Here is the article rewritten in Markdown format:

Correspondent Banking Relationships: Japan’s Approach

In Japan, correspondent banking relationships are subject to certain guidelines and requirements aimed at preventing money laundering and terrorist financing. While there is no explicit prohibition on establishing relationships with “shell” banks, financial institutions are expected to verify that prospective foreign financial institutions are not shell banks.

Additional Due Diligence Requirements

When initiating non-face-to-face transactions, such as internet or telephone banking, Japanese financial institutions must conduct additional due diligence to verify a customer’s address. This includes sending registered mail or conducting a site visit.

Suspicious Activity Reports

In Japan, suspicious activity reports (SARs) are made to the Japan Financial Intelligence Center (JAFIC). The center is responsible for analyzing and disseminating information related to suspected money laundering and terrorist financing activities.

Reporting Requirements

Japanese financial institutions are required to report suspicious transactions and other unusual activities to JAFIC. There are no de-minimis thresholds below which transactions do not need to be reported, and non-compliance with reporting requirements can result in administrative penalties.

Automated Suspicious Transaction Monitoring Technology

There is no requirement for Japanese financial institutions to use automated suspicious transaction monitoring technology.

External Audit Reporting

Japanese law does not require external auditors or other external organizations to report on a bank’s anti-money laundering (AML) systems and controls. However, banks are expected to maintain robust AML systems and controls to prevent money laundering and terrorist financing activities.

Data Protection Laws and Personal Data

Japan has data protection laws in place to protect personal information, including the Personal Information Protection Law of 2003. The law defines personal information as any information that can be used to identify a living individual. Financial institutions are required to maintain appropriate security measures to prevent unauthorized access or disclosure of personal information.

Restrictions on Credit Reports

There are no restrictions on the transfer of credit reports in Japan. However, financial institutions are prohibited from obtaining sensitive information, including criminal records and medical data, without proper authorization.

FATF Mutual Evaluation

Japan’s AML/CFT regime was last evaluated by the Financial Action Task Force (FATF) in 2008. The evaluation found that Japan has made significant progress in implementing its AML/CFT measures but still faces some challenges in certain areas.

Correspondent Banking Requirements

Japanese financial institutions are required to conduct enhanced due diligence when establishing correspondent banking relationships with banks in high-risk countries or those subject to sanctions.

Minimum Transactions

In Japan, there is no minimum transaction threshold for reporting suspicious activities. All transactions must be reported if they are deemed suspicious.

Key Restrictions

Japanese financial institutions are prohibited from engaging in transactions that involve the processing of funds related to criminal activity, including money laundering and terrorist financing.

Summary

In summary, correspondent banking relationships in Japan are subject to certain guidelines and requirements aimed at preventing money laundering and terrorist financing. While there is no explicit prohibition on establishing relationships with “shell” banks, financial institutions must conduct additional due diligence when initiating non-face-to-face transactions. Reporting of suspicious activities is mandatory, and non-compliance can result in administrative penalties.