Japan Meets FATF Requirements, Takes Steps to Enhance Sanctions Implementation

Tokyo, Japan - In its second enhanced follow-up report, Japan has made significant progress in meeting the requirements set by the Financial Action Task Force (FATF). The report highlights Japan’s efforts to strengthen its sanctions implementation framework and improve its compliance with international standards.

Meeting FATF Criteria

Initially, Japan failed to meet certain FATF criteria, including providing identifying information to support designation requests to other countries. However, since then, Japan has adopted new rules of procedure that require the Ministry of Foreign Affairs (MoFA) to provide relevant information when requesting another country to designate targets for sanctions.

National Police Agency and Public Security Intelligence Agency

The report notes that Japan’s National Police Agency (NPA) and Public Security Intelligence Agency (PSIA), both members of the Inter-Agency Monitoring Group, have legal authorities and mechanisms in place to collect information on individuals and entities subject to designation under UN Security Council resolutions. Additionally, competent authorities can operate ex parte against individuals or entities whose designations are being considered.

Targeted Financial Sanctions

Japan has made significant progress in implementing targeted financial sanctions (TFS) related to terrorism financing (TF). The country revised its administrative procedures to implement TFS within 24 hours and abolished a procedural step that required coordination among relevant MoFA divisions and other ministries. Japan has also notified financial institutions, including virtual assets services providers, of designated targets through an email distribution service prior to public notice in the Official Gazette.

Asset-Freezing Obligations

Furthermore, the report notes that Japan requires all natural and legal persons within the country to freeze funds or other assets of designated persons and entities without delay and without prior notice. However, Japan still needs to demonstrate that its asset-freezing obligations extend to a broader range of funds and assets, including those owned or controlled by designated persons or entities.

Addressing Gaps

To address this gap, Japan has revised its definition of “payments” in line with the FATF definition of “funds and other assets.” The country is also initiating a process to issue public notices and ministry notifications detailing the interpretation of relevant provisions of the Terrorism Financing Act (TFA) related to identified gaps.

Conclusion

Overall, Japan’s second enhanced follow-up report demonstrates significant progress in meeting FATF requirements. The country’s efforts to strengthen its sanctions implementation framework and improve compliance with international standards are commendable, and it is expected that Japan will continue to work towards full compliance with the FATF recommendations.