金融行动特别工作组-日本反洗钱和反恐怖主义融资措施（英）-2021.8-292页_3mb

Anti-Money Laundering and Counter-Terrorist Financing Measures in Japan: Summary

Core Content

This document presents the Fourth Round Mutual Evaluation Report on Japan's anti-money laundering (AML) and counter-terrorist financing (CTF) measures, adopted by the Financial Action Task Force (FATF) in June 2021. It assesses Japan's compliance with the FATF 40 Recommendations and evaluates the effectiveness of its AML/CFT system.

Key Findings

• Risk Understanding: Japan has a good grasp of ML and TF risks, primarily from assessments of criminal activities such as drug trafficking, fraud, and illegal remittances. However, the national risk assessment (NRA) and related analyses could be further improved.
• AML/CFT Policies: National policies have addressed some higher risks, such as virtual asset risks, but lack targeted AML/CFT activities. Inter-agency coordination on policy development is limited, though operational cooperation is generally strong.
• Financial Institutions (FIs): Some FIs, particularly larger banks and money value transfer services (MVTS), have a reasonable understanding of ML/TF risks. However, many FIs do not apply a risk-based approach effectively and lack clear deadlines for compliance with new obligations.
• Designated Non-Financial Businesses and Professions (DNFBPs): DNFBPs have a low level of understanding of ML/TF risks and obligations. They generally apply basic AML/CFT measures but lack tailored policies and enhanced due diligence (EDD).
• Virtual Currency Exchange Providers (VCEPs): VCEPs have been regulated since 2017 and apply basic AML/CFT measures. Their STR reporting has improved due to awareness campaigns and guidance, but they still lack specific risk-based mitigation strategies.
• Beneficial Ownership (BO): All FIs and DNFBPs are required to maintain BO information, but accurate and up-to-date data is not consistently available. Challenges exist in transparency of domestic and foreign trusts, particularly those not administered by trust companies.
• Financial Intelligence (FIU): The Japan Financial Intelligence Center (JAFIC) plays a crucial role in developing and disseminating financial intelligence. LEAs use this information effectively for suspect targeting but need to enhance asset tracing capabilities.
• ML Investigations and Prosecutions: Japanese LEAs have a strong record in investigating and prosecuting ML cases, particularly those involving organized crime. However, there is a lack of focus on the flow of money in complex cases, and sentences for ML are generally low.
• Confiscation: Confiscation is effective for fraud-related cases, but not for other high-risk ML predicates. There are challenges in the confiscation of proceeds from suspended prosecutions, and cross-border currency smuggling remains undetected.
• Terrorist Financing (TF): Japan has a limited understanding of TF risks and lacks a comprehensive national counter-terrorism strategy. The TF Act is restrictive and does not cover all forms of TF, including funding of terrorist organizations without a direct link to an attack.
• International Cooperation: Japan provides timely and constructive international cooperation, including MLA and extradition, though the judicial framework for extradition needs strengthening. It has frozen significant assets related to DPRK and Iran in line with UNSCRs.
• Non-Profit Organizations (NPOs): Japan has a limited understanding of TF risks in the NPO sector and has not implemented targeted measures for at-risk NPOs. Enhanced outreach and guidance are needed.
• Supervision: Financial supervisors, including the Japan Financial Services Agency (JFSA), have improved their understanding and supervision of ML/TF risks. However, they have not effectively used sanctions against FIs and DNFBPs.
• Preventive Measures: While some preventive measures are in place, there is a need for more comprehensive risk-based approaches across all sectors.

Main Recommendations

• Improve the national risk assessment by incorporating broader economic risks and cross-border threats.
• Enhance inter-agency coordination in the development of AML/CFT policies.
• Strengthen beneficial ownership transparency and ensure accurate and up-to-date BO information is available.
• Expand AML/CFT training and awareness for all financial institutions and DNFBPs.
• Improve asset tracing and confiscation procedures, particularly for cross-border and complex cases.
• Develop a comprehensive national counter-terrorism strategy that includes CFT.
• Implement targeted outreach and guidance for at-risk sectors, including NPOs.
• Ensure effective use of sanctions by financial supervisors and FIs.
• Strengthen international cooperation mechanisms, especially in extradition and asset recovery.

Key Deficiencies

• Inconsistent beneficial ownership transparency.
• Limited risk-based approach in the supervision of DNFBPs.
• Inadequate confiscation of proceeds from suspended prosecutions.
• Weak sanctions implementation by FIs and DNFBPs.
• Insufficient focus on money flows in complex ML cases.
• Limited understanding of TF risks among non-specialized officials.
• Delays in targeted financial sanctions (TFS) implementation, especially for PF.

Overall Effectiveness

Japan demonstrates a substantial level of effectiveness in risk assessment, domestic coordination, financial intelligence use, and international cooperation. However, its supervision and implementation of preventive measures are only moderate, and confiscation and prosecution of ML/TF cases remain areas for improvement.

Conclusion

Japan has made significant progress in its AML/CFT framework and implementation. Nevertheless, the report highlights several key deficiencies that require attention to ensure full compliance with FATF standards and enhance the effectiveness of Japan's AML/CFT system.