Risk-Based Approach to Anti-Money Laundering Key to Combating Financial Crime in Japan
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Despite years of effective measures, Japan continues to face significant risks of money laundering, terrorist financing, corruption, and fraud. The rapid growth of the crypto sector has created vulnerabilities that have not yet been fully regulated, leaving the system susceptible to financial crimes.
The Growing Concern of Money Laundering in Japan
According to recent reports, the number of money laundering cases increased by 40% to 511 in 2018, with cryptocurrencies playing a major role in this surge. The COVID-19 pandemic has further exacerbated these risks, as non-face-to-face transactions have become more common than ever before.
Suspicious Transaction Reports on the Rise
In its latest report on prevention of transfer of criminal proceeds, Japan’s National Police Agency revealed a steady increase in suspicious transaction reports since 2016. A staggering 530,150 cases were reported in 2021, with banks being the primary source of these reports, accounting for approximately 73.6% of all reported cases.
Laws and Regulations to Combat Financial Crime
Japan has enacted several laws and regulations to combat financial crime, including:
- Act on Special Provisions for the Narcotics and Psychotropics Control Act
- Act on Punishment of Organised Crimes
- Act on Prevention of Transfer of Criminal Proceeds
Under Japanese criminal procedure, public prosecutors have discretion in deciding whether to bring charges against individuals accused of money laundering. In cases where a suspect is charged, the court assesses the available evidence and renders a verdict regarding the defendant’s guilt.
FATF Evaluation and National AML/CTF/CPF Action Plan
Japan’s Financial Action Task Force (FATF) status was evaluated in its 4th round of Mutual Evaluation Report in August 2021. The report highlighted improvements compared to previous evaluations but also identified areas requiring attention, including enhanced supervision of financial institutions and designated non-financial businesses and professions.
In response to the report, Japan unveiled a three-year National AML/CTF/CPF Action Plan to implement necessary legislative actions effectively. Collaboration between the public and private sectors is crucial in achieving this goal.
Swift Implementation of FATF Standards
The FATF’s Second 12-Month Review Report on Standards for Virtual Assets and Virtual Asset Service Providers emphasizes the importance of swift implementation of FATF standards by both the public and private sectors to prevent regulatory loopholes.
Adopting a Risk-Based Approach to Anti-Money Laundering
To maintain a proactive stance on anti-money laundering regulations, Japan needs to adopt a risk-based approach. Sanction Scanner offers expert solutions that enable institutions to fulfill their AML obligations while gaining valuable insights into Japan’s dynamic AML environment.
By contacting us for a demonstration, you can learn how our AML solutions can influence compliance in Japan and beyond.
Conclusion
In conclusion, Japan faces significant risks of money laundering, terrorist financing, corruption, and fraud. To combat these risks, it is essential to adopt a risk-based approach to anti-money laundering regulations. Sanction Scanner’s expert solutions can help institutions fulfill their AML obligations and stay ahead of the curve in Japan’s dynamic AML environment.