When a payment or remittance service is said to require registration

1. Checking what has been raised and what the service actually does

Distinguishing inquiries, warnings and dispositions, and their deadlines

We begin by setting out what the authority, a partner bank or another party is requiring, in respect of which conduct and by when. For documents from the authority, we establish whether it is an inquiry, a warning, an order or something else, and its legal basis, and check separately the reply or measures required and the deadline for each.

The distinction matters because how one responds, and what follows from not responding, differ according to the character of the document. A voluntary inquiry or administrative guidance and a request for a report made under legislation put a reply on a different footing. Even though a reply is usually given in either case, drafting one without understanding what the request rests on leads to saying things that need not be said, or to omitting things that should be said.

Communications from partner businesses are approached in the same way. Where a partner bank makes an inquiry about the handling of an account, or a payment agency partner gives notice that it will stop handling transactions, we check which provision of the contract it is based on. Even before there is any communication from the authority, a service can come to a stop in practice through the partner businesses.

At the same time, we begin preserving records. Transaction logs, balance records, exchanges with users, internal approvals and the history of decisions, and communications with partner businesses. In normal operation these are overwritten or deleted after a set period. When the point is raised, we check the retention settings and secure what is needed separately. Records managed using an external service, in particular, can become unobtainable when the contract for that service ends.

Comparing the contracts, the user-facing screens and the flow of funds

Taking the funds transfer business as the main subject, we compare the registration position, the category under which any registration was granted, and the service actually provided. Prepaid payment instruments are a separate category analyzed differently and are not covered in detail. Where the two are combined, we do not treat the service as a single whole but consider it function by function and by reference to the flow of funds.

What is compared is as follows: the terms of use against what the screens actually display; the partnership agreements against the actual division of roles; the fees displayed against the amounts actually taken. And the flow of funds — into which account money comes, and when, on whose instruction and to where it goes out. Whether funds received from users go first into an account in the provider's own name or into a partner's account, and whether they are kept separate as money held for others, bears in particular on every judgment that follows.

Checking how the conduct in question relates to registration, notification and authorization

Rather than deciding the regulatory position from the name of the service, we compare the conduct actually carried on against the requirements that apply.

The Payment Services Act defines the funds transfer business as carrying on exchange transactions as a business by a person other than a bank or similar institution. A person registered by the Prime Minister may carry on the funds transfer business notwithstanding the provisions of the Banking Act. The Banking Act, for its part, provides that the banking business must not be carried on except by a person licensed by the Prime Minister. In other words, where a person other than a bank or similar institution carries on as a business conduct that amounts to an exchange transaction, registration for the funds transfer business is required unless a special exception applies. Carrying on these businesses without registration or a license may be subject to criminal penalties.

What has to be checked, therefore, is where each act the provider carries out sits within that framework. Even where the name "remittance service" is not used, there may be conduct that is assessed as amounting in substance to an exchange transaction. Conversely, even where the name includes the word remittance, the assessment may differ depending on the flow of funds. In addition to the terms of use and the screen displays, we check from the records who receives the funds, who instructs the remittance, and where the balance sits.

Where the provider is registered, we check how the registered category corresponds to what is actually handled. The Payment Services Act provides that a security deposit for providing funds transfer services must be made according to the category of funds transfer business, and so proceeds on the basis that the treatment differs by category. We compare the transaction amounts, the period for which funds are held and the range of transactions covered against the terms of the registration and the practice, and check for any divergence.

Even while the characterization of the service remains unsettled, we check the deadline for replying to the authority, the transactions already accepted and the whereabouts of funds already received. In parallel with meeting the deadlines, we consider which acts are to be stopped or continued and on what legal basis.

On the steps common to submitting materials to an authority and preparing for interviews, see the guide on responding to investigations by regulatory authorities and to compulsory searches.

2. Deciding how to handle new acceptances, remittances and existing transactions

Separating the stages of acceptance, receipt of funds and remittance

Framing the question as "should we stop the service?" makes it impossible to decide. We separate it stage by stage.

