Japan Conducts National Risk Assessment to Combat Money Laundering and Terrorist Financing

The Japanese government has launched a national risk assessment aimed at identifying and mitigating the risks of money laundering (ML) and terrorist financing (TF). The assessment is being conducted by the Working Group on ML/TF, comprising officials from various ministries and agencies.

Background

Japan’s highly developed financial sector, which facilitates a substantial amount of international financial transactions, makes it an attractive target for money launderers and terrorist financiers. The country’s ease of access to financial services, particularly through the internet and mobile payment systems, also increases the risk of ML/TF.

Risk Assessment Objectives

The Working Group, chaired by the Director for Prevention of Money Laundering, Organized Crime Department, Criminal Affairs Bureau of National Police Agency, will assess the risks associated with various transactions, products, and services that could be used to facilitate ML/TF. The assessment is expected to:

Identify vulnerabilities in Japan’s financial system
Recommend measures to strengthen its anti-money laundering and counter-terrorist financing regime

Vulnerabilities in Japan’s Financial System

According to a recent report, Japan’s financial system is vulnerable to ML/TF due to its lack of transparency and accountability in transactions. Criminals may use various schemes, such as shell companies and fake invoices, to launder money or finance terrorist activities.

Expected Outcomes

The national risk assessment is expected to provide valuable insights into the risks posed by ML/TF in Japan and inform the development of effective countermeasures to combat these threats. The assessment will also help to strengthen international cooperation and information sharing among countries to prevent ML/TF.

In a related development, the Japanese government has recently introduced measures to enhance transparency and accountability in financial transactions, including:

Requiring companies to disclose the beneficial ownership of their subsidiaries
Implementing stricter know-your-customer (KYC) requirements

International Cooperation

The national risk assessment is part of Japan’s efforts to comply with international standards on anti-money laundering and counter-terrorist financing. The country has committed to implementing the Financial Action Task Force (FATF) recommendations to combat ML/TF and to prevent the use of its financial system for illicit purposes.

Timeline

The Working Group on ML/TF is expected to complete its assessment by the end of 2023, which will inform the development of a comprehensive strategy to combat ML/TF in Japan.