Financial Crime World

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Financial Crime Prevention in Japan’s Economy Remains a Concern Despite Progressive Measures

Tokyo, Japan - A Growing Concern

Despite its efforts to combat financial crime, Japan continues to face significant risks of money laundering, terrorist financing, corruption, and fraud. The country’s financial sector has been grappling with the rapid growth of cryptocurrencies, which has led to an increase in money laundering cases by 40% to 511 in 2018.

National Police Agency’s Annual Report

According to the National Police Agency’s “Annual Report on Prevention of Transfer of Criminal Proceeds” for 2021, the number of reports of suspicious transactions increased sharply to 530,150, with banks being the primary source of these reports. The report highlighted that the COVID-19 pandemic has changed money laundering and terrorist financing risks, with more non-face-to-face transactions taking place than ever before.

Japan has a robust legal framework in place to prevent financial crime, comprising three main laws:

  • Act on Special Provisions for the Narcotics and Psychotropics Control Act
  • Act on Punishment of Organised Crimes and Control of Crime Proceeds
  • Act on Prevention of Transfer of Criminal Proceeds

Public prosecutors have the authority to exercise discretion when determining whether to bring charges against individuals accused of money laundering. However, Japanese criminal procedure does not provide for alternative resolutions such as plea agreements or settlement agreements.

Punishment for Money Laundering

In money laundering cases, the criminal penalty typically involves imprisonment for a maximum of five years, a fine that can reach up to ¥10 million, or a combination of both.

FATF Report and Action Plan

The Financial Action Task Force (FATF), an international organization responsible for setting anti-money laundering and counter-terrorism financing standards, released its 4th round of Mutual Evaluation Report on Japan in August 2021. The report praised Japan’s improvements in certain areas but also highlighted the need for enhanced supervision of financial institutions and designated non-financial businesses and professions.

In response to the FATF report, the Japanese government unveiled a three-year National AML/CTF/CPF Action Plan to implement necessary legislative actions effectively. Collaboration between the public and private sectors is essential to achieve the plan’s objectives.

Industry Engagement and Monitoring

The FATF has also emphasized the importance of swift implementation of its standards by both the public and private sectors to avoid regulatory loopholes. The organization has identified risks related to peer-to-peer transactions and crypto-assets, highlighting the need for industry engagement and monitoring to promote global adherence to its standards.

Maintaining a Proactive Stance

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