Financial Crime World

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Japan Takes Tough Stance on Drug Crime Proceeds, Enforcing Confiscation and Forfeiture Laws

TOKYO - The Japanese government has stepped up its efforts to combat drug crime proceeds, introducing new laws and regulations to confiscate and forfeit illegal funds generated by criminal activity.

Laws and Regulations

Under the Act on Punishment of Financing to Offences (TF Act), Japan punishes individuals who provide terrorist funds, while the Terrorist Asset Freezing Act (TAFA) regulates domestic transactions with international terrorists.

The National Public Safety Commission has also launched a risk-based approach to assess money laundering and terrorist financing risks for each category of transactions by specified business operators. The commission’s report provides a comprehensive assessment of ML/TF risks and serves as a guide for businesses and authorities.

Financial Institutions

Financial institutions (FIs) in Japan, including banks, insurance companies, and financial instruments business operators, are required to take various risk reduction measures, including:

  • Customer due diligence
  • Suspicious transaction reporting

The Financial Services Agency has issued guidelines for anti-money laundering and combating the financing of terrorism (AML/CFT/CPF), which FIs must comply with.

Designated Non-Financial Businesses and Professions

Designated non-financial businesses and professions (DNFBPs) in Japan, including:

  • Real estate brokers
  • Dealers in precious metals and stones
  • Lawyers

are also subject to AML/CFT/CPF regulations. These businesses must:

  • Verify the identity of their customers
  • Report suspicious transactions to authorities

Beneficial Ownership Verification

To prevent illegal activities, Japan has introduced a system for notaries to verify beneficial ownership information at the time of legal person incorporation. This ensures that individuals with links to organized crime groups or international terrorists do not hold significant influence over companies.

Financial Intelligence Unit (FIU)

The Japan Financial Intelligence Center (JAFIC), Japan’s FIU, collects, analyzes, and disseminates information on suspicious transactions to law enforcement agencies. JAFIC has signed agreements with more than 100 foreign countries to exchange AML/CFT/CPF-related information.

Enforcement and Asset Freezing

To combat drug crime proceeds, Japan enforces strict measures against money laundering and terrorist financing. The country’s laws and regulations provide for:

  • Investigation
  • Prosecution
  • Punishment of individuals involved in ML/TF activities
  • Asset freezing measures to prevent illegal funds from being used or transferred

The Japanese government has demonstrated its commitment to combating drug crime proceeds, ensuring the thorough deprivation of criminal profits and preventing their use for maintaining and expanding criminal organizations, including terrorist groups.