Japan Reinforces Anti-Money Laundering Measures in Line with Global Standards

TOKYO, Japan - The Japanese government has taken significant steps to strengthen its anti-money laundering (AML) measures over the years, aligning itself with international standards set by the Financial Action Task Force (FATF).

Early Efforts: Introduction of Anti-Drug Special Provisions Law

In 1992, Japan introduced the Anti-Drug Special Provisions Law, which criminalized money laundering activities connected to drug crimes and established a suspicious transaction reporting system for financial institutions. However, a FATF mutual evaluation in 1994 highlighted the need for broader coverage of predicate offenses for money laundering.

Expansion of Predicate Offenses and Introduction of Financial Intelligence Unit

To address this issue, Japan enacted the Act on Punishment of Organized Crimes and Control of Crime Proceeds in 2000. This law expanded the scope of predicate offenses and crimes subject to suspicious transaction reporting. The law also designated the Financial Services Agency as the country’s Financial Intelligence Unit (FIU).

Additional Measures Implemented after 9/11

Following the terrorist attacks in the US in 2001, Japan implemented additional measures to combat terrorist financing. The Act on Punishment of Financing of Offences of Public Intimidation was enacted in 2002, criminalizing the financing of terrorism and requiring financial institutions to report suspicious transactions related to terrorist funds.

Revisions and Amendments

In 2003, Japan further revised its AML/CFT regime by enacting the Customer Identification Act. This law requires financial institutions to identify their customers and report suspicious transactions. The law was later amended in 2004 to address issues related to the misuse of bank accounts under false names.

Act on Prevention of Transfer of Criminal Proceeds

In response to the FATF’s revised recommendations in 2003, Japan introduced the Act on Prevention of Transfer of Criminal Proceeds in 2007. This law expanded the scope of businesses required to implement customer identification and reporting measures, and transferred the FIU from the Financial Services Agency to the National Police Agency.

Amendments and Strengthening of Customer Due Diligence Requirements

A subsequent amendment to the act was passed in 2011, addressing flaws identified by a FATF mutual evaluation conducted between 2007 and 2008. The revised law strengthened customer due diligence requirements and introduced additional measures to prevent money laundering and terrorist financing.

International Recognition of Japan’s AML/CFT Efforts

Japan’s efforts to strengthen its AML/CFT regime have been recognized by the international community, with the country’s third FATF mutual evaluation concluding that it has made significant progress in implementing the FATF recommendations.