Financial Crime World

Japan’s Strict Anti-Money Laundering Reporting Requirements Fortify Financial Industry

In an effort to bolster Japan’s financial sector’s defenses against money laundering and terrorist financing, the Japanese government has enacted stringent reporting requirements for financial institutions, reinforcing Japan’s anti-money laundering (AML) framework.

The Financial Instruments and Exchange Act

The Financial Instruments and Exchange Act, enforced by the Financial Services Agency (FSA), imposes obligations on financial institutions to carry out Know Your Customer (KYC) checks and submit Suspicious Transaction Reports (STRs) to the FSA. The legislation covers a wide range of financial entities including banks, securities companies, and investment trusts.

Know Your Customer (KYC) Checks

Mandatory for clients opening new accounts and for existing clients whose identification information is not up-to-date, KYC checks require financial institutions to confirm a client’s identity based on documents such as:

  • Passports
  • Driver’s licenses
  • Proof of residence

Financial institutions are also required to maintain updated records for client identification information and produce such records upon request from the FSA.

Suspicious Transaction Reports (STRs)

In addition to KYC, the FSA enforces STR reporting requirements, mandating financial institutions to submit reports on any transaction they suspect to involve money laundering or terrorist financing. Transactions that require reporting include those with no apparent economic rationale, large transactions that deviate from a client’s normal patterns, and those originating from or related to jurisdictions with inadequate AML measures.

Consequences of Non-compliance

The submission of STRs is mandatory, and failure to do so can result in severe consequences for financial institutions. Penalties for non-compliance include:

  • Fines
  • Revocation or suspension of professional licenses
  • Potential criminal charges

To mitigate the risk of being caught unaware or non-compliant, the FSA has set up a supervisory framework for regular and independent on-site examinations of financial institutions.

Importance of Compliance

These measures, part of Japan’s broader commitment to international cooperation in the fight against financial crimes, are crucial in ensuring the integrity and security of the financial sector.

About Mori Hamada & Matsumoto

Mori Hamada & Matsumoto is a leading Japanese corporate law firm with approximately 550 lawyers in Tokyo, Osaka, and New York. Our team of experts in the field of White Collar Crime is well-versed in the complexities of Japanese anti-money laundering laws and regulations and provides tailored legal solutions to clients. We assist in navigating the challenging regulatory landscape in Japan and other jurisdictions while ensuring compliance with all relevant AML frameworks and requirements.

For more information, visit Mori Hamada & Matsumoto’s website.

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