Financial Crime World

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FATF’s Revised Recommendations Boost Japan’s AML/CFT Regime

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TOKYO - The Financial Action Task Force (FATF) has revised its 40 Recommendations to tackle emerging threats such as the financing of weapons of mass destruction and corruption. In response, Japan has strengthened its anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.

AML/CFT Framework Evolution

Japan’s AML/CFT framework has evolved significantly since the country first introduced anti-money laundering measures in 1992. The “Anti-Drug Special Provisions Law” criminalized money laundering activities connected with drug crimes and established a suspicious transaction reporting system for financial institutions.

In 2000, Japan enacted the “Act on Punishment of Organized Crimes and Control of Crime Proceeds,” which extended the scope of predicate offenses for money laundering to include other serious crimes besides illegal drug crimes. The law also designated the Financial Services Agency (FSA) as the country’s Financial Intelligence Unit (FIU).

Strengthening AML/CFT Regime

Following the 2001 terrorist attacks in the United States, Japan enacted the “Act on Punishment of Financing of Offences of Public Intimidation” and revised the “Act on Punishment of Organized Crimes.” The new law criminalized terrorist financing and required financial institutions to report suspicious transactions related to assets suspected of terrorist financing.

In 2003, FATF revised its recommendations to expand the scope of business operators required to implement customer identification. Japan responded by enacting the “Act on Prevention of Transfer of Criminal Proceeds” in 2007, which transferred the FIU from the FSA to the National Public Safety Commission/National Police Agency and extended the scope of application to include business operators required to implement customer identification.

Recent Developments

In recent years, Japan has continued to strengthen its AML/CFT regime. In 2010, the government established a meeting of experts and business people to discuss customer due diligence measures against money laundering. The results of these discussions were reported in July of that year.

A bill amending the “Act on Prevention of Transfer of Criminal Proceeds” was submitted to the Diet in April 2011, and the revised law was enacted in May of the same year. The amendments aimed to address issues related to the frequent use of call forwarding service providers in money laundering schemes and the ongoing problem of illicit transfers of savings passbooks.

The revised law was fully enforced on April 1, 2013. Japan’s efforts have been recognized by FATF, which has praised the country’s progress in implementing its AML/CFT regime.

Key Developments

1992

  • “Anti-Drug Special Provisions Law” criminalized money laundering activities connected with drug crimes and established a suspicious transaction reporting system for financial institutions.

2000

  • “Act on Punishment of Organized Crimes and Control of Crime Proceeds” extended the scope of predicate offenses for money laundering to include other serious crimes besides illegal drug crimes.

2003

  • FATF revised its recommendations to expand the scope of business operators required to implement customer identification.

2007

  • “Act on Prevention of Transfer of Criminal Proceeds” transferred the FIU from the FSA to the National Public Safety Commission/National Police Agency and extended the scope of application to include business operators required to implement customer identification.

2010

  • Meeting of experts and business people established to discuss customer due diligence measures against money laundering.

2011

  • Amendments to the “Act on Prevention of Transfer of Criminal Proceeds” aimed to address issues related to call forwarding service providers and illicit transfers of savings passbooks.

2013

  • Revised law fully enforced.

Conclusion

Japan’s AML/CFT regime has undergone significant reforms in recent years, reflecting the country’s commitment to tackling money laundering and terrorist financing. The revised “Act on Prevention of Transfer of Criminal Proceeds” is a key development in Japan’s efforts to strengthen its AML/CFT framework. The government’s ongoing efforts to address emerging threats and improve the effectiveness of its AML/CFT regime are welcome developments in the fight against financial crime.