Financial Crime World

Japan’s Efforts to Combat Money Laundering Fall Short Despite Rise in Cases: Experts Warn of Growing Threat

A Growing Concern: Money Laundering in Japan

Despite years of efforts to combat financial crime, Japan continues to face significant risks of money laundering, terrorist financing, corruption, and fraud. According to recent reports, the number of money laundering cases has increased by 40% to 511 in 2018, with cryptocurrencies playing a major role in this growth.

The Impact of Cryptocurrencies

The rapid expansion of the crypto sector, which has yet to be fully regulated, has created vulnerabilities that are being exploited by criminal organizations. The COVID-19 pandemic has further exacerbated these risks, as more non-face-to-face transactions have become commonplace.

Rising Suspicious Transactions

The National Police Agency’s “Annual Report on Prevention of Transfer of Criminal Proceeds (2021)” revealed a steady increase in the number of reports of suspicious transactions since 2016. In 2021 alone, there were over 530,000 reported cases, with banks being the source of the majority of these reports.

Current AML Laws and Regulations

Japan’s Anti-Money Laundering (AML) laws and regulations are designed to prevent financial crimes, but experts say more needs to be done to strengthen these measures. The country has implemented several pieces of legislation aimed at combating money laundering, including:

  • Act on Special Provisions for the Narcotics and Psychotropics Control Act
  • Other Matters for the Prevention of Activities Encouraging Illicit Conduct and Other Activities Involving Controlled Substances through International Cooperation

Limitations of Japan’s Criminal Justice System

However, the Japanese criminal justice system does not provide for alternative resolutions such as plea agreements or settlement agreements. Instead, cases typically proceed to trial, with a maximum sentence of five years’ imprisonment and/or a fine of up to ¥10 million.

FATF Assessment

In recent years, Japan has made progress in meeting international standards for anti-money laundering and counter-terrorism financing, according to the Financial Action Task Force (FATF). However, there are still areas that require attention, including:

  • Enhancing supervision of financial institutions
  • Designated non-financial businesses and professions

A Three-Year Action Plan

To address these concerns, the Japanese government has unveiled a three-year action plan aimed at implementing necessary legislative actions. The country’s AML authorities have also been working closely with the private sector to enhance cooperation and information sharing.

Experts’ Warning

Despite these efforts, experts warn that more needs to be done to combat money laundering in Japan. The country’s financial institutions must prioritize AML compliance and work together with regulatory bodies to stay ahead of the evolving threat.

Conclusion

Japan’s efforts to combat money laundering have fallen short despite a rise in cases. Experts urge the country to strengthen its AML laws and regulations, enhance supervision of financial institutions, and prioritize AML compliance to address this growing threat.