AML Compliance Guidelines: Japan

AML/CFT Regulations in Japan

Japan, being an integral part of the global financial system, has established stringent AML (Anti-Money Laundering) measures to counteract financial crimes, protect its financial integrity, and meet international obligations

Act on Prevention of Transfer of Criminal Proceeds (APTCP)

This is the foundational legislation for AML in Japan, which came into effect in 2007. It was revised in 2016 to strengthen customer due diligence (CDD) measures and expand the list of specified business operators.

• Customer Due Diligence (CDD):

Specified business operators are required to verify the identity of their customers when establishing business relations, conducting transactions over a certain amount, or when there’s suspicion of money laundering.

• Record Keeping:

Businesses are mandated to keep transaction records for at least seven years.

• Suspicious Transaction Reporting (STR):

Specified business operators are obligated to report transactions to the Japanese Financial Intelligence Centre (JAFIC) if they suspect money laundering or terrorist financing.

Financial Instruments and Exchange Act (FIEA)

This act mainly focuses on securities companies and financial instruments. It sets out provisions for CDD and STR requirements similar to the APTCP for securities-related businesses.

Foreign Exchange and Foreign Trade Act (FEFTA)

It focuses on the transfer of funds across the country’s borders. It requires banks and financial institutions to conduct CDD on overseas remittances exceeding 100,000 yen.

Act on Punishment of Financing of Criminal Activities related to Terrorism

Introduced in 2014, this act specifically addresses the prevention of terrorism financing. It’s provisions are:

• Criminalization

It criminalizes not only the act of financing terrorism but also any attempt or conspiracy to finance terrorist activities.

• Sanctions

The law imposes strict penalties, including imprisonment and fines, for those found guilty of supporting or facilitating the financing of terrorism. The severity of the penalty depends on the nature and extent of the involvement.

• Monitoring and Reporting

Financial institutions are required to implement measures to detect and report any suspicious transactions that might be linked to terrorist financing.

• International Cooperation

The act emphasizes the importance of international collaboration. It includes provisions that facilitate the exchange of information and coordination with foreign governments and international organizations to track and counteract the financing of terrorism.

• Asset Freezing

One of the essential tools in preventing terrorism financing is the ability to freeze the assets of individuals or entities suspected of being involved in terrorist activities. The act provides provisions for the immediate freezing of such assets, ensuring they cannot be used to fund further activities.

References:

1. Ministry of Finance, Japan
2. IMOLIN- Act on Prevention of Transfer of Criminal Proceeds (APTCP)