Japan’s Anti-Money Laundering Regime: Obliged Entities Must Comply with Stringent Governance Requirements

Combating Money Laundering and Terrorist Financing in Japan

Tokyo, Japan - As part of its efforts to combat money laundering and terrorist financing (ML/TF), Japan has introduced a series of regulations aimed at obliging entities to implement robust governance arrangements. These measures are designed to ensure that financial institutions and other organizations involved in foreign exchange, foreign trade, and other foreign transactions are equipped to detect and prevent ML/TF activities.

Obliged Entities’ Responsibilities

According to the Foreign Exchange and Foreign Trade Act, obliged entities must:

• Confirm that customers are not involved in ML/TF activities before conducting transactions with them
  • Verify the identity of customers
  • Monitor transactions for suspicious activity
  • Report any suspicious transactions to the authorities

Internal Controls and Procedures

The Act on Prevention of Transfer of Criminal Proceeds (AML Act) requires obliged entities to implement internal controls and procedures to prevent ML/TF activities, including:

• Identifying and reporting suspicious transactions
• Freezing funds associated with criminal proceeds
• Implementing customer due diligence procedures

FSA Guidelines

The Financial Services Agency (FSA) has issued guidelines for obliged entities to follow in order to comply with these regulations. The guidelines provide detailed requirements for: + Customer due diligence + Transaction monitoring + Reporting of suspicious transactions

Consequences of Non-Compliance

Obliged entities that fail to comply with these regulations risk facing:

• Administrative penalties, including business improvement orders and fines
• Criminal sanctions on individuals who engage in ML/TF activities or assist others in doing so

International Agreements

Japan has also implemented a number of international agreements aimed at combating ML/TF, including: + Membership in the Financial Action Task Force (FATF) + Participation in the Wolfsberg Group, an industry association that provides guidance on managing financial crime risks

Conclusion

In conclusion, Japan’s anti-money laundering regime is designed to ensure that obliged entities are equipped to detect and prevent ML/TF activities. The regulations require obliged entities to implement robust governance arrangements, including customer due diligence procedures, transaction monitoring, and reporting of suspicious transactions. Failure to comply with these regulations can result in administrative penalties and criminal sanctions.