Financial Crime World

Japan Grapples with Money Laundering Risks Despite Efforts to Combat Financial Crime

Despite its reputation as a leader in financial regulation, Japan continues to face significant risks of money laundering, terrorist financing, corruption, and fraud. According to recent reports, money laundering cases increased by 40% to 511 in 2018, with cryptocurrencies playing a major role in this surge.

The COVID-19 Pandemic: A New Challenge

The shift towards non-face-to-face transactions during the pandemic has created new vulnerabilities for financial institutions to combat. In fact, the National Police Agency’s “Annual Report on Prevention of Transfer of Criminal Proceeds (2021)” revealed that reports of suspicious transactions jumped to a staggering 530,150 in 2021, with banks being the primary source of these reports.

Japan’s AML Laws and Regulations

To address these risks, Japan has implemented a range of anti-money laundering laws and regulations. These include:

  • Act on Special Provisions for the Narcotics and Psychotropics Control Act, etc, and Other Matters for the Prevention of Activities Encouraging Illicit Conduct and Other Activities Involving Controlled Substances through International Cooperation (Act No. 94 of 1991)
  • Act on Punishment of Organised Crimes and Control of Crime Proceeds (Act No. 136 of 1999)
  • Act on Prevention of Transfer of Criminal Proceeds (Act No. 22 of 2007)

Under Japan’s criminal justice system, public prosecutors have significant discretion in deciding whether to bring charges against individuals accused of money laundering. If a suspect is formally charged, it falls upon the court to assess the available evidence and make a verdict regarding the defendant’s guilt.

FATF Status

In its 4th round of Mutual Evaluation Report (MER) released on August 30, 2021, the Financial Action Task Force (FATF) praised Japan for its improvements in implementing anti-money laundering measures. However, the report also identified areas that require further attention, including:

  • Enhancing supervision of financial institutions and designated non-financial businesses and professions
  • Improving the effectiveness of anti-money laundering measures

National AML/CFT/CPF Action Plan

In response to the report, the Japanese government unveiled a “National AML/CFT/CPF Action Plan” aimed at strengthening anti-money laundering and counter-terrorism financing measures over the next three years. Collaboration between the public and private sectors is crucial in achieving this goal.

Anti-Money Laundering Solutions for Japan

Maintaining a proactive stance on AML regulations is essential for Japan, given its significant influence in finance. Sanction Scanner’s expertise enables financial institutions to fulfill their AML obligations while gaining valuable insights into the dynamic AML environment unique to Japan. By partnering with Sanction Scanner, financial institutions can stay ahead of the curve and ensure compliance with evolving AML regulations.