Japan

In Japan, AML/CFT compliance program requirements and compliance officer responsibilities are statutory under the Act on Prevention of Transfer of Criminal Proceeds [JAFIC 1]. Moreover, this is closely monitored by the Financial Services Agency (FSA). Following the evaluation by FATF, Japan has adopted a stringent, risk-based system that makes regulated institutions responsible for identifying, assessing, and mitigating risks of money laundering and terrorist financing in their organizations.

In Japan, a tight seven-year period of document retention is required by the Act on Prevention of Transfer of Criminal Proceeds [JAFIC 1, JAFIC 2] and Financial Services Agency. Regulated entities are required to keep documents for seven years after ending relationship, completion of the transaction, or filing the suspicious transactions report [JAFIC 1].

Japanese legal framework for Customer Due Diligence and Know Your Customer is provided in the Act on Prevention of Transfer of Criminal Proceeds that is implemented by the Financial Services Agency and National Police Agency. The Act imposes an obligation on business operators to verify their clients' identities, determine beneficial owners with a stake of more than 25% of total corporate voting rights, and screen from antisocial groups.

According to Article 8 of the Act on Prevention of Transfer of Criminal Proceeds, the Japanese STR requirement is stringent and data-driven. Under this Act, all suspicious transactions in Japan are supposed to be reported without necessarily having a minimum amount set [JAFIC 1, JAFIC 2]. The requirement is enforced by the Financial Services Agency (FSA), but the reporting center is the Japan Financial Intelligence Center (JAFIC) under the National Police Agency. Therefore, all specified business operators should report suspicious transactions that involve criminal money laundering or terrorist activities, without necessarily setting a monetary threshold. The workflow should identify the customer's profile precisely and the geographical variations involved to facilitate the actionability of the report. It is illegal to tip off the customer about the report, while a person who fails to undergo the normal Customer Due Diligence is automatically treated as a reporting event.