Two Types of Confirmation Methods: Ordinary and Strict

Japan’s Anti-Money Laundering (AML) rules require financial institutions to implement measures to prevent money laundering and terrorist financing. To determine the level of risk involved in transactions, two types of confirmation methods are used.

Determining Risk Level

Low-Risk Transactions

For low-risk transactions, ordinary confirmation is conducted at the time of transaction. This involves verifying customer identification and information through a simple process. The business operator must create and retain records of the confirmation items for a certain period of time.

High-Risk Transactions

For high-risk transactions or those involving foreign financial institutions, strict confirmation is required at the time of transaction. This involves confirming the foreign institution’s system for confirmation at the time of transaction and the status of the transaction. The business operator must also notify the competent supervisory agency of any suspicion of money laundering.

Types of Confirmation Methods

Ordinary Confirmation

• Conducted at the time of transaction
• Verifies customer identification and information through a simple process
• Business operator creates and retains records of confirmation items for a certain period of time

Strict Confirmation

• Required for high-risk transactions or those involving foreign financial institutions
• Confirms foreign institution’s system for confirmation at the time of transaction and status of transaction
• Business operator notifies competent supervisory agency of any suspicion of money laundering

Consequences of Non-Compliance

Failure to implement effective AML measures can result in severe consequences, including:

• Criminal penalties
• Administrative sanctions

Financial institutions must ensure that they comply with the AML rules and maintain accurate records of their transactions.

Conclusion

In conclusion, Japan’s AML rules require financial institutions to implement two types of confirmation methods: ordinary and strict. The type of confirmation method used is determined by the level of risk involved in the transaction. Financial institutions must create and retain records of the confirmation items and notify the competent supervisory agency of any suspicion of money laundering. Failure to comply with these requirements can result in severe consequences.