Financial Crime World

Japan Tightens Banking Regulations to Prevent Financial Crime

Introduction

Despite efforts to combat financial crime, Japan still faces significant risks of money laundering, terrorist financing, corruption, and fraud. The country has seen a substantial increase in money laundering cases, with 511 reported in 2018 - a 40% rise from the previous year.

Contributing Factors

Several factors have contributed to this increase:

  • Rapid growth of the cryptocurrency sector: The lack of regulation in this sector has made it vulnerable to financial crimes.
  • COVID-19 pandemic: The shift to non-face-to-face transactions has changed money laundering and terrorist financing risks, making them more challenging to detect.

Statistics

According to the National Police Agency’s “Annual Report on Prevention of Transfer of Criminal Proceeds (2021)”, there were 530,150 reports of suspicious transactions in 2021 - a significant increase from previous years. Banks were responsible for the majority of these reports, with:

  • 73.6% of all reported cases
  • 390,381 cases in total

Existing Laws and Regulations

Japan has implemented various laws and regulations to prevent financial crime, including:

  • The Act on Special Provisions for the Narcotics and Psychotropics Control Act, etc, and Other Matters for the Prevention of Activities Encouraging Illicit Conduct and Other Activities Involving Controlled Substances through International Cooperation (Act No. 94 of 1991)
  • The Act on Punishment of Organised Crimes and Control of Crime Proceeds (Act No. 136 of 1999)
  • The Act on Prevention of Transfer of Criminal Proceeds (Act No. 22 of 2007)

Challenges Ahead

Japan’s Financial Action Task Force (FATF) status has been under scrutiny, with a report highlighting improvements but also areas that require more attention. The government has unveiled a “National AML/CFT/CPF Action Plan” for the next three years to implement necessary legislative actions effectively.

Collaboration and Solutions

To address these challenges, collaboration between the public and private sectors remains essential. Anti-money laundering solutions such as those offered by Sanction Scanner can help institutions fulfill their AML obligations while gaining insightful knowledge of the dynamic AML environment unique to Japan.