Japan’s Anti-Money Laundering and Counter-Terrorist Financing Framework Shows Promise But Requires Improvement
A comprehensive review by the Financial Action Task Force (FATF) and Asia-Pacific Group on Money Laundering has assessed Japan’s measures to combat money laundering and terrorist financing. While the report finds that Japan’s efforts are yielding positive results, it also identifies areas where improvement is needed.
Understanding the Threats
Japan faces significant risks from UN-designated terrorists and domestic designated terrorist organizations. Despite these threats, Japanese authorities have demonstrated a good understanding of the risks they pose and have been proactive in implementing anti-money laundering and counter-terrorist financing (AML/CFT) measures.
Effective Collection and Use of Financial Intelligence
The report commends Japan for its effective collection and use of financial intelligence to investigate and prosecute money laundering and terrorist financing cases. This has led to a number of successful investigations and prosecutions.
Positive Developments
- Japanese authorities have demonstrated good understanding of the threats posed by UN-designated terrorists and domestic designated terrorist organizations.
- The country has been proactive in implementing AML/CFT measures.
- Financial intelligence has been effectively collected and used to investigate and prosecute money laundering and terrorist financing cases.
Room for Improvement
While Japan’s efforts are commendable, there are areas where improvement is needed. Law enforcement agencies need to focus more on the laundering of proceeds in complex large-scale cases often involving fraud and drug-related crimes. Additionally, authorities have been urged to increase efforts in confiscating criminal proceeds and implementing measures to prevent the unwitting facilitation of sanctions evasion.
Areas for Improvement
- Law enforcement agencies should focus more on the laundering of proceeds in complex large-scale cases.
- Authorities should increase efforts in confiscating criminal proceeds.
- Measures should be implemented to prevent the unwitting facilitation of sanctions evasion.
Virtual Assets and Service Providers
Japan has taken significant steps to address risks linked to virtual assets and their service providers. However, the report advises that measures need to be fully implemented to prevent their abuse.
Recommendations
- Japan should fully implement measures to prevent the abuse of virtual assets and their service providers.
- Financial and non-financial institutions should strengthen requirements for customer due diligence and beneficial ownership information.
Conclusion
The FATF report concludes that while Japan’s anti-money laundering and counter-terrorist financing framework shows promise, there is still room for improvement. Japanese authorities are advised to strengthen requirements for financial and non-financial institutions, improve access to beneficial ownership information, and fully implement measures to prevent the abuse of virtual assets and their service providers.
The report was adopted by the FATF at its June 2021 plenary meeting.