Japan has been taking effective measures to combat financial crime for years. But, despite all these measures, Japan still faces risks of money laundering, terrorist financing, corruption, and fraud. According to the reports released, money laundering cases increased by 40% to 511 in 2018. Cryptocurrencies are among the sources of this increase. The deficiencies in the system, which occurred as a result of the rapid growth of the crypto sector and the fact that it could not be regulated yet, were vulnerable to financial crimes.
In this article, we will examine Japan's anti-money laundering policies and regulations in general.
AML Laws and Regulations in Japan
Anti-money laundering and combating the financing of terrorism requirements and obligations in Japan are clearly stated in various laws. These laws include "The act on Prevention of Transfer of Criminal Proceeds" and "The Foreign Exchange and Foreign Trade Act." Financial institutions that want to provide services in Japan must fulfill their AML and CFT obligations to obtain the necessary licenses. Japan aims to protect the soundness and stability of financial systems, along with AML laws and regulations.
Risk-Based Approach in Japan
Financial crime techniques and methods varied from year to year. Today, most crimes such as money laundering, terrorist financing, corruption, and bribery occur through financial systems. That's why governments and regulatory bodies need the support of financial institutions to achieve their goals in combating financial crimes.
According to Anti-Money Laundering regulations and AML regulators in Japan, financial institutions must adopt a risk-based approach. As the financial system is a huge network of various fund flows in various forms of money transfer, payment, and money transfer carried out by financial institutions, it is vital to ensure the security of the entire financial system. A risk-based approach is a minimum standard in Japan for financial institutions to detect and assess ML / FT risks they encounter in a timely manner and establish control mechanisms proportional to these risks.
Risk Assessment in Customer Onboarding
Know Your Customer and Customer Due Diligence are essential components of a risk-based AML program. Financial institutions operating in Japan under AML obligation have to fulfill KYC and CDD procedures in customer account opening processes. Financial institutions first collect the customer's identity and the necessary information when opening a customer account. Then the accuracy of this information is checked. A risk assessment must then be applied to the client. For risk assessment, customer enforcement, PEP, and adverse media scanning are required.
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