Japan’s Anti-Money Laundering Laws: A Look at the Country’s Efforts to Combat Financial Crime

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Despite its efforts to combat financial crime, Japan still faces risks of money laundering, terrorist financing, corruption, and fraud. The country has seen a significant increase in money laundering cases, particularly with the rise of cryptocurrencies.

An Increase in Money Laundering Cases

According to reports, money laundering cases in Japan increased by 40% to 511 in 2018, with cryptocurrencies being a significant source of this increase. This trend is attributed to the global COVID-19 pandemic, which has led to more non-face-to-face transactions taking place.

The National Police Agency’s Report

The National Police Agency’s “Annual Report on Prevention of Transfer of Criminal Proceeds (2021)” revealed that there was a steady increase in reports of suspicious transactions starting from 2016. In 2021, the number of reported cases reached an unexpected 530,150.

Banks were responsible for the majority of these reports, accounting for approximately 73.6% of all reported cases.
The report highlighted the need for enhanced supervision of financial institutions and designated non-financial businesses and professions to prevent money laundering and terrorist financing.

Japan’s Anti-Money Laundering Laws and Regulations

Japan’s anti-money laundering laws and regulations are outlined in several acts, including:

Act on Special Provisions for the Narcotics and Psychotropics Control Act, etc, and Other Matters for the Prevention of Activities Encouraging Illicit Conduct and Other Activities Involving Controlled Substances through International Cooperation (Act No. 94 of 1991)
Act on Punishment of Organised Crimes and Control of Crime Proceeds (Act No. 136 of 1999)
Act on Prevention of Transfer of Criminal Proceeds (Act No. 22 of 2007)

Japan’s Criminal Justice System

Under Japan’s criminal justice system, public prosecutors have discretion in determining whether to bring charges against an individual accused of money laundering. If a suspect is formally charged, it is up to the court to assess the available evidence and make a verdict regarding the defendant’s guilt.

Financial Action Task Force (FATF) Evaluation

Japan’s FATF status was evaluated in its 4th round of Mutual Evaluation Report (MER), which highlighted improvements compared to its previous report in 2008. However, the report also pointed out areas that require more attention, such as:

Enhancing supervision of financial institutions and designated non-financial businesses and professions
Implementing necessary legislative actions effectively

National AML/CTF/CPF Action Plan

In response to the FATF’s evaluation, the Japanese government unveiled a “National AML/CTF/CPF Action Plan” for the next three years. The plan aims to implement necessary legislative actions effectively and promote collaboration between the public and private sectors.

Collaboration between Public and Private Sectors

Collaboration between the public and private sectors is essential in achieving the plan’s objectives. Swift implementation of FATF standards and travel regulations by both sectors is crucial to avoid regulatory loopholes.

Maintaining a Proactive Stance on Anti-Money Laundering Regulations

Maintaining a proactive stance on anti-money laundering regulations is crucial for Japan given its significant influence in finance. Sanction Scanner’s AML solutions enable institutions to fulfill their obligations while gaining insightful knowledge of the dynamic AML environment unique to Japan.