Japan’s Comprehensive Approach to Financial Crime

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Preventing Money Laundering and Terrorist Financing

In a bid to prevent money laundering and other financial crimes, Japan has established a robust domestic regulatory regime that imposes customer due diligence (CDD) obligations on financial institutions and designated non-financial businesses and professions.

• The Act on Prevention of Transfer of Criminal Proceeds provides preventive measures in combating money laundering and terrorist financing by requiring specified business operators to:
  • Perform CDD
  • Prepare and preserve transaction records
  • File suspicious transaction reports

Financial institutions, including non-banks, are required to take necessary customer due diligence measures, such as:

• Customer and beneficial owner identification
• Maintaining information obtained by the measures and transaction records
• Reporting suspicious transactions to the Financial Intelligence Unit

Ensuring Effectiveness of Obligations

To ensure effectiveness of these obligations imposed on financial institutions, the Financial Services Agency and other competent authorities conduct necessary on-site inspections, focusing on their compliance with the requirement.

International Cooperation

Japan has also demonstrated its commitment to international cooperation in combating financial crime. As one of the founding members of the Financial Action Task Force (FATF), JAFIC has been a very active contributor to its work since its establishment in 1989. Likewise, JAFIC is one of the founding members of Asia/Pacific Group on Money Laundering (APG) since its establishment in 1998.

Border Controls

Japan requires individuals who are departing and entering Japan to declare to Minister of Finance (Customs) beforehand in accordance with the Foreign Exchange and Foreign Trade Act. Individuals are obliged to declare:

• Total amount of cash (including foreign currency)
• Checks (including traveler’s checks)
• Promissory notes
• Securities exceeding 1 million JPY (or their equivalent)

Electronic Transfer of Funds

The Act on Prevention of Transfer of Criminal Proceeds prescribes obligations on financial institutions, including money remitters, to identify the originator of electronic transfer and maintain records of such transactions.

Regional and Multilateral Initiatives

Japan has sent officials from JAFIC to the annual meetings and typology studies to share information and analyze the latest money laundering and terrorist financing trends. The country has also demonstrated its commitment to using mutual legal assistance, administrative or judicial cooperation in cases of money laundering among law enforcement, judicial authorities, and financial regulatory authorities.

Challenges and Future Plans

Despite these efforts, Japan still faces challenges related to coordinating agencies responsible for combating money laundering with regard to global, regional, and bilateral cooperation. The country also needs to strengthen its monitoring of compliance by banks and other reporting entities with the AML preventive measures.

Japan requires technical assistance in relation to some of these measures. However, no specific forms of technical assistance have been requested at this time.