Financial Crime World

Japan’s Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) Regulations

Laws and Regulations

Japan has enacted several laws to combat money laundering and terrorist financing, including:

  • Act on Prevention of Transfer of Criminal Proceeds (APTCP): This law aims to prevent the transfer of criminal proceeds and punish those who engage in such activities.
  • Terrorist Asset-Freezing Act (TAFA): This act enables the freezing of assets suspected to be related to terrorist financing.
  • Act on Punishment of Financing of Offences of Public Intimidation (TF Act): This law punishes those who provide financial support to public intimidation offenses.

Risk-Based Approach

Japan’s National Public Safety Commission prepares the National Risk Assessment-Follow-up Report (NRA-FUR), which:

  • Specifies and assesses money laundering/terrorist financing risks for each category of transactions by specified business operators.
  • Provides a risk-based approach to AML/CFT measures, ensuring that institutions implement measures based on the level of risk their business poses.

Financial Institutions (FIs)

Financial institutions, such as banks, insurance companies, and financial instruments business operators, are required to:

  • Take various risk reduction measures, including customer due diligence.
  • Report suspicious transactions to the Japan Financial Intelligence Center (JAFIC).

Designated Non-Financial Businesses and Professions (DNFBPs)

DNFBPs, including real estate brokers, lawyers, and certified public accountants, are subject to AML/CFT regulations in Japan.

Non-Profit Organizations (NPOs)

Japan’s CFT measures target not only corporations engaging in specified non-profit activities but also:

  • Public interest corporations
  • Social welfare corporations
  • Medical corporations
  • Incorporated educational institutions
  • Religious corporations

Beneficial Ownership Transparency

The transparency of beneficial ownership of legal persons is crucial to prevent their misuse. In Japan, the following measures are taken regarding information on BO:

  • Obligation on FIs to report suspicious transactions.
  • Verification by notaries before certification of articles of incorporation for founding legal persons.
  • Overview of the BO of Legal Persons List System.

Utilization of Financial Intelligence Units (FIUs)

Japan’s Financial Intelligence Unit, Japan Financial Intelligence Center (JAFIC), collects, organizes, analyzes, and disseminates information reported by FIs to support law enforcement agencies in AML/CFT measures.

Enforcement and Asset Freezing

Strict measures are taken against ML/TF to prevent illegal money transfers. The Strategy to Make Japan the Safest Country in the World calls for using relevant laws to implement punishments for ML, ensuring thorough deprivation of proceeds of crime and preventing criminal proceeds from being used for maintaining and expanding criminal organizations including terrorism.

Japan’s AML/CFT regulations are designed to ensure that financial transactions do not support or promote illegal activities. The country’s approach emphasizes a risk-based approach, where institutions are required to implement measures based on the level of risk their business poses. This strategy is intended to prevent money laundering and terrorist financing while minimizing unnecessary burdens on legitimate businesses.