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Anti-Money Laundering and Combating the Financing of Terrorism in Japan

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The Japanese government has implemented various measures to prevent anti-money laundering (AML) and combating the financing of terrorism (CFT). Here are some key points on AML/CFT measures in Japan.

  • The AML Act requires financial institutions to implement AML/CFT measures, including:
    • Customer due diligence
    • Risk assessment
    • Reporting suspicious transactions
  • The Foreign Exchange and Foreign Trade Act imposes regulations on foreign exchange, foreign trade, and other foreign transactions to prevent money laundering and terrorist financing.

Practical Measures

  • Financial institutions are required to prepare a risk assessment document, summarizing the results of investigating and analyzing ML/TF risks.
  • They must maintain up-to-date customer information verified through know-your-customer (KYC) procedures.
  • Banks have introduced systems to screen against databases of anti-social forces and implement measures to prevent money laundering.

Enforcement

  • Enforcement is carried out through reporting orders and business improvement orders by regulatory authorities.
  • The Financial Services Agency (FSA) has strengthened inspections focused on AML/CFT measures since 2021.
  • From April 2024, the FSA will issue administrative penalties, including business improvement orders or other actions, if financial institutions have inadequate governance arrangements.

International Cooperation

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