Financial Crime World

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Japan’s Financial Regulator Publishes Recommendations for Anti-Money Laundering Regulations by Country

The Financial Services Agency (FSA) of Japan has released its final report from the Payment Services Working Group, outlining recommendations for anti-money laundering (AML) regulations and a reconsideration of the regulatory regime for digital assets such as stablecoins. The report was published on January 11, 2022.

Key Recommendations

The PSWG suggests several key measures to strengthen AML regulations in Japan:

  • Stablecoin Regulation: Restructuring regulations on stablecoins pegged to statutory currency, including introducing a consolidated licensing requirement for intermediation of trades and reconsidering the legal structure of such stablecoins.
  • Disclosure Requirements: Further discussions on the sufficiency of regulations regarding scope of disclosure requirements for stablecoins similar to cryptoassets.

Collaborative AML Operation Regime

The report proposes introducing a collaborative AML operation regime, where financial institutions would jointly conduct filtering and monitoring of fund transfer deals with third-party entities. This would require:

  • Licensing Requirement: A licensing requirement for carrying out such services
  • Personal Information Regulation: Regulations regarding treatment of personal information by these entities

Enhancing AML Regulations

The PSWG recommends enhancing AML regulations regarding prepaid payment instruments, including:

  • Extending Scope: Extending the scope of AML regulations to issuers of prepaid payment instruments whose issued amount exceeds a certain threshold. Currently, there is no AML regulation in place for prepaid payment instrument issuers.

Response to FATF Evaluation

The report’s recommendations come as a response to Japan’s fourth mutual evaluation by the Financial Action Task Force (FATF), which highlighted the need for a safe and efficient regime for anti-money laundering. The FSA has committed to implementing these recommendations to strengthen Japan’s AML regulations and protect its financial system from money laundering and terrorist financing risks.