The units of separation are broadly as follows. New user registrations. Acceptance of new transactions. Receipt of funds from users. Holding funds received. Execution of remittance instructions. Arrival of funds and delivery to the payee. Refunds and withdrawals. Each of these is a distinct act, and both the decision whether to stop and the consequences of stopping differ.

For example, stopping new acceptances leaves the holding of funds already received and the execution of remittances continuing. Leaving that state of affairs unaddressed can mean that, in relation to a service said to have been stopped, conduct that may amount to an exchange transaction went on afterwards. Conversely, stopping everything down to the execution of remittances means continuing to hold funds while leaving obligations already owed to users unperformed.

Considering which acts need to be stopped and over what range

Which acts to stop is decided from what has been raised and the legal character of the act in question. The range to be stopped differs according to whether the point raised is carrying on business without registration or, where there is a registration, going beyond the scope of the business. In the latter case, handling that falls within the scope of the registration may be capable of continuing, while the part that goes beyond it has to be separated out.

As to range, we consider whether the separation can be made along lines such as the attributes of users, the type of transaction, the amount bracket, or the destination country or region. Treating a blanket suspension as the only option makes the effect disproportionate and also makes it difficult to explain matters to users.

That said, stopping only part of the service without being able to explain the basis for the line drawn invites the question why that particular range was chosen. If it is taken to mean that only the handling with the greatest effect on revenue was kept going, the seriousness of the corrective effort itself is called into question. Where a line is drawn, we make sure it can be shown, in a form that remains on the record, that the criterion corresponds to what has been raised.

Checking the legal basis and method for processing existing transactions

Where the processing of transactions already accepted is to continue, we set out the basis for it. Whether it is done in performance of contractual obligations to users, or as part of the corrective steps after explaining the position to the authority, affects how records are kept. That said, the existence of a contractual obligation, or the fact that the approach has been explained to the authority, does not by itself make it possible to continue processing that is not permitted under the regulations. Where a registered provider's registration ceases to have effect, there is a mechanism under which it continues to be regarded as a funds transfer service provider to the extent necessary to complete performance of its existing obligations, and we check whether that applies and what range of processing it permits. Where the business was carried on without registration from the outset, that mechanism cannot simply be applied.

In practice, the hard case is where continuing to process may itself be said to be a problem. Even then, holding the funds and doing nothing is not necessarily the safe option. The obligations to users remain, and demands and complaints accumulate as time passes. For both continuing and stopping, we record the reasons and the date on which the decision was taken.

Checking that suspension measures, including automated processing, have taken effect

Once a decision to stop has been taken, we check that it is actually reflected in operation. If the payment system, scheduled batch processing, processing on the partner's side, or acceptance from outside through an API remains live, the statement that processing was stopped and the processing that actually occurs will not match.

This mismatch is one of the points most likely to cause difficulty later in dealings with the authority. If, after a reply stating that acceptances were stopped, transactions dated after that day appear in the records, the reliability of the reply itself is called into question. We record the range of the suspension, the date and time it took effect and how it was verified, and reconcile this against the actual logs.

Checking is not a one-off exercise. After the suspension measures are in place, we check periodically whether transactions are still arising. Where systems are connected to external ones in particular, transactions can come in through a route the provider believed it had closed. And where a suspension measure depends on manual action by an individual, it can be lifted while that person is away. So far as possible, measures are implemented as settings within the systems.

3. Sorting out funds already received and the position with users

Reconciling obligations user by user against the whereabouts and balances of funds

For each user, we set out the amount held, the unprocessed transactions and the obligations that are fixed. At the same time, we check where those funds actually are: in the provider's own account, in a partner's account, on deposit, or mixed with other money.

Where the two do not reconcile, we identify the reason for the difference. Fees not yet taken, funds in transit, a divergence between the system records and the actual balance, or diversion to other uses — what follows differs completely according to the cause. Where diversion is suspected in particular, the matter goes beyond the return of funds and becomes a question of internal investigation.

