Japan Tightens Banking Regulations to Combat Financial Crime

Introduction

In an effort to combat financial crime and money laundering, Japan has established a comprehensive domestic regulatory and oversight regime that imposes stringent customer due diligence (CDD) obligations on financial institutions and designated non-financial businesses and professions.

Strengthening Anti-Money Laundering Efforts in Japan

Japan’s anti-money laundering efforts are governed by the Act on Prevention of Transfer of Criminal Proceeds, which requires financial institutions to:

• Perform CDD measures: including customer and beneficial owner identification
• Maintain information obtained: by the measures and transaction records
• Report suspicious transactions: to the Financial Intelligence Unit (FIU)

The government has also established the Japan Financial Intelligence Center (JAFIC), which is responsible for collecting, arranging, analyzing, and disseminating information on suspicious transactions to investigative authorities in Japan.

Requirements for Cash Border Transportation and Electronic Transfers

To strengthen its anti-money laundering efforts, Japan requires:

• Individuals and businesses: to declare and disclose cash border transportation and other negotiable instruments exceeding certain thresholds
• Financial institutions: including money remitters, to meaningfully identify the originator of electronic transfers of funds and maintain such information throughout the payment chain

Effective Cooperation and Exchange of Information

The government has taken steps to ensure effective cooperation and exchange of information among law enforcement, judicial authorities, and financial regulatory agencies in cases of money laundering.

Challenges Facing Japan

Despite its efforts, Japan faces several challenges in combating financial crime, including:

• Financial and technical capacity: with regard to the ability of agencies involved in combating money laundering to cooperate and exchange information at the national and international levels
• Coordination challenges: among relevant agencies responsible for combating money laundering with regard to global, regional, and bilateral cooperation

Regional and Multilateral Cooperation

As one of the founding members of the Financial Action Task Force (FATF), Japan has committed to implementing international standards for combating money laundering and terrorist financing. The country also participates in regional and multilateral initiatives, including the Asian-Pacific Group (APG) and the Egmont Group, to share information and best practices with other countries.

Conclusion

Overall, Japan’s efforts demonstrate a commitment to combating financial crime and money laundering, and its regulatory framework provides a robust foundation for effective anti-money laundering measures.