(Nikkei: October 16, 2014 – p. 2)
In its effort to strengthen measures to combat money laundering, the government has submitted in the current extraordinary Diet session a bill amending the Act on Prevention of Transfer of Criminal Proceeds and a new bill aimed at freezing terrorist assets in Japan.
The Financial Action Task Force (FATF), an international organization tasked with evaluating countries’ legal and regulatory systems to prevent money laundering and terrorist financing, said in its recent statement that there are flaws in Japan’s legal system. In response, the government came up with the two bills.
In coping with money laundering, the international community needs to take joint steps in implementing countermeasures. Japan must have the bills enacted after thorough debate in order also to prevent Japan’s laws from being labeled as being full of loopholes.
Some other countries are stepping up efforts to crack down on money laundering. In the U.S., in particular, the authorities have imposed tough penalties on violators, as shown by a foreign financial institutes suspected of being involved in money laundering ordered to pay large fines. Japan must quickly fix the faults in its laws; otherwise, the nation will continue to be labeled a high-risk country, and eventually, Japanese financial institutions could face obstacles to their overseas transactions.
Japan has taken measures to crack down on money laundering until now. But with respect to suspicious transactions, financial institutions are given the right to decide on whether to report them to regulators under the current system.
The amended legislation specifies how to detect suspicious transactions and also what procedures should be taken depending on the relationship with the client and the kind of transaction. It also requires financial institutions to set internal rules on the management of customers and install persons in charge of this.
Under the new legislation, the burden on financial institutions and customers will inevitably become heavier to some extent. Specific criteria for judging transactions as money laundering will be set by a ministerial ordinance rather than in the new legislation. But the burden on them should be minimized as much as possible. For what are clearly low-risk transactions, taking simplified procedures should be approved.
As for terrorist funds in Japan, no regulatory system has been established. Under the new legislation, restrictions are placed on transactions by the terrorists and terrorist groups included in the list of the United Nations Security Council.
The FATF is also urging Japan to make conspiracy a crime with severe penalties for even those involved in planning a serious offense. In response, the government intends to draft a bill, but many lawmakers are voicing opposition to the idea, out of concern about a violation of human rights. Reflecting such views, the government decided to put off submitting the bill to the current extraordinary Diet session. (Slightly abridged)