Financial Crime World

Japan Tackles Money Laundering with New Guidelines

Strengthening Anti-Money Laundering Regulations in Japan

In an effort to meet international standards set by the Financial Action Task Force (FATF), Japan’s Financial Services Agency has published proposed guidelines aimed at certified public accountants and audit firms. The new rules are part of the country’s efforts to strengthen its anti-money laundering (AML) regulations.

Background: FATF Review

In 2021, the FATF reviewed Japan’s AML environment and determined that the country was underperforming compared to international norms. As a result, Japanese regulators have drafted new revisions to the Act on the Prevention of Transfer of Criminal Proceeds to bring the country’s regulations more in line with FATF standards.

New Guidelines: Enhanced Obligations for Professionals

The proposed guidelines place greater obligations on certified public accountants and tax accountants, including administrative scriveners. Key changes include:

  • Verification of transactions: Certain transactions will be subject to more extensive checks, including pinpointing the purpose of transactions, client identities, and business nature.
  • High-risk transactions: Transactions above 2 million yen will require verification of clients’ assets and income.
  • Risk-based approach: Professional firms are expected to take a risk-based approach and examine risks for services they provide.

Reporting Suspicious Transactions

Administrative scriveners, certified public accountants, and tax accountants will be required to report suspicious transactions where they suspect proceeds to be criminally connected. In some cases, accounts may be frozen.

Enhanced Due Diligence in High-Risk Cases

  • Politically Exposed Persons: Enhanced due diligence is expected in transactions involving Politically Exposed Persons.
  • Shell companies and nominee director arrangements: The proposed guidelines aim to combat exploitation of corporate structures, shell companies, SPVs, and nominee director arrangements to facilitate criminal activities.

Implementation and Assistance

Financial institutions are advised to pay closer attention to the activities of their clients to ensure they meet FSA requirements applicable to them. For more information on the proposed guidelines, please refer to the draft published by the FSA in Japanese. If you require assistance with implementing AML/CTF programs or procedures, contact Philippa Allen or Manabu Nagano for further guidance.