Financial Crime World

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Japan’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Regulations: A Mixed Assessment

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Japan’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regulations have received a mixed assessment from international authorities. According to its Follow-Up Report for 2023, Japan was found to be largely compliant with several key recommendations, but partially compliant in others.

Key Recommendations

The report highlights that Japan has implemented most of the technical requirements related to:

  • Assessing risk and applying a risk-based approach (R.1)
  • National cooperation and coordination (R.2)
  • Money laundering offence (R.3)
  • Confiscation and provisional measures (R.4)
  • Terrorist financing offence (R.5)
  • Targeted financial sanctions related to terrorism and terrorist financing (R.6)
  • Targeted financial sanctions related to proliferation (R.7)

Areas of Partial Compliance

However, Japan was found to be partially compliant in several areas, including:

  • Regulation and supervision of DNFBPs (R.22)
  • Transparency and beneficial ownership of legal arrangements (R.25)
  • International instruments (R.36)

Additionally, Japan received a non-compliant rating for its financial institution secrecy laws (R.9).

Shortfalls

Japan’s AML/CFT regulations were also found to be lacking in several areas, including:

  • Regulation and supervision of financial institutions (R.26)
  • Powers of supervisors (R.27)

Furthermore, the country was criticized for not having sufficient measures in place to prevent tipping-off and maintain confidentiality (R.21).

Efforts and Progress

Despite these shortfalls, Japan’s AML/CFT regulations were praised for their efforts to:

  • Implement new technologies (R.15)
  • Wire transfers (R.16)
  • Reporting of suspicious transactions (R.20)

The country was also commended for its transparency in providing guidance and feedback (R.34) and statistics (R.33).

Conclusion

Overall, Japan’s AML/CFT regulations have made significant progress, but there is still work to be done to address the remaining shortcomings. International authorities will continue to monitor the country’s efforts to implement effective measures to prevent money laundering and terrorist financing.