Japan’s AML/CFT Efforts Deliver Results, But Room for Improvement Remains

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A comprehensive review by the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering has assessed Japan’s anti-money laundering and counter-terrorist financing (AML/CFT) system. The Mutual Evaluation Report highlights areas where Japan needs to prioritize efforts to strengthen its AML/CFT framework.

Understanding Risks and Implementing Measures

Japan’s authorities have a good understanding of the money laundering and terrorist financing risks they face, and have been at the forefront of implementing AML/CFT measures in high-risk areas. The country has made progress in collecting and utilizing financial intelligence to investigate and prosecute these crimes. Additionally, Japan has demonstrated constructive cooperation with international partners.

Key Risk Areas

However, the report identifies several key risk areas where Japan needs to focus its efforts:

• Addressing Complex Large-Scale Cases: Law enforcement must prioritize addressing the laundering of proceeds from complex large-scale cases involving fraud and drug-related crimes, including organized crime groups such as the Boryokudan.
• Increasing Efforts in Confiscating Criminal Proceeds: Authorities also need to increase their efforts in confiscating criminal proceeds.

Preventing Abuse

Another area for improvement is in preventing the unwitting facilitation of sanctions evasion. Japan needs to ensure effective implementation of measures to prevent this type of abuse.

• Virtual Assets and Service Providers: The country has taken robust action to address risks linked to virtual assets and their service providers, but now needs to fully implement measures to prevent their abuse.
• Preventing Sanctions Evasion: Japan must also improve its measures to prevent the misuse of legal persons and arrangements by increasing access to beneficial ownership information.

Recommendations

The report recommends that Japan:

• Improve requirements for financial and non-financial institutions to prevent money laundering and terrorist financing, including customer due diligence.
• Increase access to beneficial ownership information to prevent the misuse of legal persons and arrangements.

Conclusion

The FATF adopted this report at its June 2021 plenary meeting, highlighting the importance of continued efforts by Japan to strengthen its AML/CFT framework and combat these global threats. While Japan’s efforts have delivered results, there is still room for improvement in key areas.