Financial Crime World

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FATF Revises AML/CFT Guidelines, Japan Adapts to New Requirements

June 2003 - The Financial Action Task Force (FATF) has revised its “40 Recommendations” for combating money laundering and terrorist financing, expanding the scope of operators required to implement customer identification and other measures. In response, Japan’s financial authorities have taken steps to align domestic regulations with the new guidelines.

Japan’s AML/CFT Regime

In 1992, Japan enacted the Anti-Drug Special Provisions Law, which criminalized money laundering activities connected with drug crimes and established a suspicious transaction reporting system for financial institutions. However, a 1994 FATF mutual evaluation highlighted limitations in the scope of predicate offenses for money laundering, leading to the enactment of the Act on Punishment of Organized Crimes in 2000.

  • The act extended the scope of predicate offenses and introduced a more comprehensive suspicious transaction reporting regime.
  • In 2002, Japan enacted the Act on Punishment of Financing of Offences of Public Intimidation to combat terrorist financing, while also revising the Act on Punishment of Organized Crimes to include terrorist financing as a predicate offense.

Recent Developments

In November 2005, Japan’s government publicized an Action Plan for Prevention of Terrorism, which included implementing the re-revised FATF Recommendations. A draft bill was submitted to the National Diet in February 2007 and became law as the Act on Prevention of Transfer of Criminal Proceeds in March 2008.

  • The act extended the scope of application to business operators required to implement customer identification and transferred the Financial Intelligence Unit (FIU) from the Financial Services Agency to the National Public Safety Commission/National Police Agency.
  • The law was partially enforced in April 2007, with full enforcement taking place in March 2008.

Ongoing Efforts

In response to flaws identified by the Third FATF Mutual Evaluation, Japan’s government has been working to improve its AML/CFT regime. In January 2010, a meeting of business operators on customer due diligence for measures against money laundering was held, and the results were reported in July of that year.

  • The government has also continued to address ongoing issues related to Furikome Fraud and other crimes, including the use of call forwarding service providers as tools for illicit transfers.
  • A bill amending the Act on Prevention of Transfer of Criminal Proceeds was submitted to the National Diet in April 2011 and became law on June 28, with full enforcement taking place on April 1, 2013.

Conclusion

Japan’s financial authorities have taken significant steps to adapt to the FATF’s revised AML/CFT guidelines, implementing new measures to prevent money laundering and terrorist financing. Ongoing efforts to address flaws identified by international evaluations and domestic issues related to crime will continue to shape Japan’s AML/CFT regime in the years ahead.