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Japan’s AML/CFT Measures Receive Boost in Latest FATF Report

Tokyo, Japan - The Financial Action Task Force (FATF) has upgraded Japan’s technical compliance rating on Recommendation 2 from Partially Compliant to Largely Compliant, citing significant progress made by the country in addressing deficiencies in its anti-money laundering and counter-terrorist financing (AML/CFT) framework.

Progress Made

According to a report released by FATF, Japan has taken concrete steps to strengthen its national cooperation and coordination framework. This includes:

  • The establishment of an Inter-Ministerial Council for AML/CFT & CPF Policy
  • Issuance of an action plan addressing deficiencies related to national cooperation and coordination, as well as combating terrorist financing activities

Addressing Deficiencies

The report highlights Japan’s progress in addressing technical compliance deficiencies identified in its previous Mutual Evaluation Report (MER). These include:

  • Establishment of a task force to promote strengthening of terrorist financing investigation and prosecution
  • Enhancing risk understanding on terrorist financing by obliged entities
  • Improving implementation of asset freezing measures

Minor Gaps Remain

While Japan has made significant progress, minor gaps remain. The report notes that it is unclear whether the mandate of the Inter-Ministerial Council would fully satisfy the requirements of criterion 2.5 related to data protection.

Enhanced Follow-up

Japan will continue to remain in enhanced follow-up with FATF and will inform the organization of its progress in implementing AML/CFT measures. The country’s upgrade in technical compliance rating reflects its commitment to strengthening its AML/CFT framework and combating financial crime.

Technical Compliance Ratings

The FATF report provides a technical compliance rating for Japan on each of the 40 Recommendations, with four possible levels: Compliant (C), Largely Compliant (LC), Partially Compliant (PC), and Non-Compliant (NC).

Here are some key takeaways from the report:

  • Recommendation 2: LC
  • Recommendation 3: LC
  • Recommendation 4: LC
  • Recommendation 5: PC

The full report is available on the FATF website.

Source: Financial Action Task Force, “Japan: 1st Enhanced Follow-up Report” (September 2022)

Contact: Michele Antonio Bozza Venturi, AML/CFT Financial Advisor, Bank of Italy