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Japan’s Efforts to Prevent Money Laundering (ML) and Terrorist Financing (TF)
Key Laws and Regulations
The Japanese government has implemented various laws and regulations to prevent money laundering (ML) and terrorist financing (TF). The main laws include:
1. Act on Punishment of Financing of Terrorism (TF Act)
This law provides for punishment for the collection and provision of terrorist funds.
2. Terrorist Asset Freezing Act (TAFA)
This law regulates domestic transactions by international terrorists, which the Financial Action Task Force (FATF) does not cover.
Risk-Based Approach to ML/TF Prevention
The government employs a risk-based approach to ML/TF prevention, based on the Act on Prevention of Transfer of Criminal Proceeds. The National Public Safety Commission prepares and publishes the National Risk Assessment-Follow-up Report, which assesses risks for each category of transactions by specified business operators.
Financial Institutions (FIs) and Designated Non-Financial Businesses and Professions (DNFBPs)
- Financial Institutions: FIs are required to take various risk reduction measures, including customer due diligence and reporting suspicious transactions, under the AML/CFT/CPF regime. Authorities supervise whether FIs comply with the requirement.
- Designated Non-Financial Businesses and Professions: DNFBPs are also subject to the same requirements as FIs. The government identifies risks, formulates guidelines, and conducts inspection and supervision in consideration of their sizes and characteristics.
Non-Profit Organizations (NPOs)
Non-profit organizations (NPOs) are vulnerable to misuse for terrorist finance because of their social credibility and financial resources. Japan’s CFT measures target not only corporations engaging in specified non-profit activities but also public interest corporations, social welfare corporations, medical corporations, incorporated educational institutions, and religious corporations.
Transparency of Beneficial Ownership
The government has implemented various measures to improve the transparency of beneficial ownership (BO) of legal persons, including:
- Obligation on FIs, etc. to perform verification at the time of transactions
- Notaries’ verification of BO at the time of legal person incorporation
- The BO of Legal Persons List System
Financial Intelligence Center and Law Enforcement Agencies
The Japan Financial Intelligence Center collects, organizes, analyzes, and disseminates information reported by FIs, etc., to law enforcement agencies in order to support the government’s AML/CFT measures.
Investigation, Prosecution, and Asset Freezing
Investigation, prosecution, and asset freezing are also important aspects of ML/TF prevention. The Strategy to Make Japan the Safest Country in the World calls for using relevant laws to appropriately implement punishments for ML in order to ensure the thorough deprivation of the proceeds of crime and prevent criminal proceeds from being used for maintaining and expanding criminal organizations including terrorism.
Asset freezing measures have been implemented to prevent funds and other assets from being used for or flowing to Taliban-related parties and terrorists under the FEFTA and the TAFA.