The reconciliation is carried out at as early a point as possible. The more time passes, the harder it becomes to trace the reason for a divergence between the records and the actual funds. Nor can this work begin only once the authority asks for it. If the position remains one where the only answer that can be given is "we are checking," the adequacy of the provider's management of the funds itself comes into question.

The results of the reconciliation are kept with the date recorded. Balances continue to move afterwards, so a document that does not show the point in time it relates to is of no use in explaining the position.

Checking the applicable arrangements for safeguarding funds and whether there is a shortfall

The Payment Services Act provides that a funds transfer service provider must make a security deposit for providing funds transfer services according to the category of funds transfer business. Where the provider is registered, we check how the amount deposited corresponds to the obligations actually owed. Methods of safeguarding other than deposit are also provided for, so we check which method is used and whether its requirements are met.

Where the point raised is that the business is unregistered, this statutory safeguarding is not in place as a starting point. It therefore becomes necessary to show, as a matter of fact, how users' funds are secured. We check how funds are segregated in practice, in whose name the accounts are held, and whether there has been any mixing with other money. We also check, including under the Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates, whether the practice has been to receive and hold funds that are not used for remittance. Receiving and holding funds does not of itself mean there is a problem, so this is checked from the purpose for which they were received and what then happened to them.

Considering who is to be refunded or paid out and how

Where refunds are to be made, it has to be decided who is to be repaid, how much and in what order. What requires care here is that in some cases the matter cannot be resolved on the basis that "it is the users' money, so it should all be returned."

For an unprocessed remittance, whether the money goes back to the sender or on to the payee varies with the stage the transaction had reached and the terms of the contract. And where the funds available for refunds are not enough to cover everyone, repaying some users first may be called into question later. For fees and for any set-off of mutual claims, we check the contractual basis.

We also check whether the method of making refunds itself gives rise to a regulatory issue. We set out the scope and the method so that a remittance dressed up as a refund is not assessed as a continuation of the very conduct that was stopped. In addition, when refunds or remittances are carried out, procedures for customer identity verification at the time of a transaction and for anti-money laundering measures, and checks under the Foreign Exchange and Foreign Trade Act, may be required, so these are checked before proceeding.

Considering explanations to users and responses to outstanding claims

In explaining matters to users, we distinguish the facts that have been checked from matters not yet checked or decided. Even where checking or deciding takes time, we take account of the deadlines for any required reports or explanations and communicate the position as it then stands and how further information will be provided. What is to happen to the service, how the funds held are to be treated, and by when what will be known. If matters that are not settled are communicated as though they were, a correction has to follow, and the correction itself becomes a fresh problem.

For individual claims from users, we settle in advance who is to handle them and on what criteria. Dealing with them individually without explaining the basis, in particular, leads to differences in treatment being raised later.

For the recovery of funds by a company that has been the victim of a fraudulent remittance, and for responses to a business partner demanding payment again, see the guide on the initial response to business email compromise, and the allocation of loss. That page is written from the position of the company that suffered the loss, and is not for the purpose of deciding the liability of, or defenses available to, a payment service provider.

4. Considering the partnership agreements and changes to how the business is run

Checking the provisions of the partnership agreements on suspension, termination and reporting

A partnership agreement usually provides for what happens where a suspected breach of laws and regulations arises. We check the provisions on reporting obligations, suspension of handling, termination of the contract, allocation of loss, and return of funds.

In terms of order, we look first at whether there is a reporting obligation and by when. A failure to report can itself be relied on later as a basis for termination or for damages. Next we look at the conditions on which the other party may suspend or terminate. Where the drafting is broad — "where there is a risk of a breach of laws and regulations" — it may be argued that the condition is met as soon as an inquiry is received from the authority.

