Financial Crime World

Japan’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Measures

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Overview of Japan’s AML/CFT Efforts

Japan has implemented various measures to combat money laundering (ML) and the financing of terrorism (TF). These efforts are aimed at preventing the misuse of financial systems for illicit activities.

1. Risk-Based Approach

The National Public Safety Commission prepares and publishes the National Risk Assessment-Follow-up Report (NRA-FUR), which specifies and assesses ML/TF risks for each category of transactions by specified business operators.

2. Financial Institutions (FIs)

Financial institutions, including:

  • Banks
  • Life insurance companies
  • Non-life insurance companies
  • Financial instruments business operators
  • Money lending business operators
  • Fund transfer services providers
  • Crypto-asset exchange service providers
  • Currency exchange operators

are required to take various risk reduction measures, including customer due diligence and the reporting of suspicious transactions.

3. Designated Non-Financial Businesses and Professions (DNFBPs)

DNFBPs, such as:

  • Real estate brokers
  • Dealers in precious metals and stones
  • Postal receiving service providers
  • Telephone receiving and forwarding service providers
  • Casino business operators
  • Lawyers
  • Judicial scriveners
  • Certified administrative procedures legal specialists
  • Certified public accountants
  • Certified public tax accountants

are designated as specified business operators under the AML/CFT regime.

4. Non-Profit Organizations (NPOs)

The FATF requires that CFT measures should be applied to NPOs that are vulnerable to misuse for terrorist finance because of their social credibility and financial resources. Japan’s CFT measures target not only:

  • Corporations engaging in specified non-profit activities (CESNAs)
  • Public interest corporations
  • Social welfare corporations
  • Medical corporations
  • Incorporated educational institutions
  • Religious corporations

5. Beneficial Ownership

International arguments have grown for improving the transparency of Beneficial Ownership (BO) of legal persons to prevent their misuse. Japan requires FIs, etc. to verify the BO of legal persons and has a system in which notaries before the certification of articles of incorporation ask clients to report information on BO.

6. Financial Intelligence Unit (FIU)

The FIU serves as a national center for the receipt and analysis of suspicious transaction reports and disseminates analysis results to law enforcement agencies. Japan’s FIU, named Japan Financial Intelligence Center (JAFIC), collects, organizes, analyzes, and disseminates information reported by FIs, etc. to law enforcement agencies in order to support the government’s AML/CFT measures.

7. Enforcement and Asset Freezing

Strict measures must be taken against ML/TF to prevent illegal money transfers. Japan uses relevant laws to appropriately implement punishments for ML and ensures the thorough deprivation of the proceeds of crime, including the proceeds of drug crime, and prevents criminal proceeds from being used for maintaining and expanding criminal organizations, including terrorism.

These points highlight Japan’s efforts to combat money laundering and the financing of terrorism through a risk-based approach, strict measures against illegal transactions, and transparency in beneficial ownership.