Japan’s Terrorism Financing Laws Praised but Urged for Improvement

A recent assessment by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering has concluded that Japan’s anti-money laundering and counter-terrorist financing (AML/CFT) framework is effective in combating money laundering and terrorist financing. However, Japanese authorities are urged to prioritize efforts in certain areas to further improve the effectiveness of their AML/CFT system.

Strengths of Japan’s AML/CFT Framework

• Japan has a good understanding of the risks it faces from money laundering and terrorist financing.
• It has been at the forefront of AML/CFT measures in high-risk areas.
• The country is commended for its ability to collect and use financial intelligence to investigate and prosecute these crimes.
• Japan’s constructive cooperation with international counterparts is also recognized.

Areas for Improvement

Law Enforcement

• Focus more on laundering of proceeds from complex large-scale cases involving fraud and drug-related crimes, including addressing key risk areas such as organized crime groups like the Boryokudan.
• Increase efforts in confiscating criminal proceeds.

Proactive Outreach to Businesses

• Japan’s proactive outreach to businesses about the risks of proliferation financing is praised.
• However, the country needs to ensure effective implementation of measures to prevent unwitting facilitation of sanctions evasion.

Virtual Assets and Service Providers

• Japanese authorities are urged to fully implement measures to prevent abuse of virtual assets and their service providers.

Recommendations for Improvement

• Prioritize efforts to improve requirements for financial and non-financial institutions to prevent money laundering and terrorist financing, including customer due diligence.
• Improve access to beneficial ownership information to prevent misuse of legal persons and arrangements.

The FATF adopted this report at its June 2021 Plenary meeting.