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Foreign payments are getting very common for Japan, mostly due to two reasons: the immense growth of the e-commerce market and tranquil regulation of business registration in the country. Because of wire transfers via banks being frequently too expensive, alternative money transfers started increasing in numbers in the last years.
Earlier in Japan, there was a single license, which was not optimally structured. Therefore, the Japanese parliament came up with a few crucial amendments to the existing legislation to make money transfers and the process of starting a financial company in Japan less complicated.
We will now discuss the new process of obtaining a money transfer license in Japan.
In the past, it was not required from collection agencies in Japan to have a financial services license. Collection agencies are entities that collect funds from a debtor and transfer them to a lender for a commission. They provide their services to individual and corporate customers. It was rather legal to collect money for corporate clients, but for individual clients agencies required a redundant fee from both lenders and debtors.
The goal of the new modification is to oblige collect agencies to obtain a money transfer license in order to be able to continue the provision of their services.
The new amendment dictates that the maximum amount of funds to be transferred is JPY 1 million. Nevertheless, this restriction can be negatively limiting the major operators that are used to transactions with large amounts of money for corporate customers. Moreover, this change also affects small operators: they transfer smaller amounts of money but still must obtain a license. In order to satisfy both of these sides, Japan invented three license types:
Type 1) Funds per transaction are not limited, however, the license specifies the maximum possible amount.
Type 2) The limit for the transaction is JPY 1 million.
Type 3) Smaller amounts of funds can be transferred, yet it must be less than JPY 50 000 per transaction.
Operators that hold a license have to comply with the KYC requirement, which is not foreseen to be amended in the nearest future.
Although there is a limit for transactions of maximum JPY 1 million, money transfer operators that have a license enabled their clients to transfer and hold funds that exceed this limitation by using their quasi-wallets. This fact had been vastly criticized and led to the amendment of existing legislation.
According to the amendment, operators that hold licenses of Type 1) can only receive the amount that the client is going to transfer and no more. Additionally, holders of Type 3) license may not get the amount exceeding the one stated in the license.
The new amendments to the money transfer act brought the limitation for the MT operators which consists of them not being permitted to obtain or hold more funds than allowed. We will continue informing you of the latest modifications to the financial market of Japan as we never cease to monitor the updates.
In case your questions about this industry were not fully answered, do not hesitate to contact our experts. COREDO will help you solve all legal issues and uncertainties you have.