Considering what to tell partner businesses and how costs and liability are shared

What to tell partner businesses, and when, calls for judgment. Not telling them may amount to a breach of the reporting obligation; but it also has to be avoided that what is told is treated as established fact and then diverges from what is said to the authority. The approach is therefore to settle internally first the range of facts that have been established, and to communicate on a footing consistent with the explanation given to the authority.

As to costs and liability, we check both the contractual provisions and the actual division of roles. Where a partner carried out part of the operations, responsibility for that part becomes a point in dispute. Where the contract treats the provider as the principal but in practice the partner received the funds and issued the remittance instructions, the two sides' accounts may diverge.

A partner may also suspend dealings with the provider and then contact users directly. Information then reaches users through two channels, and confusion follows if the two differ. We coordinate with the partner in advance on what users are to be told and when.

Considering changes to who carries on the business, the flow of funds and the scope of outsourcing

As a corrective measure, changing who carries on the business, changing the route the funds take, or changing the scope of what is outsourced may be considered. What requires care here is that entrusting the business to a registered partner does not necessarily remove the need for the provider's own registration.

The fact that a partner holds a registration does not automatically cover the acts the provider itself carries out. Who is carrying on an exchange transaction is determined not only by how the contracts are structured but by who actually receives the funds and on whose instruction the funds move. Where a change is under consideration, we set out concretely the flow of funds and the division of roles after the change, and check the position of each act.

Checking the conditions for transferring unprocessed transactions and user contracts

Where the business is to be transferred, it has to be decided how unprocessed transactions and the contracts with users are to be dealt with. Whether users' consent is required or notice is enough, whether existing obligations transfer, and how the safeguarding of funds is secured before and after the transfer. Proceeding with a transfer before these are settled risks leaving obligations with the original provider, or leaving it unclear who is actually to perform and how the safeguarding of funds is to be switched over.

For the registration and notification requirements, and for the transaction contracts, where a transfer by way of a business transfer or a similar arrangement is under consideration, see the guide on M&A of financial services companies and financial regulation.

5. Explaining the position to the authority and considering how the business is run afterwards

Distinguishing facts checked, legal views and matters not yet checked

In replying to the authority we separate these three clearly. Facts that have been checked are set out with the supporting materials. Legal views are presented as views. Matters not yet checked are identified as such, together with when they are expected to be checked.

What is most to be avoided is stating matters that have not been checked as though they had been. If a correction becomes necessary later, it is the stance taken in the original explanation, more than the substance of the correction, that is called into question. Rather than filling gaps with supposition in order to keep the reply short, stating expressly that a matter has not been checked is more likely to avoid a later correction.

Whether to state a view on the lawfulness of the provider's own conduct is a matter for careful judgment. There are situations in which declining to give a view is taken as a lack of candor, but stating a conclusion before the facts have been checked constrains the position that can be taken later.

Organizing the corrective measures and the materials that evidence them

The corrective measures are set out together with evidence that they were carried out. The acts stopped and the date and time; the changes to operational flows; the state of refunds and settlements; changes to internal arrangements; and measures to prevent recurrence. For each, we organize the materials that evidence implementation — records of system configuration changes, internal approvals, copies of notices to users, and account records.

For anything stated as a plan, we set out when it will be carried out and how that will be verified. A plan that is not carried out leads to a more serious assessment later. Rather than stating a plan that goes beyond what can be delivered, we give priority to limiting its scope and doing what was stated.

Internal arrangements, too, cannot be a matter of form alone. Who makes which decisions, what materials those decisions are based on, and where the record of a decision is kept — these are settled and then actually operated. The fact that internal rules have been drawn up does not by itself explain why the same problem would not arise again.

Checking the procedures required and the conditions for resuming, changing or ending the business

For the future conduct of the business, the options are to continue after going through the registration or other procedures, to continue with changes to the scope or method of the business, or to bring it to an end.

What needs to be checked here is that going through a registration or business change procedure does not resolve the position on the past. Securing lawful operation going forward and the assessment of past conduct are separate questions. Taking the procedural steps has significance as a corrective measure, but it does not mean that past conduct is treated as not having occurred.

