Financial Crime World

Financial Action Task Force (FATF) Recommendations in Japan: A Mixed Bag of Compliance

The Financial Action Task Force (FATF) has released its latest report on Japan, assessing the country’s compliance with recommendations aimed at preventing money laundering and terrorist financing. The Follow-Up Report 2023 highlights both strengths and weaknesses in Japan’s efforts to combat financial crime.

Compliance Highlights

  • Risk Assessment: Japan scored highly on R.1 Assessing risk and applying a risk-based approach, deemed “compliant” by the FATF.
  • National Cooperation: Japan has made significant progress in R.2 National cooperation and coordination, praised by the report for its efforts in this area.

Areas of Concern

  • Money Laundering Offence: Japan was found to be “partially compliant” with R.3 Money laundering offence due to concerns over the definition of money laundering and its application in practice.
  • Terrorist Financing Offence: Japan’s performance on R.5 Terrorist financing offence was deemed “partially compliant”, with issues related to the lack of a specific terrorist financing offence in Japanese law.

Non-Compliance

  • Financial Institution Secrecy Laws: Japan was found to be “non-compliant” with R.9 Financial institution secrecy laws, due to concerns over the lack of adequate safeguards against secrecy and limited scope of information sharing between financial institutions and law enforcement agencies.

Progress in Other Areas

  • Customer Due Diligence: Japan has implemented robust customer due diligence measures across various sectors, commended by the report for its efforts on R.10 Customer due diligence.

The FATF Recommendations

The Financial Action Task Force (FATF) is an international agency that sets standards aimed at preventing money laundering and terrorist financing. The agency assesses countries’ compliance with these recommendations through regular follow-up reports.

Conclusion

Japan’s mixed performance in the latest report highlights both its strengths and weaknesses in combating financial crime. To ensure compliance with international standards and maintain a strong reputation for financial integrity, Japan will need to address its shortcomings.