Financial Crime World

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Japan Tightens Banking Regulations to Combat Financial Crime

In an effort to prevent financial crimes in Japan, the government has strengthened banking regulations by implementing stricter measures to combat money laundering and terrorist financing.

The Banking Act

The Banking Act, formulated in 1927 and revised in 1981, sets out regulations for banks operating in Japan. The law divides the scope of banking business into six main categories:

  • Typical banking
  • Securities
  • Insurance
  • Trust businesses

Banks are also required to maintain capital adequacy requirements and submit regular reports on their financial conditions.

Regulatory Authority

The Financial Services Agency (JFSA) serves as the primary regulatory authority for financial institutions in Japan. The agency has the power to:

  • Request reports and materials from banks
  • Conduct on-site inspections
  • Penalize misconduct
  • Order banks to hold a portion of their assets within Japan

Additional Regulations

Several other principal laws regulate banking activities in Japan, including:

  • Anti-Monopoly Act: restricts bank shareholdings in other companies
  • Act on Limitation on Shareholding by Banks and Other Financial Institutions: limits the amount of shares banks can own
  • Deposit Insurance Act: protects deposits up to a certain amount

Investment-Type Financial Products

The Financial Instruments and Exchange Act regulates investment-type financial products and provides for user protection.

Customer Identification and Suspicious Transactions

The Act on Prevention of Transfer of Criminal Proceeds requires financial institutions to:

  • Verify customer identity
  • Report suspicious transactions

Depositor Protection

The Act on Protection, etc. of Depositors and Postal Saving Holders from Unauthorized Automated Withdrawal, etc. using Counterfeit Cards, etc. and Stolen Cards, etc. provides compensation for damages suffered by depositors in cases where their cash cards are counterfeited or stolen.

Conclusion

The government’s efforts to strengthen banking regulations aim to prevent financial crimes, protect depositors, and maintain a stable financial system in Japan.