Financial Crime World

Money Laundering Detection Methods Gain Traction in Japan’s Financial Sector

In a bid to combat financial crimes and maintain its reputation as a global financial hub, Japan has been strengthening its anti-money laundering (AML) measures. The country’s AML/Counter-Terrorism Financing (CFT) regulations have become increasingly stringent, with various laws and acts aimed at detecting and preventing money laundering, terrorist financing, and other financial crimes.

Key Laws and Regulations

Act on Prevention of Transfer of Criminal Proceeds (APTCP)

Enacted in 2007 and revised in 2016, the APTCP is at the heart of Japan’s AML efforts. The law requires specified business operators to conduct customer due diligence (CDD) when:

  • Establishing relationships or conducting transactions exceeding a certain amount
  • Suspicions of money laundering arise

Specified businesses must also keep transaction records for at least seven years and report suspicious transactions to the Japanese Financial Intelligence Centre (JAFIC).

Other Key Legislation

  • Financial Instruments and Exchange Act (FIEA): Focuses on securities-related businesses, sets out provisions for CDD, and requires suspicious transaction reporting.
  • Foreign Exchange and Foreign Trade Act (FEFTA): Requires banks and financial institutions to conduct CDD on overseas remittances exceeding 100,000 yen to prevent money laundering.
  • Act on Prevention of Financing of Terrorism: Criminalizes the act of financing terrorism, attempts, or conspiracies. Imposes strict penalties for those found guilty of supporting or facilitating terrorist activities.

Implementation and International Cooperation

Financial institutions are required to implement measures to detect and report suspicious transactions linked to terrorism financing. International cooperation is emphasized, with provisions facilitating the exchange of information and coordination with foreign governments and international organizations.

Freezing Assets Suspected of Terrorist Activities

The ability to freeze assets suspected of being involved in terrorist activities is another essential tool in Japan’s fight against terrorism financing. The country’s AML/CFT regulations aim to strike a balance between preventing financial crimes and ensuring the stability of its financial system, while also meeting international obligations.

Conclusion

As Japan continues to strengthen its AML measures, it is expected that the country will become an even more attractive destination for foreign investment and businesses, while maintaining its reputation as a leader in global finance.