Financial Crime World

Risk-Based Approach to Anti-Money Laundering in Japan Faces Scrutiny: Experts Weigh In on Compliance Strategies

FATF Report Highlights Areas for Improvement

A recent report by the Financial Action Task Force (FATF) has identified areas where Japan can enhance its risk-based approach to anti-money laundering (AML) and combating the financing of terrorism (CFT). The assessment noted that while Japan has a good understanding of the main elements of money laundering and terrorism financing risks, there are several areas where national risk assessments and other assessments could be further improved.

Challenges in Implementing Risk-Based Approach

  • Some financial institutions have a limited understanding of their AML/TF risks, which can impact the application of the risk-based approach to money laundering recommended by the FATF.
  • Designated non-financial businesses and professions (DNFBPs), such as casinos, real estate professionals, and law firms, were found to have a low level of understanding of AML/TF risks and obligations.

Lack of Coordination between Government Agencies

  • The report identified issues arising from a lack of coordination between various government agencies, with some areas requiring more interagency cooperation for the development of AML/CFT policies.
  • The Japanese government has announced plans to set up a cross-agency team, including the Financial Services Agency (FSA) and the Justice Ministry, to target money laundering.

Expert Insights: Key Elements of Best Practice

According to LexisNexis Risk Solutions, experts agree that technology and intelligent analysis of quality data are key to efficient and effective AML processes. The following elements are essential for best practice:

  • Make use of technology: New digital technologies, including artificial intelligence and machine learning, have the potential to make AML/CFT measures faster, cheaper, and more effective.
  • Adopt a risk-based approach: A risk-based approach combined with technology offers more effective and efficient protection at a lower cost.
  • Update and upgrade: It is essential to keep software up to date by upgrading when necessary and updating regularly. Screening capabilities are continually being improved, offering the most comprehensive protection.
  • Get the most out of your data: Financial institutions have access to huge amounts of structured and unstructured data, which is invaluable in the fight against financial crime.

Staying Ahead of Regulatory Requirements

To stay ahead of regulatory requirements and protect themselves, organizations in Japan can benefit from adopting advanced AML/CFT solutions that leverage technology and intelligent analysis of quality data. LexisNexis Risk Solutions offers advanced financial crime screening solutions and dependable watch list data. For more information on how to review your current process and achieve greater effectiveness in complying with regulations, contact us today.