Japan Tightens Noose on Money Launderers with Stringent Regulations

Introduction

In a bid to protect its financial system and meet international obligations, Japan has established a robust framework of anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. The country’s stringent measures are aimed at preventing the flow of illicit funds through its borders and disrupting the activities of organized crime groups.

Key Legislation

Act on Prevention of Transfer of Criminal Proceeds (APTCP)

Came into force in 2007
Revised in 2016 to strengthen customer due diligence (CDD) requirements
Mandates specified business operators, including banks and securities companies, to verify the identity of their customers when establishing business relations or conducting transactions over a certain amount.
Requires businesses to keep transaction records for at least seven years and report suspicious transactions to the Japanese Financial Intelligence Centre (JAFIC).
Imposes measures to detect and prevent the transfer of criminal proceeds.

Financial Instruments and Exchange Act (FIEA)

Sets out provisions for CDD and STR requirements similar to the APTCP
Focuses on securities companies and financial instruments

Foreign Exchange and Foreign Trade Act (FEFTA)

Requires banks and financial institutions to conduct CDD on overseas remittances exceeding 100,000 yen.

Introduced in 2014
Specifically addresses the prevention of terrorism financing by criminalizing not only the act of financing terrorism but also any attempt or conspiracy to finance terrorist activities.
Imposes strict penalties, including imprisonment and fines, for those found guilty of supporting or facilitating the financing of terrorism.

International Cooperation

Emphasizes the importance of international cooperation
Facilitates the exchange of information and coordination with foreign governments and international organizations to track and counteract the financing of terrorism.
Provides for the immediate freezing of assets suspected of being involved in terrorist activities.

Recognition from Global Watchdog

Japan’s AML/CFT regulations are in line with international standards set by the Financial Action Task Force (FATF), a global watchdog on money laundering and terrorism financing. The country’s efforts to strengthen its financial system and prevent illicit flows have been recognized by the FATF, which has praised Japan for its commitment to combating money laundering and terrorist financing.

Conclusion

As the global economy becomes increasingly interconnected, Japan’s robust AML/CFT regime serves as a model for other countries seeking to protect their financial systems from money launderers and terrorists. By implementing stringent regulations and strengthening international cooperation, Japan is playing a critical role in maintaining the integrity of the global financial system.