Financial Crime World

FATF Revises “The 40 Recommendations” Again, Japan Enacts New Laws to Implement Measures

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June 2003 - The Financial Action Task Force (FATF) has revised its “40 Recommendations” for the second time, extending the scope of operators required to take measures against money laundering and terrorist financing. In response, Japan has enacted new laws to implement these recommendations.

Japan’s Anti-Money Laundering Regime

Since 1992, Japan has developed its anti-money laundering regime step by step in accordance with international initiatives.

Key Developments

  • Criminalized money laundering activities connected with drug crimes
  • Established a suspicious transaction reporting system for financial institutions
  • Enacted the “Act on Punishment of Organized Crimes” in 2000 to address issues raised by the FATF’s mutual evaluation in 1994
    • Extended the scope of predicate offenses for money laundering
    • Introduced a new regime for reporting suspicious transactions

New Laws Enacted

Following the terrorist attacks in the US, Japan enacted several new laws to combat terrorism financing and money laundering.

Key Laws

  • “Act on Punishment of Financing of Offences of Public Intimidation” (2002)
    • Implemented the International Convention for the Suppression of the Financing of Terrorism
  • “Customer Identification Act” (2003)
    • Requires financial institutions to identify their customers and report suspicious transactions
    • Extended the scope of predicate offenses for money laundering to include terrorist financing

Recent Developments

Action Plan and Draft Bill

  • Japan’s government published an action plan in December 2004 to implement the revised FATF recommendations
  • A draft bill was submitted to the National Diet in November 2005 to establish a new law on preventing the transfer of criminal proceeds

Enacted Laws

  • “Act on Prevention of Transfer of Criminal Proceeds” (March 2007)
    • Transferred the Financial Intelligence Unit (FIU) from the Financial Services Agency to the National Police Agency
    • Extended the scope of application to business operators required to implement customer identification
  • Amendments to the Act on Prevention of Transfer of Criminal Proceeds (April 2011)
    • Addressed flaws pointed out by the FATF’s third mutual evaluation
    • Strengthened measures against money laundering and terrorist financing

Conclusion

Japan has made significant progress in implementing anti-money laundering and combating the financing of terrorism (AML/CFT) measures since 1992. The country has enacted several laws to implement the revised FATF recommendations, including the “Act on Prevention of Transfer of Criminal Proceeds” and the “Customer Identification Act”. Japan’s AML/CFT regime is expected to continue evolving in response to emerging threats and best practices.