Japan’s Economic Sanctions: Compliance Expectations and Enforcement

Strengthening Economic Sanctions Regime

In a bid to strengthen its economic sanctions regime, Japan has put in place a range of measures aimed at preventing violations and ensuring compliance.

Guidelines for Anti-Money Laundering and Combating Terrorism Financing

• The Financial Services Agency (FSA) has established guidelines for anti-money laundering and combating the financing of terrorism.
• The Ministry of Finance (MOF) has set out clear expectations for banks and other financial institutions to confirm customer identities and report suspicious transactions.

Compliance Expectations

• The Act on Prevention of Transfer of Criminal Proceeds requires financial institutions to:
  • Verify the identity of their customers
  • Notify authorities of any “suspicious transactions” suspected to be linked to criminal activities, including terrorism
• Japan’s FEFTA (Foreign Exchange and Foreign Trade Act) requires individuals and companies to obtain permission or approval for transactions subject to economic sanctions. Failure to comply can result in:
  • Criminal penalties: imprisonment of up to three years and fines of up to one million yen

Anti-Money Laundering Measures

• The FSA has established a set of guidelines for financial institutions to implement effective anti-money laundering measures, including:
  • Customer due diligence
  • Transaction monitoring
  • Reporting suspicious transactions

Compliance Programs

• Despite the lack of civil penalties under Japan’s economic sanctions regime, authorities have emphasized the importance of maintaining compliance programs.
• The MOF has stressed that financial institutions must establish internal control systems to prevent violations and ensure effective implementation of anti-money laundering measures.

Enforcement

• The enforcement of Japan’s economic sanctions laws is primarily carried out by:
  • Police
  • Public prosecutors: investigating and prosecuting criminal cases related to violations
• Both individual and corporate entities can be held accountable for violating economic sanctions laws.

Corporate Liability

• The FEFTA provides for fines of up to one million yen for individuals and up to 500 million yen for corporations.
• Provisions for administrative sanctions include:
  • Prohibition of financial transactions and trade in goods by individuals or companies found to have violated economic sanctions laws.

Conclusion

While there is no provision for civil penalties under Japan’s economic sanctions regime, authorities have emphasized the importance of maintaining compliance programs to prevent violations and ensure effective implementation of anti-money laundering measures.