Financial Crime World

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Japan Steps Up Efforts to Combat Financial Crime

In a bid to strengthen its defenses against money laundering and terrorist financing, Japan’s Financial Services Agency (FSA) has unveiled proposed guidelines for certified public accountants and audit firms. The new rules aim to bring the country’s anti-money laundering measures in line with international standards.

Background and Context

The move comes as part of an ongoing effort by the Japanese government to address concerns raised by the Financial Action Task Force (FATF), which last year deemed Japan’s anti-money laundering environment underperforming. This has prompted the FSA to take decisive action to tighten regulations and prevent illicit financial activities.

Key Provisions of the Guidelines

The proposed guidelines require certified public accountants and audit firms to verify more information about clients, including:

  • Purpose of transactions: Clients’ transaction purposes will need to be verified.
  • Identity of beneficial ownership: The identity of beneficial owners will also need verification.
  • Assets and income verification: For high-risk transactions exceeding 2 million yen, clients’ assets and income will need to be verified.

Administrative scriveners, tax accountants, and other professionals will be required to:

  • Report suspicious transactions: Report suspicious transactions and freeze accounts where necessary.
  • Enhanced due diligence for high-risk cases: Mandatory enhanced due diligence for high-risk cases, such as transactions involving Politically Exposed Persons.

Implementation Timeline and Guidance

The guidelines are expected to come into effect in April 2024. The FSA has urged certified public accountants and audit firms to familiarize themselves with the proposed rules to avoid regulatory penalties and reputational damage. Financial institutions are also being urged to pay closer attention to client activity to ensure compliance with FSA requirements.

For those seeking more information on the guidelines or assistance in implementing anti-money laundering programs, please contact Philippa Allen or Manabu Nagano.