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Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) in Japan

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Overview

Japan has implemented various regulations to combat money laundering and terrorist financing, including the Act on Prevention of Transfer of Criminal Proceeds (AML Act) and the Foreign Exchange and Foreign Trade Act. The Ministry of Finance (MOF) has established guidelines for AML/CFT measures, which are followed by financial institutions.

Key Regulations

  • The AML Act
  • The Foreign Exchange and Foreign Trade Act
  • MOF’s guidelines for AML/CFT measures

Regulatory Framework

Financial institutions must establish governance arrangements in compliance with the MOF’s guidelines, including a risk assessment report and measures to reduce money laundering risks. Obliged entities must maintain up-to-date customer information through Know-Your-Customer (KYC) procedures and submit suspicious transaction reports.

Compliance Requirements

  • Governance arrangements
  • Risk assessment report
  • Measures to reduce money laundering risks
  • KYC procedures
  • Suspicious transaction reports

Enforcement

Enforcement is carried out through reporting orders and business improvement orders by regulatory authorities.

International Organizations and Agreements

Japan has been a member of the Financial Action Task Force (FATF) since its establishment in 1990 and has developed its legal framework for AML/CFT based on FATF recommendations. One of Japan’s major banks, MUFG, is a member of the Wolfsberg Group, which publishes frameworks and guidance for managing financial crime risks.

International Cooperation

  • FATF membership
  • Development of AML/CFT legal framework
  • Wolfsberg Group membership

Other Laws

The Act on Protection of Personal Information (APPI) requires obliged entities to obtain customer consent when providing personal data to third parties, with exemptions for certain situations. The Whistleblower Protection Act protects employees from dismissal or unfavourable treatment as a result of whistleblowing about money laundering by their employer.

Relevant Laws

  • APPI
  • Whistleblower Protection Act

Outlook

In response to the increasing strictness and sophistication of AML/CFT measures, regulatory authorities will continue to closely supervise obliged entities. Obliged entities with inadequate governance arrangements may be subject to administrative penalties.