Financial Crime World

FATF’s Revised Recommendations Lead to Strengthened AML/CFT Regime in Japan

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TOKYO, JAPAN - The Financial Action Task Force (FATF) has revised its “40 Recommendations” several times since 2003 to combat money laundering and terrorist financing. This global effort has prompted Japan to strengthen its anti-money laundering and combating the financing of terrorism (AML/CFT) regime.

Early Developments

  • In 1992, Japan implemented the Anti-Drug Special Provisions Law, which criminalized money laundering activities connected with drug crimes for the first time in the country.
  • The law also established a suspicious transaction reporting system for financial institutions. However, this system was limited to illegal drug crimes, and it was difficult for financial institutions to determine if each transaction was actually related to drug crimes.

Enforcement of Act on Punishment of Organized Crimes

  • In response to FATF’s mutual evaluation in 1994, which pointed out the limitations of the predicate offences for money laundering, Japan enacted the Act on Punishment of Organized Crimes and Control of Crime Proceeds in February 2000.
  • This law extended the scope of predicate offences for money laundering and included other serious crimes besides illegal drug crimes.

Further Revisions

  • In July 2002, Japan enacted the Act on Punishment of Financing of Offences of Public Intimidation to implement the International Convention for the Suppression of the Financing of Terrorism.
  • The same year, the Act on Punishment of Organized Crimes was partly revised to include terrorist financing as a predicate offence.
  • To implement customer identification requirements under the FATF Recommendations and the International Convention for the Suppression of the Financing of Terrorism, Japan enacted the Law on Customer Identification by Financial Institutions etc. in January 2003.

Recent Developments

  • In response to the FATF’s revised recommendations in 2003, Japan publicized an Action Plan for Prevention of Terrorism in December 2004.
  • The plan included implementing the re-revised Recommendations, and a draft law was submitted to the National Diet in February 2007.
  • The Act on Prevention of Transfer of Criminal Proceeds was enacted in March 2007.

Amendments

  • A bill on amendments to the Act on Prevention of Transfer of Criminal Proceeds was submitted to the National Diet in April 2011, and a law for the amendment was enacted on June 27, 2011.
  • The government has since considered working on the flaws pointed out by the Third FATF Mutual Evaluation conducted between 2007 and 2008.

Conclusion

Japan’s AML/CFT regime has undergone significant changes since the FATF’s revised recommendations were introduced. The country has implemented various laws and regulations to combat money laundering and terrorist financing, including the Act on Prevention of Transfer of Criminal Proceeds, which was fully enforced in April 2013.