What is a performance bond? Regulations on money transfer business operators
Updated: July 2025, 7
Money transfer service providers are required to provide a performance bond as part of regulations to ensure the safekeeping of users' funds. This article provides a detailed explanation of the regulations imposed on money transfer business operators, such as the deposit of a performance bond.
Funds transfer service providers are obligated to secure at least 100% of the funds they have received from users that are still outstanding through a performance security deposit or other such arrangement. The purpose of this is to protect users' funds even in the unlikely event that the money transfer service provider goes bankrupt.
How the amount of protection is calculated
The sum of the "amount of unpaid debt on each business day (※)" and the "amount of expenses related to the refund procedure" isPerformance guarantee amount requiredIt's called. Funds transfer service providers must keep track of this required performance guarantee amount each business day. The method for calculating the actual amount to be secured varies depending on the type of money transfer business, but we will explain it using the case of Type 2 as an example.
(*) Undelivered debts generally refer to funds that a money transfer service provider has received from a user but has not yet completed the transfer. However, how undelivered debts are perceived varies by service provider.
Calculation example (for Type II funds transfer business)
When business days are Monday through Friday, the unpaid debt calculation time is 18:1 p.m., and the fixed period is one week: ① Calculate the amount of outstanding debt as of 18:XNUMX p.m. on each business day. ② Calculate the "amount of expenses related to the refund procedure" using the method below and add it to the amount of the unpaid debt (calculation of the required performance guarantee amount).
When the amount of the unpaid debt is 1 million yen or less,Amount of outstanding debt x 5%
When the amount of unpaid debt exceeds 1 million yen,(Amount of unpaid debt - 1 million yen) x 1% + 500 million yen
③The highest of the above
[Example]
Monday: Amount of outstanding debt > 1,500 million yen ⇒ Required performance guarantee amount > 1,575 million yen
Tuesday: Amount of outstanding debt > 2,500 million yen ⇒ Required performance guarantee amount > 2,625 million yen
Wednesday: Amount of outstanding debt > 2,000 million yen ⇒ Required performance guarantee amount > 2,100 million yen
Thursday: Amount of outstanding debt > 1,800 million yen ⇒ Required performance guarantee amount > 1,890 million yen
Friday: Amount of outstanding debt > 1,000 million yen ⇒ Required performance guarantee amount > 1,050 million yen
In this case, the highestTuesday 2,625 million yenis the amount required for conservation.
Please note that there is a lower limit to the required performance guarantee amount (minimum required performance guarantee amount). This also depends on the type of money transfer business, but for the second type it is 1,000 million yen. If the amount of the unpaid debt is 500 million yen, the required performance guarantee amount would be 525 million yen, but in reality it is 1,000 million yen.
Regarding the deposit deadline
The deadlines for deposits are set by law as follows:
First type: From the reference dateWithin 2 business days
Type 2 and Type 3: From the reference dateWithin 3 business days
The base date can be set by the Funds Transfer Service Provider at its discretion. For example, if the base date is a Sunday, in the above example, 2,625 million yen would need to be secured by Wednesday.
If the amount already secured exceeds 2,625 yen, no additional security is required.
Performance deposit and preservation method
As a method of securing the performance deposit, the Funds Transfer Service Provider may choose one or more of the following methods:
Conservation method
Description
Depository, etc.
deposit of money
Deposit cash.
Depository office (Legal Affairs Bureau) nearest to the funds transfer service provider
Deposit by debt
Deposit government bonds, local government bonds, etc.
Conclusion of maintenance contract
Instead of depositing a performance bond, you can conclude a performance bond preservation contract with a financial institution and notify the finance (branch) director, etc. of this agreement.
(Partners with whom maintenance contracts are concluded) - Banks, etc. (including foreign bank branches) - Life insurance companies - Non-life insurance companies that meet certain requirements
Conclusion of trust agreement
In lieu of depositing a performance bond, a trust company etc. concludes a performance bond preservation contract, receives the approval of the finance (branch) director, etc., entrusts the property, and notifies the finance (branch) director, etc. to that effect.
Trust contracts can be concluded with: ・Trust companies, foreign trust companies (limited to companies licensed in Japan) ・Trust banks
In addition, for Type 3 funds transfer businesses, fund management known as deposit management is also permitted.
Other regulations
User protection measures
Funds transfer service providers are required to take the following measures to protect users.
(1) Measures must be taken to prevent customers from mistaking the transaction as a foreign exchange transaction conducted by a bank, etc. (2) Providing information to users such as fees and other contract details. (3) When receiving funds such as remittance amount, issue a receipt. (4) Establish company rules, etc., and provide training, etc. to employees. etc
Response to the financial ADR system
Funds transfer businesses are subject to the alternative dispute resolution system (financial ADR system), so they must take the following two measures related to funds transfer businesses based on the law.
In general, in many cases, a company joins the Japan Payment Services Association, a certified payment service association, and takes measures to handle complaints and resolve disputes by following its regulations.
If you join the Japan Payment Services Association (General Incorporated Association), you will be able to receive the following services.
(1) Complaints related to the funds transfer industry can be resolved through complaint resolution conducted by the association. (2) By utilizing the agreement concluded between the Association and three bar associations in Tokyo to resolve disputes related to the funds transfer industry, it is possible to resolve disputes related to the funds transfer industry.
Summary of this page
Money transfer business operators are required to secure a performance bond of at least 1,000 million yen.
Methods for depositing a performance bond include depositing money or a claim, or entering into a security agreement or trust agreement.
Money transfer businesses are required to take various measures to protect users.
Money transfer service providers are required to take measures to handle complaints and resolve disputes.
Complaint handling and dispute resolution measures are often implemented by joining the Japan Payment Services Association (a general incorporated association).
For consultation regarding funds transfer business registration, please contact Support Administrative Scrivener Corporation
At Support Administrative Scrivener Corporation, we provide application support and consulting regarding the Fund Settlement Act for both those newly entering the funds transfer industry and existing funds transfer companies.
Funds transfer business registration is highly specialized and can be said to be one of the fields in which there are few administrative scriveners who can handle it. We provide legal services related to the funds transfer industry based on the know-how and track record that we can accumulate because we are administrative scriveners who handle applications and negotiations with administrative agencies on behalf of companies on a daily basis.
The first interview is free of charge. Please feel free to contact us.
Administrative Scrivener Chief Consultant Certified AML Specialist Yu Shimizu
