Financial Crime World

The Evolution of Anti-Money Laundering Measures in Japan

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Japan has a long history of implementing anti-money laundering (AML) measures to combat illicit activities. This article outlines the five periods in the development of AML measures in Japan, from the pre-1992 era to the present day.

Pre-1992: The Era of Absence

Before 1992, Japan did not have any AML measures in place. However, with the enforcement of the Law concerning Special Provisions for the Narcotics and Psychotropics Control Law etc. and Other Matters for the Prevention of Activities Encouraging Illicit Conduct and Other Activities Involving Controlled Substances through International Cooperation (Anti-Drug Special Provisions Law), Japan began to address money laundering related to drug crimes.

Key Developments:

  • Establishment of a suspicious transaction reporting system for financial institutions
  • Criminalization of money laundering activities connected with drug crimes

1992-1996: The First Steps towards AML

In response to the growing concern of money laundering, Japan enacted the Anti-Drug Special Provisions Law in 1992. This law marked the beginning of Japan’s AML efforts.

Key Developments:

  • Extension of the scope of predicate offenses for money laundering
  • Designation of the Financial Supervisory Agency as the Financial Intelligence Unit (FIU)

1996-2000: International Cooperation and Expansion

Following the recommendations of the Financial Action Task Force (FATF), Japan enacted the Act on Punishment of Organized Crimes and Control of Crime Proceeds in February 2000. This law expanded the scope of AML measures to include non-financial businesses.

Key Developments:

  • Extension of the scope of predicate offenses for money laundering
  • Designation of the Financial Supervisory Agency as the FIU

2000-2007: Addressing Terrorist Financing

In response to the terrorist attacks in the US, Japan enacted the Act on Punishment of Financing of Offences of Public Intimidation in July 2002. This law implemented the International Convention for the Suppression of the Financing of Terrorism.

Key Developments:

  • Inclusion of terrorist financing as a predicate offense
  • Revision of the Act on Punishment of Organized Crimes

2007-Present: Continuous Evolution and Improvement

In response to the FATF’s recommendations, Japan enacted the Act on Prevention of Transfer of Criminal Proceeds in March 2007. This law extended the scope of application to business operators required to implement customer identification.

Key Developments:

  • Extension of the scope of application to non-financial businesses
  • Transfer of the FIU from the Financial Services Agency to the National Public Safety Commission/National Police Agency

Overall, Japan’s AML measures have evolved significantly over time to address new threats and challenges, including terrorist financing and money laundering by non-financial businesses.