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Japan Makes Progress in Improving Technical Compliance

Tokyo, Japan - The Financial Action Task Force (FATF) has announced that Japan has made significant progress in improving its technical compliance with anti-money laundering and counter-terrorist financing (AML/CFT) measures. As a result, the country has been re-rated on Recommendation 2 from “partially compliant” to “largely compliant”.

Background

In its initial Mutual Evaluation Report (MER), Japan was identified as having deficiencies in its AML/CFT framework, particularly in relation to Recommendation 2. The recommendation calls for clear responsibility and coordination among authorities to define AML/CFT policies informed by risks and regularly review them.

Progress Made

Since the adoption of its MER, Japan has taken several steps to address these deficiencies. The country established an Inter-ministerial Council for AML/CFT & CPF Policy, which developed a new National AML/CFT/CPF Action Plan. The plan addresses several weaknesses in Japan’s national cooperation and coordination framework, including:

• Renewal of the National Risk Assessment (NRA)
• Development of a national policy informed by identified risks
• Strengthening TF investigation and prosecution
• Enhancing risk understanding on TF of obliged entities
• Implementing asset freezing measures

A task force was established to promote strengthening of TF investigation and prosecution, and a policy to prevent non-profit organizations from being exploited for terrorism financing was developed.

Remaining Weaknesses

While Japan has made significant progress in addressing the deficiencies identified in its MER, some minor gaps remain. The country’s data protection regime is still unclear, and it is uncertain whether the mandate of the Inter-ministerial Council fully satisfies the requirements of criterion 2.5.

Technical Compliance Ratings

The following table shows Japan’s re-evaluated technical compliance ratings for each of the 40 Recommendations:

Note: The ratings are based on a four-level system, with “Compliant” being the highest level and “Non-Compliant” being the lowest.

Conclusion

Japan’s progress in improving its technical compliance with AML/CFT measures is a positive step towards strengthening its anti-money laundering and counter-terrorism financing framework.