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The FATF mutual evaluation report on Japan proposes the formation of a joint-agency body to enhance the country’s AML/CFT measures.
The global financial watchdog, Financial Action Task Force (FATF), has published its mutual evaluation report for Japan. The report provides an evaluation of the Anti-Money Laundering measures in place in Japan after a three-week site visit that ended in November 2019.
Following the June 2021 Plenary meeting, the FATF has released the mutual evaluation report, which states that while Japan’s AML measures are showing results in combating money laundering and terrorist financing, improvements are needed in some key areas to make the country’s AML/CFT framework more effective.
In particular, Japan is delivering good results when it comes to the collection of financial intelligence for tackling money laundering and terrorist financing and is also cooperating well with counterpart countries.
However, authorities need to improve efforts for the confiscation of criminal proceeds, law enforcement needs to focus more on fraud and drug-related crimes, including cases that involve organized crime groups (known as “Boryokudan”) – a key risk area for Japan.
Furthermore, the report says that Japan has adequately identified its key risk areas, but the country needs to strengthen its AML policies especially when it comes to the prevention of specific money laundering activities, such as large cash transactions.
The report also adds that numerous financial and non-financial institutions regularly fail to fully understand their obligations to prevent money laundering and terrorist financing. For some high risk areas, this includes core concepts such as customer due diligence and transaction checks.
“They do not have an adequate understanding of the recently introduced/modified AML/CFT obligations, and have no clear deadlines to comply with these new obligations,” the report says regarding non-compliant financial institutions.
Japan has also taken necessary steps for the collection of Beneficial Ownership (BO) information by requiring all FIs and DNFBPs to maintain such records. However, accurate and up-to-date BO information is not yet consistently available on “legal persons”.
The report proposes that Japan should designate a joint-agency body with the purpose of devising enhanced national AML/CFT policies and activities, to improve coordination and ML/TF risk mitigation efforts.
The FATF’s mutual evaluation report on Japan can be viewed here.