Japan’s Efforts Against Money Laundering and Terrorist Financing Face Challenges
TOKYO - Japan has made significant strides in combating money laundering (ML) and terrorist financing (TF), but several challenges persist, according to a new assessment by the Financial Action Task Force (FATF).
Understanding Risks and Efforts to Combat ML/TF
The report highlights Japan’s good understanding of its ML and TF risks, as well as its efforts to assess these risks and coordinate with domestic authorities. However, it also identifies gaps in preventive measures applicable to designated non-financial businesses and professions (DNFBPs), technical deficiencies affecting the dissuasiveness of sanctions for ML and physical elements of TF, and weaknesses in implementing targeted financial sanctions against terrorism.
Challenges Persist
The assessment notes that Japan’s national policies and strategies have focused on addressing higher ML risks, such as virtual asset risks, but lack targeted anti-money laundering activities. Key national authorities have taken steps to adjust their priorities to be consistent with identified risks, but more needs to be done.
- Lack of targeted anti-money laundering activities
- Insufficient prioritization of ML/TF risks
- Technical deficiencies in sanctions and physical elements of TF
Counter-Terrorism Expertise Lacking
The report highlights a good understanding by counter-terrorism experts of TF risks, but notes that this level of understanding does not extend to other Japanese officials with a role in combating terrorist financing.
Areas of Strength
The FATF assessment also praises Japan’s good interagency cooperation and coordination on AML/CFT operational matters, as well as its efforts to develop and use financial intelligence and related information to investigate ML and TF cases. However, it notes that progress could be made to improve cooperation and coordination in the development of AML/CFT policies.
Recent Efforts
Japan has taken steps to strengthen its anti-money laundering framework, including:
- Introducing measures to license, regulate, and supervise virtual currency exchange providers (VCEPs) in 2016
- Financial supervisors adopting enforceable guidelines for financial institutions
Challenges Remain
Despite these efforts, Japan still faces challenges in implementing targeted financial sanctions against terrorism, as well as supporting the non-profit sector to address TF risks.
FATF Assessment
The FATF assessment provides a comprehensive overview of Japan’s anti-money laundering and counter-terrorist financing framework, highlighting areas of strength and weakness. It will be used by the Japanese government to inform its efforts to strengthen its AML/CFT regime and ensure compliance with international standards.