Japan’s Anti-Money Laundering and Counter Terrorist Financing Framework Faces Prioritization Needs
Progress, but Key Areas for Improvement Remain
According to a comprehensive review conducted by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG), Japan has made significant strides in combating money laundering and terrorist financing. However, authorities must focus efforts in certain areas to enhance the effectiveness of its anti-money laundering and counter terrorist financing (AML/CFT) framework.
Japanese Authorities Demonstrate Good Understanding of Risks
Japanese authorities have demonstrated a good understanding of the risks posed by money laundering and terrorist financing. They have taken proactive measures in high-risk areas, such as collecting and utilizing financial intelligence to investigate and prosecute these crimes. Additionally, they have provided constructive cooperation with international partners.
Key Risk Areas Identified for Improvement
The report identified several key risk areas that require attention:
- Law Enforcement Focus: Law enforcement must focus on laundering proceeds from complex large-scale cases often involving fraud and drug-related crimes.
- Criminal Proceeds Confiscation: Authorities must increase efforts in confiscating criminal proceeds and addressing the risks associated with organized crime groups such as the Boryokudan.
Proactive Outreach and Effective Implementation
Japan has been commended for its proactive outreach to businesses about the risks of proliferation financing. However, it must ensure the effective implementation of measures designed to prevent the unwitting facilitation of sanctions evasion.
- Virtual Assets: Authorities must prioritize efforts to fully implement measures aimed at preventing the abuse of virtual assets and their service providers.
- Financial Institutions: Japan must strengthen requirements for financial and non-financial institutions to prevent money laundering and terrorist financing, including:
- Enhancing customer due diligence
- Improving access to beneficial ownership information to prevent the misuse of legal persons and arrangements
FATF Adoption of Report
The Financial Action Task Force adopted this report at its June 2021 Plenary meeting. Japan’s authorities must now prioritize efforts to address these key areas for improvement, ensuring a robust AML/CFT framework that protects against money laundering and terrorist financing threats.