Japan Urged to Step Up Fight Against Money Laundering

Global Watchdog Warns of Improvement Needed in Anti-Money Laundering Measures

Tokyo - A recent report from the Financial Action Task Force (FATF) has highlighted Japan’s need to strengthen its efforts against money laundering. The country, along with the United States and China, is ranked as one of the nations that require improvement in their anti-money laundering measures.

Key Findings and Recommendations

• Japan is placed in the “enhanced follow-up” group by the FATF, which is the second lowest level under its three-stage classification.
• The watchdog recommended that financial institutions confirm customer identities using bank accounts and crack down on concealing proceeds from crimes.
• Ongoing customer due diligence on bank accounts was found to be insufficient, with many customers failing to respond to verification letters or emails sent by banks.

Implementation of Additional Measures

Financial Services Agency officials are urging financial institutions to implement additional measures, such as:

• Making phone calls to verify information
• Visiting homes for identification purposes
• Issuing warnings to high-risk bank accounts

The agency plans to assign more inspectors to monitor these efforts.

Economic Burden and Potential Solutions

Developing and updating systems that can detect illegal activities add to the economic burden of financial institutions, particularly those operating in regional areas. However, the Japanese Bankers Association is preparing to put an artificial intelligence-based system into practical use that can be shared among banks.

Prosecution and Investigation of Money Laundering Cases

The FATF’s report also noted that Japan needs to improve prosecution and investigation of money laundering and terrorist financing cases. The government plans to increase the statutory maximum sentence for money laundering by revising laws on punishing organized crimes and penalizing terrorism financing.

Japanese Government Response

A Japanese government official stated that tracing the flow of money can help wipe out entire criminal organizations, as more and more cases involve multiple groups. Judicial authorities can play a bigger role in cracking down on such crimes, the official added.

International Implications

The FATF’s recommendations are not legally binding, but targeted nations and regions could face restrictions on financial transactions if their measures are deemed insufficient. Japan must take further action to meet international standards and prevent money laundering.