Here is the rewritten article in markdown format:

Japan Struggles with Money Laundering Despite Efforts to Combat Financial Crime

Despite years of efforts to combat financial crime, Japan is still facing significant risks of money laundering, terrorist financing, corruption, and fraud.

Rising Cases of Money Laundering

According to reports, money laundering cases increased by 40% in 2018, with cryptocurrencies being a significant source of this increase. The rapid growth of the crypto sector has created vulnerabilities in the system that are ripe for exploitation.

Impact of COVID-19 Pandemic

The global COVID-19 pandemic has also had a profound impact on Japan’s financial landscape, leading to an increase in non-face-to-face transactions and changing money laundering and terrorist financing risks. The National Police Agency’s “Annual Report on Prevention of Transfer of Criminal Proceeds 2021” revealed that there was a steady increase in the number of reports of suspicious transactions starting from 2016, with a total of 530,150 cases reported in 2021.

Reports by Banks and Money Lending Industries

Banks were the source of the majority of these reports, accounting for 73.6% of all reported cases, while money lending industries accounted for only a small percentage. This highlights the need for stricter anti-money laundering regulations and enforcement.

Laws and Regulations in Place

Japan has several laws and regulations aimed at combating financial crime, including:

• The Act on Special Provisions for the Narcotics and Psychotropics Control Act
• The Act on Punishment of Organised Crimes
• The Act on Prevention of Transfer of Criminal Proceeds

Public prosecutors have the authority to exercise discretion when deciding whether to bring charges against individuals accused of money laundering, while courts assess evidence and impose sentences.

Shortcomings in Japan’s Criminal Procedure

However, Japan’s criminal procedure does not provide for alternative resolutions such as plea agreements or settlement agreements, which can result in lengthy and costly trials. Money laundering cases typically involve imprisonment for up to five years, fines of up to ¥10 million, or a combination of both.

International Scrutiny

Japan is also subject to international scrutiny, with the Financial Action Task Force (FATF) releasing its 4th round of Mutual Evaluation Report in August 2021. While the report highlighted Japan’s improvements in certain areas, it also pointed out areas that require more attention, such as strengthening anti-money laundering and counter-terrorism financing measures.

National AML/CTP Action Plan

In response to the FATF report, the Japanese government unveiled a “National AML/CTF Action Plan” for the next three years to implement necessary legislative actions effectively. Collaboration between the public and private sectors is essential to achieve this goal.

FATF’s Second 12-Month Review Report

The FATF’s Second 12-Month Review Report on Standards for Virtual Assets and Virtual Asset Service Providers also emphasized the importance of swift implementation of FATF standards by both the public and private sectors. The report identified risks related to peer-to-peer transactions and crypto-assets, highlighting the need for global adherence to FATF standards.

Maintaining a Proactive Stance

Maintaining a proactive stance on anti-money laundering regulations is crucial for Japan’s significant influence in finance. Sanction Scanner offers AML solutions that enable institutions to fulfill their obligations while gaining insightful knowledge of the dynamic AML environment unique to Japan. Contact us today to learn more about our solutions and how they can help you stay compliant.