Financial Crime World

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Japan Tightens AML/CFT Regulations to Strengthen Financial Integrity

In an effort to bolster its anti-money laundering (AML) and counter-terrorist financing (CFT) measures, Japan has reinforced its regulatory framework to meet international standards. The country’s AML/CFT regulations are now more stringent than ever, aimed at combating financial crimes and protecting its financial system.

The Cornerstone of Japan’s AML Legislation

The cornerstone of Japan’s AML legislation is the Act on Prevention of Transfer of Criminal Proceeds (APTCP), enacted in 2007. This law was revised in 2016 to enhance customer due diligence measures and expand the list of specified business operators subject to these regulations.

Regulatory Requirements for Businesses

Under the APTCP, businesses are required to:

  • Conduct thorough identity verification of customers when establishing business relationships, conducting transactions exceeding a certain amount, or suspecting money laundering activities
  • Maintain transaction records for at least seven years
  • Report suspicious transactions to the Japanese Financial Intelligence Centre (JAFIC)

FIEA and FEFTA: Additional Regulations

The Financial Instruments and Exchange Act (FIEA) focuses on securities companies and financial instruments, imposing similar AML/CFT requirements. The Foreign Exchange and Foreign Trade Act (FEFTA), meanwhile, targets cross-border fund transfers, mandating banks and financial institutions to conduct customer due diligence on overseas remittances exceeding 100,000 yen.

Combating Terrorism Financing

Japan’s Countermeasures Against Terrorism Financing Act was introduced in 2014. This law:

  • Criminalizes not only the act of financing terrorism but also any attempt or conspiracy to do so
  • Imposes severe penalties, including imprisonment and fines, for those found guilty of supporting or facilitating terrorist financing

Asset Freezing Mechanism

The asset freezing mechanism is another crucial tool in preventing terrorism financing. The law enables the immediate freezing of assets suspected of being involved in terrorist activities, ensuring they cannot be used to fund further activities.

International Cooperation and Coordination

Financial institutions are required to:

  • Implement measures to detect and report suspicious transactions linked to terrorism financing
  • Cooperate with foreign governments and international organizations to track and counteract the financing of terrorism

Conclusion

These stringent AML/CFT regulations demonstrate Japan’s commitment to maintaining a robust financial system and upholding international standards to combat financial crimes and protect its integrity.