Combating Money Laundering and Terrorism Financing: Japan’s Efforts
Strengthening Financial Sector Resilience Against Illicit Activities
The Japanese government has taken significant steps to combat money laundering and terrorism financing, aiming to strengthen its financial sector’s resilience against illegal activities.
According to the National Public Safety Commission’s annual report, “National Risk Assessment of Money Laundering and Terrorism Financing,” Japan’s financial institutions must implement strict measures to prevent the misuse of their services for illegal purposes.
Notification Requirements for Foreign Exchange Transactions
Financial institutions in Japan are required to notify receiving institutions of certain customer identification data when conducting foreign exchange transactions. This includes:
- Confirming that exchange dealers residing in foreign countries have developed necessary systems to verify customers at the time of a transaction
- Notifying receiving institutions of customer identification data
Record-Keeping and Reporting Requirements
Covered institutions and persons are required to maintain records of verified information collected during transactions for seven years from the date of termination. They must also prepare and preserve records of transactions for seven years from the date of transaction.
Additionally, if property accepted from a customer is suspected to have been criminal proceeds, covered institutions and persons must promptly report the transaction to a competent administrative authority.
Privacy Laws
The Act on the Protection of Personal Information does not affect record-keeping requirements, due diligence efforts, or information sharing prescribed in the Act on Prevention of Transfer of Criminal Proceeds.
Resolutions and Sanctions
While there is no criminal sanction for breaching AML laws, administrative measures can be taken against covered institutions and persons who violate these regulations.
Limitation Period for AML Enforcement
There is no limitation period for administrative measures regarding AML violations.
Extraterritoriality
Japan’s AML laws apply to foreign institutions and persons that fall within the category of covered entities under relevant laws. However, there is no specific provision governing the applicability of these laws to subsidiaries of domestic institutions in foreign jurisdictions or conduct outside Japan’s borders.
Civil Claims
Victims of crimes can bring civil actions for damages against money launderers who have concealed crime proceeds and caused damage to them. There is no specific provision regarding private rights of action against money launderers and covered institutions and persons in breach of AML laws.
International Money Laundering Efforts
Japan is a member of the Financial Action Task Force (FATF), Asia/Pacific Group on Money Laundering, and Egmont Group. The FATF conducted a third mutual evaluation of Japan regarding compliance with its 40 Recommendations and nine Special Recommendations from 2007 to 2008.
The report highlighted areas for improvement, including:
- Direct provision in AML laws for the verification of transaction purpose and beneficial owner
- Additional customer identification measures when identifying customers without photo identification
In response, amendments were made to the Act on Prevention of Transfer of Criminal Proceeds in April 2011.
Japan’s efforts to combat money laundering and terrorism financing demonstrate its commitment to maintaining a robust financial system that protects its citizens and supports international cooperation against illicit activities.