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Evolution of Anti-Money Laundering Measures in Japan

Japan has made significant efforts to combat money laundering and terrorist financing over the years. This article highlights key developments and changes in Japan’s anti-money laundering (AML) measures, from 1999 to 2011.

Key Developments in AML Measures

1. Extension of Scope for Predicate Offenses and Suspicious Transaction Reports

In 1999, the Japanese government extended the scope of predicate offenses for money laundering and introduced a suspicious transaction reports regime to include other serious crimes besides drug-related offenses.

  • Predicate offenses: The scope was expanded to include not only drug-related offenses but also other serious crimes such as murder, robbery, and kidnapping.
  • Suspicious transaction reports: Financial institutions were required to report any transactions that they suspected of being related to money laundering or other predicate offenses.

2. Enforcement of Anti-Terrorism Financing Laws

In response to the 9/11 terrorist attacks, Japan enacted laws to implement international anti-terrorism financing conventions, including customer identification requirements for financial institutions.

  • Customer Identification Act: Financial institutions were required to verify the identity of their customers and maintain records of customer information.
  • Act on Punishment of Financing of Offences of Public Intimidation: The act made it a crime to provide or collect funds for terrorist activities, and imposed penalties on individuals and organizations that did so.

3. Revision of Anti-Organized Crime Act

Terrorist financing was added as a predicate offense under this act, and suspicious transactions related to terrorist financing were required to be reported by financial institutions.

  • Predicate offenses: The scope of predicate offenses was expanded to include terrorist financing.
  • Suspicious transaction reports: Financial institutions were required to report any transactions that they suspected of being related to terrorist financing.

4. Enforcement of Act on Prevention of Transfer of Criminal Proceeds

In 2007, Japan enacted an act aimed at preventing the transfer of criminal proceeds, which included customer due diligence requirements for non-financial businesses.

  • Customer due diligence: Non-financial businesses were required to verify the identity of their customers and maintain records of customer information.
  • Act on Prevention of Transfer of Criminal Proceeds: The act made it a crime to transfer or conceal criminal proceeds, and imposed penalties on individuals and organizations that did so.

5. Amendment of Act on Prevention of Transfer of Criminal Proceeds

In 2011, amendments were made to address issues related to money laundering and terrorist financing, including strengthening customer due diligence requirements.

  • Customer due diligence: Customer due diligence requirements were strengthened for both financial and non-financial businesses.
  • Act on Prevention of Transfer of Criminal Proceeds: The act was amended to make it a crime to transfer or conceal criminal proceeds, and to impose penalties on individuals and organizations that did so.

Other Key Points

Third FATF Mutual Evaluation

The Third FATF Mutual Evaluation conducted on Japan between 2007 and 2008 identified flaws in Japan’s AML measures.

  • FATF Mutual Evaluation: The evaluation highlighted areas where Japan needed to improve its AML measures, including customer due diligence and suspicious transaction reporting.
  • Recommendations for improvement: The FATF made recommendations for improving Japan’s AML measures, which were implemented by the Japanese government.

Customer Due Diligence for Measures Against Money Laundering

Discussions were held among business operators on customer due diligence for measures against money laundering.

  • Customer due diligence: Business operators discussed and implemented best practices for customer due diligence to prevent money laundering.
  • Measures against money laundering: Businesses took steps to prevent money laundering, including verifying the identity of customers and maintaining records of customer information.

Furikome Fraud

Furikome Fraud (a type of financial crime) remains a significant issue in Japan, with frequent use of call forwarding service providers.

  • Furikome Fraud: This type of financial crime involves using call forwarding services to make unauthorized transactions.
  • Call forwarding service providers: Businesses that provide call forwarding services have been implicated in Furikome Fraud cases.