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Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) Requirements in Japan

Overview

Japan has strict anti-money laundering (AML) and counter-terrorist financing (CFT) regulations to prevent financial crimes. The key laws and regulations governing AML/CFT are:

• Act on Prevention of Transfer of Criminal Proceeds (Act No 22 of 2007): This is the principal law that governs AML/CFT in Japan.
• Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism: The Financial Services Agency (FSA) issues these guidelines to clarify required actions and expected actions by financial institutions.

Customer Due Diligence

To prevent money laundering, banks in Japan must:

• Verify customer identification data: Banks must verify the identity of their customers, including natural persons and legal entities.
• Verify transaction purpose and nature: Banks must also verify the purpose and intended nature of transactions with their customers.
• Use robust verification methods for high-risk transactions: If a bank suspects a high-risk transaction, it must use more robust verification methods to ensure compliance.

Record-Keeping

Banks in Japan are required to maintain accurate records of their transactions. These records must be kept for at least seven years from the date of the transaction. Specifically:

• Verification records: Banks must prepare and preserve verification records for seven years from the date of the transaction.
• Transaction records: Records of dates and contents of transactions must also be kept for seven years.

Reporting Suspicious Transactions

If a bank suspects that assets received through a transaction are criminal proceeds or if a customer is engaged in money laundering, it must file suspicious transaction reports with the competent administrative authority. This helps to prevent financial crimes and maintain the integrity of the financial system.