Financial Crime World

Japan’s Financial Services Agency Revamps AML Policies Following FATF Evaluation

In response to the findings of the fourth-round mutual evaluation report (MER) published by the Financial Action Task Force (FATF) on August 30, 2021, the Financial Services Agency (FSA) of Japan announced a series of initiatives to strengthen its Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), and Countering Proliferation Financing (CPF) measures.

FATF’s Critique of Japan’s AML/CFT/CPF Measures

The FATF MER identified several areas for improvement in Japan’s AML/CFT/CPF framework, specifically with regards to:

  1. Understanding of risks
  2. Appropriate risk assessments by financial institutions (FIs) and virtual currency exchange providers (VCEPs)

FSA’s Response to FATF’s Findings

In response to these concerns, the Japanese government launched several initiatives aimed at reinforcing the AML/CFT/CPF measures and enhancing their supervision. The following documents were published as part of the AML/CFT/CPF Action Plan:

FSA’s Measures to Address the Concerns

To address the concerns outlined in the FATF MER, the FSA will reinforce its AML/CFT/CPF supervision by implementing the following measures:

  1. Strengthening supervision of AML/CFT/CPF measures taken by FIs and VCEPs: By Autumn 2022
  2. Enhancing FIs’ and VCEPs’ understanding of risks and ensuring appropriate risk assessments: By Autumn 2022
  3. Fully implementing ongoing customer due diligence by FIs and VCEPs: By Spring 2024
  4. Operationalizing a new shared IT platform for transaction screening and monitoring by FIs: By Spring 2024

Updates to the Guidelines

The FSA has also revised the “Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism” in February 2021 and issued updated FAQs in March 2021.