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Japan Tightens Belts on AML/CFT Regulations for Financial Institutions

In a bid to fortify its position as a key player in the global financial system, Japan has stepped up its Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) regulations for financial institutions. The move aims to protect the country’s financial integrity and meet international standards.

The Heart of Japan’s AML/CFT Framework

At the heart of Japan’s AML/CFT framework is the Act on Prevention of Transfer of Criminal Proceeds (APTCP), which came into force in 2007 and was revised in 2016 to enhance customer due diligence measures. Under this legislation, specified business operators are required to verify the identity of their customers when establishing business relations or conducting transactions exceeding a certain amount.

Specified Business Operators Face Enhanced Scrutiny

As part of its AML/CFT efforts, Japan has identified several sectors as “specified businesses” that must adhere to stricter customer due diligence requirements. These include:

• Financial institutions
• Securities companies
• Other entities involved in high-risk transactions

The revised ATPCP requires these operators to conduct enhanced customer due diligence when suspecting money laundering or terrorist financing activities.

Record Keeping and Suspicious Transaction Reporting

In addition to customer due diligence, Japan’s AML/CFT regulations mandate specified business operators to maintain transaction records for a minimum period of seven years. Moreover, they are required to report suspicious transactions to the Japanese Financial Intelligence Centre (JAFIC) if they suspect money laundering or terrorist financing activities.

Japanese Authorities Crack Down on Terrorism Financing

The Foreign Exchange and Foreign Trade Act (FEFTA) requires banks and financial institutions to conduct customer due diligence on overseas remittances exceeding 100,000 yen. Meanwhile, Japan’s Counter-Terrorism Financing Act, introduced in 2014, specifically addresses the prevention of terrorism financing by:

• Criminalizing acts related to terrorism financing
• Imposing strict penalties for those found guilty of supporting or facilitating the financing of terrorism
• Requiring financial institutions to implement measures to detect and report suspicious transactions linked to terrorist financing

International Cooperation and Asset Freezing

Japan’s AML/CFT regulations also emphasize international cooperation, enabling the exchange of information and coordination with foreign governments and international organizations. The country has also established provisions for asset freezing, allowing authorities to immediately freeze assets suspected of being involved in terrorist activities.

Conclusion

In conclusion, Japan’s enhanced AML/CFT regulations demonstrate its commitment to maintaining financial integrity and meeting international standards. By tightening due diligence procedures for financial institutions, the country aims to prevent money laundering and terrorism financing, ensuring a safer and more secure financial system for all stakeholders.