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The Evolution of Anti-Money Laundering (AML) Measures in Japan

1. Initial Efforts (1992-2000)

In 1992, Japan enacted the “Anti-Drug Special Provisions Law” to combat money laundering related to drug crimes. This law established a suspicious transaction reporting system for financial institutions and introduced measures to prevent activities encouraging illicit conduct.

However, in 1994, the FATF (Financial Action Task Force) mutual evaluation of Japan highlighted concerns about the limited scope of predicate offenses for money laundering, which only included illegal drug crimes. This led to difficulties in determining whether transactions were related to drug crimes, rendering the suspicious transaction reporting system ineffective.

2. Expansion of AML Measures (2000-2003)

To address these issues, Japan enacted the “Act on Punishment of Organized Crimes and Control of Crime Proceeds” in 2000. This law expanded the scope of predicate offenses for money laundering to include other serious crimes and designated the Financial Supervisory Agency as the FIU (Financial Intelligence Unit).

3. Response to International Developments (2002-2004)

Following the terrorist attacks in the US, Japan enacted the “Act on Punishment of Financing of Offences of Public Intimidation” in 2002 to implement the International Convention for the Suppression of the Financing of Terrorism. The law also revised the Act on Punishment of Organized Crimes to include terrorist financing offenses and introduced customer identification requirements.

4. Extension of AML Measures (2004-2013)

In response to the FATF’s re-revised Recommendations, Japan enacted the “Act on Prevention of Transfer of Criminal Proceeds” in 2007. This law extended the scope of business operators required to implement customer identification and transferred the FIU from the Financial Services Agency to the National Police Agency.

5. Ongoing Efforts (2010-2013)

The Japanese government has continued to address flaws pointed out by the FATF’s mutual evaluation, including improving customer due diligence measures. A bill amending the Act on Prevention of Transfer of Criminal Proceeds was enacted in 2011 and came into effect in 2013.

Conclusion

Overall, Japan’s anti-money laundering measures have evolved over time to address emerging threats and international developments, with a focus on expanding the scope of predicate offenses, improving customer identification requirements, and enhancing financial intelligence.