AML in Japan

Japan has implemented effective measures to combat financial crime over the years. However, despite these efforts, the country still faces risks associated with money laundering, terrorist financing, corruption, and fraud. Reports indicate a significant increase in money laundering cases, rising by 40% to 511 in 2018. Cryptocurrencies have emerged as one of the contributing factors to this increase. The rapid growth of the crypto sector, combined with the challenges of regulatory oversight, has created vulnerabilities to financial crimes.

In Japan, the requirements and obligations pertaining to anti-money laundering and combating the financing of terrorism are clearly defined in various laws, such as “The Act on Prevention of Transfer of Criminal Proceeds” and “The Foreign Exchange and Foreign Trade Act.” Financial institutions seeking to provide services in Japan must fulfill their AML and CFT obligations to obtain the necessary licenses. The aim is to safeguard the integrity and stability of the financial systems, in conjunction with the implementation of AML laws and regulations.

Despite the existing risks and challenges, Japan remains committed to addressing financial crime and continuously strengthening its AML framework to ensure the resilience and security of its financial systems.

The techniques and methods employed in financial crimes continue to evolve year by year. Presently, crimes such as money laundering, terrorist financing, corruption, and bribery primarily exploit vulnerabilities within financial systems. Consequently, governments and regulatory bodies rely on the support and cooperation of financial institutions to effectively combat these illicit activities.

In Japan, Anti-Money Laundering regulations and AML regulators emphasize the adoption of a risk-based approach by financial institutions. Given the intricate nature of the financial system, which involves diverse fund flows, money transfers, and payment mechanisms conducted by financial institutions, safeguarding the overall security of this system is paramount. Implementing a risk-based approach serves as the minimum standard for Japanese financial institutions, enabling them to promptly identify and evaluate the money laundering and terrorist financing risks they encounter. Furthermore, it necessitates the establishment of proportional control mechanisms to mitigate these risks effectively.