Japan Grapples with Rising Financial Crimes Amid Global Pandemic

Tokyo, Japan - The Land of the Rising Sun is also struggling to contain a growing wave of financial crimes.

According to reports from the National Police Agency’s “Annual Report on Prevention of Transfer of Criminal Proceeds (2021)”, despite efforts to combat money laundering, terrorist financing, corruption, and fraud, the number of reported suspicious transactions has reached an unprecedented 530,150 in 2021. Banks were at the forefront of these reports, accounting for approximately 73.6% or 390,381 cases, significantly surpassing that of the money lending industry.

The Rise of Non-Face-to-Face Transactions

The rise in non-face-to-face transactions due to the COVID-19 pandemic is partly responsible for this surge. As a result, institutions must adapt their Anti-Money Laundering (AML) strategies to effectively combat financial crimes.

Japan’s AML Laws and Regulations

To combat financial crimes, Japan has enacted several laws and regulations, including:

• The Act on Special Provisions for the Narcotics and Psychotropics Control Act, etc, and Other Matters for the Prevention of Activities Encouraging Illicit Conduct and Other Activities Involving Controlled Substances through International Cooperation (Act No. 94 of 1991)
• The Act on Punishment of Organised Crimes and Control of Crime Proceeds (Act No. 136 of 1999)
• The Act on Prevention of Transfer of Criminal Proceeds (Act No. 22 of 2007)

These laws grant public prosecutors the authority to exercise discretion when determining whether to bring charges against individuals accused of money laundering. Once a suspect is formally charged, it falls upon the court to assess the available evidence and make a verdict regarding the defendant’s guilt.

Penalties for Money Laundering in Japan

If found guilty, defendants may face imprisonment for up to five years, fines of up to ¥10 million, or a combination of both. The severity of the sentence depends on the specific type and circumstances of the money laundering activities involved.

FATF Status

In August 2021, the Financial Action Task Force (FATF) released its 4th round of Mutual Evaluation Report (MER) concerning Japan’s efforts in combating money laundering, terrorist financing, and countering the financing of proliferation. The report highlighted improvements but also pointed out areas that require more attention.

Anti-Money Laundering Solutions for Japan

Maintaining a proactive stance on AML regulations is crucial given Japan’s significant influence in finance. Sanction Scanner enables institutions to fulfill their AML obligations while gaining insightful knowledge of the dynamic AML environment unique to Japan.