Financial Crime World

History of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Efforts in Japan

In response to increasing international awareness of anti-money laundering (AML) and countering the financing of terrorism (CFT), Japan has developed its AML/CFT measures. The following is a chronological overview of significant developments:

1. Enforcement of “the Anti-Drug Special Provisions Law” (1992)

Japan’s AML efforts began with the enforcement of this law in July 1992, which aimed to combat drug-related crime proceeds. The law established the suspicious transaction reporting system for financial institutions and criminalized money laundering activities connected with drug crimes.

2. Enforcement of “the Act on Punishment of Organized Crimes” (2000)

In response to a 1994 FATF mutual evaluation recommendation, Japan extended the scope of predicate offenses for money laundering to include other serious crimes beyond drug-related crimes. The law also mandated the Financial Services Agency to serve as the Financial Intelligence Unit (FIU) and established the Japan Financial Intelligence Office.

3. Enforcement of “the Act on Punishment of Financing of Offences of Public Intimidation” and Amendments to “the Act on Punishment of Organized Crimes” (2002)

Following the 9/11 terrorist attacks, Japan enforced this law to join the International Convention for the Suppression of the Financing of Terrorism. The law criminalized terrorist financing and collecting funds for terrorism.

4. Enforcement of “the Act on Customer Identification by Financial Institutions” (Customer Identification Act) (2003)

To implement international obligations on customer identification and record keeping, Japan enforced this act.

5. Development of “the Act on Prevention of Transfer of Criminal Proceeds” (2007)

In response to recommendations from the 40 Recommendations, Japan extended the scope of businesses subject to customer due diligence (CDD) and other obligations to include designated non-financial businesses and professions (DNFBPs).

Key Developments:

  • Expanded CDD requirements for DNFBPs
  • Strengthened customer identification procedures

6. Amendments to “the Act on Prevention of Transfer of Criminal Proceeds” (2011-2013)

Following discussions on recommendations from the 3rd FATF Mutual Evaluation of Japan, amendments were made to strengthen customer due diligence, add call forwarding service providers to specified business operators, and enhance penalties for illicit transfer of passbooks.

Key Developments:

  • Enhanced customer due diligence requirements
  • Added call forwarding service providers as specified business operators
  • Increased penalties for illicit transfer of passbooks

7. Establishment of the International Terrorist Asset-Freezing Act (2015)

Japan established this act in October 2015, following the amendment of the CFT Act in December 2014.

Please note that the above is a summary of significant developments in Japan’s AML/CFT efforts and may not be an exhaustive list.