Financial Crime World

Japan’s Progress in Tackling Money Laundering and Terrorist Financing: A New Report on Japan’s AML Policies

The 2022 Mutual Evaluation Report analyzes Japan’s progress in addressing technical compliance deficiencies

Japan, a member of the Financial Action Task Force (FATF), has released a follow-up report on its progress in addressing the technical compliance deficiencies identified in its 2021 Mutual Evaluation (ME) on Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT). The report, produced by the International Monetary Fund (IMF), highlights Japan’s significant advancements in implementing AML and CFT measures to prevent money laundering and terrorist financing.

Highlights from the Report

Japan has made notable progress in various areas since the 2021 report, as outlined below.

1. Improved risk assessment

  • Japan has streamlined its risk assessment approach
  • Enhanced focus on higher-risk sectors (casinos, real estate, financial institutions, etc.)

2. Enhanced customer due diligence

  • Financial institutions strides in conducting rigorous customer due diligence
  • Reduced risks of financial systems being misused for money laundering and terrorist financing activities

3. Expansion of AML/CFT regulations

  • Various sectors (lawyers, accountants, casinos, prepaid cards, virtual asset companies) now mandatory to adhere to AML/CFT measures

4. Training and awareness

  • Improved training and awareness for financial institutions and other sectors
  • Enhanced efforts from Japan’s Financial Services Agency (FSA) to train institutions and increase awareness of AML/CFT regulations

5. Technology advancements

  • Latest technologies (AI, machine learning, blockchain) improve efficiency and effectiveness of AML/CFT systems
  • FSA aims to promote technology for improved risk assessment and transaction monitoring

Key Takeaways

  • Japan is taking significant steps to combat money laundering and terrorist financing
  • Stringent AML/CFT measures ensure financial integrity and stability
  • Compliance with international standards

Recommendations

The report also presents several recommendations to further strengthen Japan’s AML/CFT system:

  • Beneficial ownership transparency
    • Improve disclosure requirements
    • Create a central register
  • Effective financial intelligence unit (FIU)
    • Enhance FIU’s role and resources
  • Supervision and enforcement mechanisms
    • Implement effective sanctions for non-compliance
    • Increase transparency in enforcement actions