Financial Crime World

Drug Crimes as Predicate Offenses for Concealing Proceeds

In an effort to combat drug-related crimes, Japan has strengthened its laws to prevent the concealment of proceeds from such offenses. The country’s authorities have also stepped up efforts to confiscate or forfeit illegal assets.

Strengthened Laws and Measures

Under the Act on Punishment of Financing to Offences (TF Act), individuals and organizations found guilty of providing funds for terrorist activities can face severe penalties. Similarly, the Terrorist Asset Freezing Act (TAFA) aims to regulate domestic transactions by international terrorists and prevent the flow of funds to such groups.

Risk-Based Approach

Japan’s National Public Safety Commission has developed a risk-based approach to identify and assess money laundering (ML)/terrorist financing (TF) risks in various sectors. The commission publishes an annual report, which specifies and assesses ML/TF risks for each category of transactions by specified business operators.

  • Financial institutions (FIs), such as banks and insurance companies, are required to take risk reduction measures, including customer due diligence and the reporting of suspicious transactions.
  • Authorities closely monitor FIs’ compliance with these requirements.

Beneficial Ownership

To prevent the misuse of legal persons, Japan has implemented measures to improve transparency in beneficial ownership (BO). FIs and other specified business operators are obliged to verify information about BO at the time of specified transactions with corporate customers. Notaries also verify BO information when certifying articles of incorporation for founding legal persons.

Utilization of FIU

Japan’s Financial Intelligence Unit (FIU), known as Japan Financial Intelligence Center (JAFIC), plays a crucial role in:

  • Receiving and analyzing suspicious transaction reports
  • Disseminating analysis results to law enforcement agencies
  • Supporting the government’s anti-money laundering/combating terrorist financing (AML/CFT) measures

Enforcement and Asset Freezing

To combat ML/TF, Japan has implemented strict measures, including investigation, prosecution, and asset freezing. The country has also signed agreements with foreign FIUs to exchange information on AML/CFT measures.

  • In response to the September 2001 terrorist attacks in the United States and North Korea’s development of weapons of mass destruction, Japan has frozen assets of terrorists, including those related to Taliban and others involved in North Korea’s and Iran’s proliferation of weapons of mass destruction.

Conclusion

Japan’s efforts to combat drug-related crimes have led to significant progress in preventing the concealment of illegal proceeds. The country’s risk-based approach, utilization of FIU, and enforcement measures have all contributed to a robust AML/CFT regime. As Japan continues to strengthen its laws and policies, it is well-positioned to remain a leader in the fight against money laundering and terrorist financing.