Financial Crime World

Japan’s Financial Crime Prevention Efforts Deliver Results But Need Improvement, Says Global Watchdog

Overview of Japan’s Anti-Money Laundering and Counter-Terrorist Financing Framework

The Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering have conducted a comprehensive review of Japan’s anti-money laundering and counter-terrorist financing (AML/CFT) framework. While Japan has made significant progress in combating money laundering and terrorist financing, there are still areas that require improvement.

Positive Results

The Mutual Evaluation Report praises Japan’s good understanding of the risks it faces and its proactive efforts to address major risk areas. Japanese authorities have demonstrated a strong commitment to collecting and using financial intelligence to investigate and prosecute money laundering and terrorist financing cases, as well as providing constructive cooperation with international counterparts.

Areas for Improvement

However, the report identifies several key areas where Japan must improve its AML/CFT framework:

  • Law Enforcement Agencies: Law enforcement agencies must focus more on addressing the laundering of proceeds in complex large-scale cases often involving fraud and drug-related crimes, including the risks associated with organized crime groups such as the Boryokudan.
  • Confiscation of Criminal Proceeds: Authorities must increase efforts to confiscate criminal proceeds.
  • Implementation of Measures: Japan must improve its implementation of measures to prevent the unwitting facilitation of sanctions evasion and enhance its requirements for financial and non-financial institutions to prevent money laundering and terrorist financing. This includes:
    • Improving customer due diligence
    • Accessing beneficial ownership information to prevent the misuse of legal persons and arrangements

Additional Recommendations

The report also recommends that Japan:

  • Prevent Abuse of Virtual Assets: Japan has made significant progress in addressing risks linked to virtual assets and their service providers, but must now fully implement measures to prevent their abuse.
  • Conduct Outreach with Businesses: Authorities have taken proactive steps to conduct outreach with businesses about the risks of proliferation financing, but must ensure the effective implementation of these measures.

Roadmap for Improvement

The FATF adopted the report at its June 2021 Plenary meeting, providing a roadmap for Japan to strengthen its AML/CFT framework and improve its efforts to prevent financial crimes. With this guidance, Japan can continue to make progress in combating money laundering and terrorist financing.