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Japan’s Struggle with Crime: A Look into its Efforts to Combat Money Laundering and Terrorist Financing

In a bid to combat the scourge of money laundering and terrorist financing, Japan has been taking various measures to strengthen its anti-money laundering (AML) and counter-terrorist financing (CFT) framework. However, despite these efforts, experts say that more needs to be done to address the country’s vulnerabilities.

A Mixed Bag

According to a recent assessment by the Financial Action Task Force (FATF), Japan has made some progress in addressing its AML/CFT risks. The country has introduced measures to license and regulate virtual currency exchange providers, as well as to supervise financial institutions and designated non-financial businesses and professions.

However, the assessment also pointed out several technical shortcomings that pose challenges for effectiveness. These include gaps in preventive measures applicable to designated non-financial businesses and professions, such as the absence of suspicious transaction reporting obligations for some sectors.

Understanding the Risks

Japan has a good understanding of its AML/CFT risks, mainly based on the large number of assessments conducted by its National Risk Assessment (NRA) and other entities. However, experts say that more needs to be done to deepen this understanding, particularly in relation to cross-border risks and threats.

National Policies

The Japanese government has introduced national policies and strategies to address some of its higher AML risks, including virtual asset risks. However, these policies lack targeted anti-money laundering activities, focusing instead on criminals and the smuggling of illegal goods and assets.

International Cooperation

Japan has demonstrated good international cooperation and coordination in relation to AML/CFT operational matters. It has also been active in developing financial intelligence and related information to investigate money laundering, associated predicate offences, and potential terrorist financing cases.

However, experts say that more needs to be done to improve interagency cooperation and coordination in the development of AML/CFT policies. Additionally, there are weaknesses in relation to activities to prosecute terrorist financing, implementation of targeted financial sanctions, and support for non-profit organizations (NPOs) to address terrorist financing risks.

Conclusion

While Japan has made some progress in addressing its AML/CFT risks, more needs to be done to strengthen its framework and address the country’s vulnerabilities. The Japanese government must work closely with international partners to develop effective policies and strategies to combat money laundering and terrorist financing.