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FATF Recommendations in Japan: Follow-Up Report 2023 Reveals Mixed Progress

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Japan’s efforts to combat money laundering and terrorist financing have been assessed by the Financial Action Task Force (FATF), with mixed results. The country has made some progress in implementing the technical requirements of the FATF Recommendations, but still lags behind in others.

Assessing Risk and Applying a Risk-Based Approach

According to the report, Japan is largely compliant with Recommendation R.1 on assessing risk and applying a risk-based approach. This means that the country has made significant progress in identifying and mitigating risks associated with money laundering and terrorist financing.

National Cooperation and Coordination

However, Japan is only partially compliant with Recommendation R.2 on national cooperation and coordination. This suggests that there may be some gaps in communication and collaboration between different government agencies and stakeholders involved in combating money laundering and terrorist financing.

Combating Money Laundering and Terrorist Financing through Financial Institutions

Japan has made significant progress in implementing measures to prevent money laundering and terrorist financing through its financial institutions. The country is compliant with Recommendations R.3 on money laundering offence and R.5 on terrorist financing offence.

However, Japan still needs to improve its efforts to combat proliferation-related activities, as it is only partially compliant with Recommendation R.7 on targeted financial sanctions related to proliferation.

New Technologies and Digital Currencies

Japan has also made some progress in implementing measures to prevent the misuse of new technologies, as it is largely compliant with Recommendation R.15 on new technologies. However, it still needs to improve its efforts to regulate and supervise digital currencies, which are only partially compliant with Recommendation R.27 on regulation and supervision of financial institutions.

International Cooperation

The report also highlights Japan’s need to improve its international cooperation, particularly in the areas of mutual legal assistance, extradition, and other forms of international cooperation. It is only partially compliant with Recommendations R.37-40 on these issues.

Conclusion

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Overall, while Japan has made some progress in implementing the FATF Recommendations, it still needs to address several key areas to ensure that its financial system is robust and effective in combating money laundering and terrorist financing.