Financial Crime World

Here’s the article in markdown format:

Japan’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Measures

Risk-Based Approach

Japan uses a risk-based approach to assess ML/TF risks for each category of transactions by specified business operators.

  • This approach enables Japan to tailor its AML/CFT measures to the specific needs of different types of businesses and transactions.
  • By focusing on high-risk areas, Japan can allocate resources more effectively and reduce the burden on lower-risk entities.

Financial Institutions (FIs)

Financial institutions, such as banks and insurance companies, are required to take various risk reduction measures under the AML/CFT regime. These measures include:

  • Customer due diligence: FIs must verify the identity of their customers and maintain accurate records of customer information.
  • Suspicious transaction reporting: FIs must report suspicious transactions to the Financial Intelligence Unit (FIU) and cooperate with law enforcement agencies in investigations.

Designated Non-Financial Businesses and Professions (DNFBPs)

Designated non-financial businesses and professions, such as real estate brokers and lawyers, are also subject to AML/CFT regulations and guidelines. These regulations require DNFBPs to:

  • Verify customer information: DNFBPs must verify the identity of their customers and maintain accurate records of customer information.
  • Report suspicious transactions: DNFBPs must report suspicious transactions to the FIU and cooperate with law enforcement agencies in investigations.

Non-Profit Organizations (NPOs)

Japan’s CFT measures target NPOs that are vulnerable to misuse for terrorist finance due to their social credibility and financial resources. These measures include:

  • Enhanced customer due diligence: NPOs must conduct enhanced customer due diligence to ensure that they do not facilitate terrorist financing.
  • Reporting of suspicious transactions: NPOs must report suspicious transactions to the FIU and cooperate with law enforcement agencies in investigations.

Beneficial Ownership

To prevent the misuse of legal persons, Japan requires FIs and other specified business operators to verify information about beneficial owners of corporate customers at the time of specified transactions with them. This includes:

  • Verification of identity: Beneficial owners must be identified and verified by FIs and DNFBPs.
  • Maintenance of records: Accurate records of customer information, including beneficial owner information, must be maintained.

Notaries’ Verification

Notaries are required to verify information on beneficial owners of legal persons at the time of incorporation and issue relevant verification certificates. This includes:

  • Verification of identity: Beneficial owners must be identified and verified by notaries.
  • Issuance of verification certificates: Notaries must issue verification certificates to confirm the identity of beneficial owners.

Financial Intelligence Unit (FIU)

Japan’s FIU, JAFIC, collects, organizes, analyzes, and disseminates information reported by FIs, etc. to law enforcement agencies in order to support the government’s AML/CFT measures.

  • Collection of reports: The FIU receives reports from FIs and DNFBPs regarding suspicious transactions.
  • Analysis of reports: The FIU analyzes reports to identify potential ML/TF activity.
  • Dissemination of information: The FIU disseminates information to law enforcement agencies to support investigations.

Enforcement and Asset Freezing

Strict measures are taken against ML/TF, including investigation, prosecution, and asset freezing, to prevent illegal money transfers and ensure the thorough deprivation of the proceeds of crime. These measures include:

  • Investigation: Law enforcement agencies investigate suspected ML/TF activity.
  • Prosecution: Suspects are prosecuted for ML/TF-related offenses.
  • Asset freezing: Assets related to ML/TF activity are frozen to prevent their use or transfer.

These measures are aimed at preventing the misuse of legal persons and entities for ML/TF purposes and ensuring that Japan remains a safe country.