraud, more than 9% of respondents said they had established an internal whistle-blowing contact point, while 76.8% said they had set up an external whistle-blowing contact point, and 76.3% said they had implemented an internal training system. Many things were mentioned such as(Figure 4).Additionally, about 1% of respondents said they had adopted email auditing, which has been increasingly introduced in recent years.

　Nobuyuki Katsu, a lawyer at Nagashima Ohno & Tsunematsu, commented as follows:
“Although a small percentage overall, we see several examples of companies of all sizes implementing regular or irregular email audits. Compliance programs need to be designed on a risk-based basis, but Utilizing data managed by companies, not just e-mail, for risk assessment and evaluation of the effectiveness of measures, is a necessary initiative for efficiently investing limited compliance resources, and will continue to be used in the future. It is expected that it will spread.”

<Nobuyuki Katsu Profile> Joined Nagashima Ohno Tsunematsu Law Office in 2015. He graduated from NYU School of Law in 2022 (Program on Corporate Compliance and Enforcement Student Fellow).After that, he returned to Japan in August 1 after completing one year of training at Kirkland & Ellis LLP, focusing on areas such as white collar crime.His main areas of work include corporate and organizational compliance, risk management, fraud investigation and scandal response, labor law, and financial regulation.

　The results of all questions in this survey are published on the FRONTEO Legal Tech AI Business Headquarters website and can be downloaded from the URL below.In addition, we plan to publish a report summarizing more detailed analysis and commentary on the results of this survey.
https://lp.fronteo.com/FLLP_WP_2311_ltai-survey.html

■ About FRONTEO　URL: https://www.fronteo.com/
FRONTEO is a data analysis company that provides various AI solutions and services using the in-house developed AI engine "KIBIT". Based on the philosophy of "providing solutions that do not overlook risks and opportunities buried in records and realizing fairness in the information society," extract meaningful and important information from vast amounts of text data and complex networks. Our strengths are natural language processing and network analysis technologies that support advanced judgments by experts.We are developing businesses in the areas of legal tech AI, business intelligence, life science AI, and economic security, and contributing to solving various corporate and social issues. Founded in August 2003, listed on Tokyo Stock Exchange Mothers (currently Tokyo Stock Exchange Growth) on June 8, 2007.The company operates in Japan, the United States, South Korea, and Taiwan.Acquisition of first-class medical device manufacturing and sales business license, notification of controlled medical device sales business.Capital 6 thousand yen (as of March 26, 3,042,317).

 

* FRONTEO and KIBIT are registered trademarks of FRONTEO in Japan.

 

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