Financial Crime World

Japan Takes Tough Stance on Financing Terrorism and Intimidation

Japan has taken a significant step towards combating the menace of terrorism and public intimidation by enacting the Financing to Offences of Public Intimidation (TF Act). This law criminalizes the collection and provision of terrorist funds, making it a key part of the country’s efforts to prevent the misuse of financial institutions for illegal activities.

A Risk-Based Approach

Under Japan’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime, the National Public Safety Commission prepares and publishes a National Risk Assessment-Follow-up Report (NRA-FUR). This report identifies money laundering (ML) and terrorist financing (TF) risks for each category of transactions by specified business operators. The NRA-FUR analyzes ML cases, suspicious transaction reports, and information held by relevant government agencies to assess the risks.

Financial Institutions

Japan’s financial institutions (FIs), including banks, insurance companies, and other financial services providers, are required to take various risk reduction measures, such as:

  • Customer due diligence
  • Reporting of suspicious transactions
  • Supervision by authorities to ensure compliance with AML/CFT requirements

Designated Non-Financial Businesses and Professions

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

  • Real estate brokers
  • Lawyers
  • Accountants

are also subject to AML/CFT measures. The government identifies risks, formulates guidelines, and conducts inspections and supervision in consideration of their sizes and characteristics.

Non-Profit Organizations

The Financial Action Task Force (FATF) requires that CFT measures be applied to non-profit organizations (NPOs) vulnerable to misuse for terrorist finance. Japan’s CFT measures target not only corporations engaging in specified non-profit activities but also:

  • Public interest corporations
  • Social welfare corporations
  • Other types of NPOs

Beneficial Ownership

To combat money laundering and terrorist financing, Japan has implemented a system requiring FIs to report information on beneficial owners of legal persons. The system includes a verification process by notaries before the certification of articles of incorporation for founding legal persons.

Financial Intelligence Unit

Japan’s Financial Intelligence Unit (FIU), the Japan Financial Intelligence Center (JAFIC), collects, organizes, analyzes, and disseminates information reported by FIs to support AML/CFT measures. JAFIC has signed documents to establish a framework for information exchange with FIUs in over 100 foreign countries.

Enforcement and Asset Freezing

Japan’s law enforcement agencies investigate and prosecute cases of money laundering and terrorist financing. The country also implements asset freezing measures, as required by United Nations Security Council resolutions, to prevent funds from being used for or flowing to terrorists.

In conclusion, Japan has taken a significant step towards making itself the safest country in the world by enacting the TF Act. This law demonstrates Japan’s commitment to combating terrorism and public intimidation, and its efforts to prevent the misuse of financial institutions for illegal activities.