Banks Take Extra Precautions to Verify Customer Information

In recent years, Japanese banks have been taking a more proactive approach in verifying customer information, especially in cases where customers’ personal details may have changed.

The Rise of Deposit Account Fraud

According to industry insiders, this increased scrutiny is largely due to the rise of deposit account fraud, which has seen criminals open accounts using fake identities and then sell them on the black market. To combat this, banks are now required to:

• Confirm visitors’ stay periods in Japan
• Check if their accounts are still active before they leave the country
• Request closure of the account upon their departure

Asset Freezes and Transaction Monitoring

In addition, banks are also implementing measures to prevent money laundering and terrorist financing (ML/TF). This includes:

• Screening customers against databases of anti-social forces and sanctioned persons during the onboarding process
• Monitoring transactions for suspicious activity
• Freezing accounts if a customer is found to be involved in fraudulent activities based on a victim’s report or request from the police

Enforcement and International Cooperation

The Financial Services Agency (FSA) has strengthened its inspections of financial institutions’ anti-money laundering and combating the financing of terrorism (AML/CFT) measures, with a focus on risk-based supervision. Japan is also a member of the Financial Action Task Force (FATF) and has developed its legal framework for AML/CFT based on FATF recommendations.

Data Protection and Whistleblower Protection

In addition to AML/CFT measures, Japan has laws in place to protect personal data and whistleblowers. Under the Act on the Protection of Personal Information:

• Obligated entities must obtain a customer’s consent before providing their personal data to third parties, unless an exemption applies
• The Whistleblower Protection Act protects employees from dismissal or other unfavourable treatment as a result of reporting money laundering to their employer

Outlook

As the FATF plans to start its fifth round of mutual examinations in 2024, it is likely that Japan’s regulatory authorities will continue to closely supervise financial institutions and impose administrative penalties on those with inadequate governance arrangements. With the increasing strictness and sophistication of AML/CFT measures, customers can expect even more scrutiny from their banks in the future.