Financial Crime World

Japan’s Efforts in Combating Money Laundering and Terrorist Financing Under Scrutiny

Introduction

Tokyo - Japan’s efforts to combat money laundering (ML) and terrorist financing (TF) have been put under the spotlight, with experts highlighting both strengths and weaknesses in its anti-money laundering and counter-terrorism financing (AML/CFT) measures.

FATF and APG Assessment

According to a recent assessment by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering (APG), Japan has made significant progress in implementing AML/CFT reforms, including introducing measures to license and regulate virtual currency exchange providers. However, experts have identified several areas for improvement.

Key Concerns

Implementation of the Travel Rule

  • While Japan has introduced guidelines for the implementation of the rule, experts say that there are still weaknesses in its enforcement.
  • Financial institutions are required to report certain transactions, but lack of effective enforcement raises concerns.

Prevention Measures against ML and TF by DNFBPs

  • The assessment found that some designated non-financial businesses and professions (DNFBPs) do not have sufficient risk assessments in place to identify potential ML/TF risks.
  • Effective prevention measures are necessary to prevent money laundering and terrorist financing activities.

Areas for Improvement

Enforcement of AML Regulations

  • Japan’s anti-money laundering regulations are not always effectively enforced, with some financial institutions failing to conduct adequate customer due diligence.
  • Lack of effective enforcement raises concerns about the country’s ability to combat ML and TF.
  • The country’s legal framework does not always provide for effective confiscation of criminal proceeds or property of equivalent value.
  • Strengthening the legal framework is necessary to effectively combat money laundering and terrorist financing.

Positive Notes

Good Understanding of ML and TF Risks

  • Japan has a good understanding of ML and TF risks, which is essential for developing effective AML/CFT measures.

Coordination and Policy Setting

  • The country has demonstrated good coordination and policy setting in these areas, which is crucial for effective AML/CFT implementation.

Conclusion

While Japan has made some progress in implementing AML/CFT measures, experts say that there is still much work to be done to effectively combat ML and TF.