Where ending the business is chosen, a temporary suspension of new acceptances is distinguished from abolishing all or part of the funds transfer business. Where a registered provider abolishes the business, we check the procedures laid down in legislation, including giving public notice by 30 days before the date of abolition and posting notice at the business offices, and filing notifications after the public notice and after the abolition. Even after the business is abolished, the discharge of obligations to users, the retention of records and the settlement of accounts with partner businesses remain. Taking into account whether the business is to be succeeded to, we put in place the method of performing those obligations and the arrangements for handling matters through to completion. Proceeding on the basis that the work ends when the service stops leaves the provider facing later claims from users and inquiries from the authority without arrangements in place to deal with them.

Where a disposition such as revocation of registration or suspension of business is in prospect, as a general rule a hearing or an opportunity for explanation is provided, according to the type of disposition. Exceptions are, however, laid down for cases such as those requiring urgency, so we check which procedure applies and its deadlines. We set out in advance what is to be said and at what stage. Depending on the content of a disposition, it may become impossible to carry on business of the same kind for a period, and there may be effects on a person's position as an officer. These consequences inform the decision as to how far to contest matters and from what point to concentrate on corrective steps.

These decisions cannot be separated from cash flow either. Stopping acceptances stops fee income, and making refunds reduces the funds in hand. In drawing up a corrective plan, we also check whether the funds to carry it through to the end will last.

How we assist

Setting out how the business actually operates and the basis of what has been raised

We compare the terms of use, the partnership agreements, the user-facing screens and the flow of funds, and set out how the acts actually carried out correspond to the provisions relied on in what has been raised. We also separate out, stage by stage, the units in which the decision to stop or continue is made.

Assisting with explanations to the authority and with the position towards users and partner businesses

We assist with drafting replies that distinguish facts checked, legal views and matters not yet checked. We also work through explanations to users, the order and method of refunds and settlements, and reports to and discussions with partner businesses, checking that these are consistent with one another.

Assisting with corrective measures and with reviewing how the business is run

We assist with organizing the corrective measures and the supporting materials, with considering changes to who carries on the business, the flow of funds and the scope of outsourcing, and with checking the conditions for resuming, changing or ending the business.

Key legislation and official sources

English translations of legislation are provided for reference. The Japanese texts are authoritative.

Where it appears	Legislation	Source type
Checking how the conduct in question relates to registration, notification and authorization	Payment Services Act（資金決済に関する法律）	Japanese legislation / English translation
Checking how the conduct in question relates to registration, notification and authorization	Banking Act（銀行法）	Japanese legislation / English translation
Checking the legal basis and method for processing existing transactions	Payment Services Act（資金決済に関する法律）	Japanese legislation / English translation
Checking the applicable arrangements for safeguarding funds and whether there is a shortfall	Payment Services Act（資金決済に関する法律）	Japanese legislation / English translation
Checking the applicable arrangements for safeguarding funds and whether there is a shortfall	Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates（出資の受入れ、預り金及び金利等の取締りに関する法律）	Japanese legislation / English translation
Considering who is to be refunded or paid out and how	Foreign Exchange and Foreign Trade Act（外国為替及び外国貿易法）	Japanese legislation / English translation
Considering who is to be refunded or paid out and how	Act on Prevention of Transfer of Criminal Proceeds（犯罪による収益の移転防止に関する法律）	Japanese legislation / English translation
Checking the procedures required and the conditions for resuming, changing or ending the business	Payment Services Act（資金決済に関する法律）	Japanese legislation / English translation
Checking the procedures required and the conditions for resuming, changing or ending the business	Administrative Procedure Act（行政手続法）	Japanese legislation / English translation

Legal information reviewed: 2026-09-18

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This article is provided for general informational purposes only and does not constitute legal advice on any specific matter. Please consult us regarding your specific situation. The content is based on the laws and regulations in effect as of the date of the last update.