Japan Tightens Banking Regulations to Prevent Financial Crime
A record high 583,317 transactions were reported as suspected cases of money laundering by financial institutions in Japan last year. In response, the government has strengthened laws and guidelines for financial institutions to detect and prevent money laundering.
What is Money Laundering?
Money laundering refers to the act of disguising criminal proceeds so that their source and true ownership are obscured, making it difficult for authorities to detect and apprehend perpetrators. This can have serious consequences, including fuelling organized crime and undermining legitimate businesses.
Does Money Laundering Constitute a Criminal Act?
Yes, money laundering is prohibited by law in Japan. The country has enacted laws such as the Act on Punishment of Organised Crimes and the Anti-Drug Special Provisions Law to prevent and punish money laundering. Statutory penalties have been increased to strengthen measures against money laundering.
How Does Money Laundering Work?
The money-laundering process typically involves three stages:
- Placement: Introducing criminal proceeds into the financial system
- Layering: Moving funds through repeated transactions to obscure their origins
- Integration: Reintroducing laundered funds into economic activity
Examples of Money Laundering in Japan
Money laundering can take various forms, including domestic exchange transactions and cash transactions. The use of crypto assets has also become a serious problem, with the number of cases increasing by 68% last year.
- Impersonating someone else to sell electronic money obtained through sophisticated fraud schemes
- Concealing assets using a crypto address belonging to an unidentified person
- Cross-border concealment of funds
Financial Institutions Verify Transaction Details
To prevent money laundering, financial institutions regularly send users documents such as the Confirmation of Purpose of Transaction, Confirmation of Customer Information, and Confirmation of Delivery Details. These documents are used to verify transactions and customer information in accordance with the Act on Prevention of Transfer of Criminal Proceeds and guidelines established by the Financial Services Agency.
Consequences of Ignoring Customer Information Verification Requests
If customers ignore requests for verification, financial institutions may refuse to fulfill their obligations related to a transaction until the customer has complied with the verification process. If no response is received, the transaction may be halted or restricted.
The government urges people to respond within the given deadline when they receive documents from financial institutions to assist with crime prevention.