Financial Crime World

Japan Falls Short in Anti-Money Laundering Guidelines, Says FATF Report

A recent report by the Financial Action Task Force (FATF) has revealed that Japan has failed to fully comply with technical requirements for implementing anti-money laundering (AML) guidelines.

Mixed Bag of Ratings

According to the report, Japan scored a mixed bag of ratings across various aspects of its AML regime. The country was found to be:

  • Largely Compliant in assessing risk and applying a risk-based approach (R.1) as well as national cooperation and coordination (R.2)
  • Partially Compliant in several areas, including:
    • Terrorist financing offenses (R.5)
    • Targeted financial sanctions related to terrorism and terrorist financing (R.6)
    • Non-profit organizations (R.8)
  • Non-Compliant in other areas, including:
    • Financial institution secrecy laws (R.9)
    • Customer due diligence (R.10)

Areas for Improvement

The report highlighted several areas where Japan needs to improve, including:

  • Record keeping (R.11)
  • Politically Exposed Persons (R.12)
  • Correspondent banking (R.13)
  • Money or value transfer services (R.14)
  • Reliance on third parties (R.17)
  • Lack of transparency in beneficial ownership of legal persons and arrangements (R.24 and R.25)

Commitment to Improvement

Despite the shortfalls, the FATF report praised Japan for its efforts to implement AML guidelines and its commitment to improving its anti-money laundering regime. The country has been given a timeline to address the identified weaknesses and improve its overall compliance with international standards.

Response from Japanese Authorities

In response to the report, Japanese authorities have vowed to take immediate action to address the concerns raised by the FATF. They have pledged to strengthen their AML regime, enhance cooperation with other countries, and improve transparency in financial transactions.

Implications of the Report

The full implications of the report are yet to be seen, but it is clear that Japan has a lot of work ahead if it wants to meet international standards for anti-money laundering.