Financial Crime World

Financial Crime Risk Assessment Tools Take Center Stage in Japan’s AML Efforts

Introduction

As a key player in the global financial system, Japan has been at the forefront of implementing stringent anti-money laundering (AML) measures to protect its financial integrity and meet international obligations. At the heart of these efforts is a robust regulatory framework that seeks to prevent the financing of terrorism and other illicit activities.

AML Legislation in Japan

Japan’s AML framework is built around several key pieces of legislation, including:

  • Act on Prevention of Transfer of Criminal Proceeds (APTCP): This foundational legislation came into effect in 2007 and was revised in 2016 to strengthen customer due diligence (CDD) measures and broaden the scope of specified business operators.
  • Financial Instruments and Exchange Act (FIEA): This law primarily focuses on securities companies and financial instruments, mandating CDD and STR requirements for securities-related businesses.

Record-Keeping and Reporting

Specified businesses in Japan are required to maintain transaction records for at least seven years, allowing authorities to track and investigate suspicious activity. When such activity is detected, specified business operators are obligated to report it to the Japanese Financial Intelligence Centre (JAFIC).

Targeted Approach to International Cooperation

Japan’s AML framework also emphasizes international cooperation in combating terrorism financing:

  • Foreign Exchange and Foreign Trade Act (FEFTA): This law takes a targeted approach, focusing on the transfer of funds across Japan’s borders. Banks and financial institutions are required to conduct CDD on overseas remittances exceeding 100,000 yen.
  • Prevention of Terrorism Financing Act: Introduced in 2014, this law specifically addresses the financing of terrorist activities, criminalizing not only the act of financing terrorism but also any attempt or conspiracy to facilitate such activities.

Asset Freezing and Risk Assessment Tools

Asset freezing is another essential tool in preventing terrorism financing:

  • Prevention of Terrorism Financing Act: This law provides provisions for the immediate freezing of assets suspected of being involved in terrorist activities, ensuring they cannot be used to fund further activities.
  • Advanced Risk Assessment Tools: The use of advanced risk assessment tools will play a crucial role in identifying and mitigating financial crime risks. By leveraging these tools, specified business operators can better identify high-risk customers and transactions, ultimately enhancing their ability to prevent money laundering and terrorist financing.

Conclusion

Japan’s AML efforts are at the forefront of global standards, with a robust regulatory framework that seeks to prevent the financing of terrorism and other illicit activities. As Japan continues to strengthen its AML efforts, the use of advanced risk assessment tools will play a crucial role in identifying and mitigating financial crime risks.