Act on Prevention of Transfer of Criminal Proceeds

Act on Prevention of Transfer of Criminal Proceeds
Name	Act on Prevention of Transfer of Criminal Proceeds
Long title	Act on Prevention of Transfer of Criminal Proceeds
Enacted by	National Diet
Enacted	2007
Amended	2014, 2016, 2021
Status	in force

Act on Prevention of Transfer of Criminal Proceeds is a statute enacted to deter money laundering and the reuse of proceeds derived from criminal activity by imposing due diligence, reporting, and record-keeping duties on designated financial institutions and other businesses. It establishes a regulatory regime that interfaces with international standards set by the Financial Action Task Force and harmonizes with domestic frameworks such as the Penal Code, the Code of Civil Procedure, and financial supervision by the Financial Services Agency (Japan). The law has been amended multiple times to address evolving risks tied to cross-border transfers, virtual currencies, and organized crime groups like the Yamaguchi-gumi.

Overview and Purpose

The law aims to prevent the conversion, transfer, or use of proceeds obtained through crimes including offenses under the Stimulants Control Law, Narcotics Control Law (Japan), Act on Prevention of Unjust Acts by Organized Crime Groups, and economic offenses prosecuted under the Tokyo District Court and other judicial venues. It seeks to implement obligations for entities such as Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, Nomura Holdings, and non-bank actors like Japan Post Bank to detect and deter schemes tied to groups such as the Yakuza. The statute reflects commitments under instruments like the United Nations Convention against Transnational Organized Crime and the Basel Committee on Banking Supervision guidelines.

Definitions and Scope

Key terms defined in the law include "specified transaction," "customer," and "reporting entity," covering sectors from banking institutions—MUFG Bank, Mizuho Financial Group—to non-financial businesses such as real estate agents, casinos, and providers of services involving Bitcoin and other virtual assets handled by exchanges like bitFlyer and Coincheck. The scope extends to international wire transfers involving correspondent banking relationships with entities in jurisdictions such as Hong Kong, Singapore, United States, and Switzerland, and addresses risks associated with politically exposed persons related to offices like the Prime Minister of Japan or foreign offices such as the President of the United States.

Obligations of Reporting Entities

Designated entities must establish internal controls including appointment of compliance officers comparable to roles at Japan Securities Dealers Association members, implementation of anti-money laundering policies used by Daiwa Securities Group, and training programs reminiscent of those at Japan Exchange Group. Firms must screen transactions against sanctions lists maintained by bodies like the United Nations Security Council and adhere to reporting thresholds influenced by international practices from European Central Bank supervision and Financial Crimes Enforcement Network guidance. The law mandates organizational measures paralleling corporate governance standards under the Companies Act and auditing relationships with firms such as Ernst & Young ShinNihon LLC.

Customer Due Diligence and Record-Keeping

Customer identification procedures require verification using official documents issued by authorities like the Ministry of Justice (Japan), residency registries maintained by municipal offices such as Tokyo Metropolitan Government, and cross-checks against databases held by institutions like the Bank of Japan. Enhanced due diligence applies for high-risk customers including those connected with entities like Mitsubishi Corporation subsidiaries, politically exposed persons linked to Diet members or foreign leaders like Vladimir Putin, and transactions involving high-value assets such as real estate overseen by the Ministry of Land, Infrastructure, Transport and Tourism. Record retention periods and audit trails are designed to satisfy standards similar to those used by International Organization for Standardization certifications and banking rules applied by the Japan Bankers Association.

Reporting and Information Sharing

Suspicious transaction reporting channels route filings to authorities including the National Public Safety Commission, the National Police Agency (Japan), and the country's Financial Intelligence Unit coordinated with international counterparts like Eurojust and the Egmont Group. The statute provides mechanisms for information exchange with foreign authorities such as the United States Department of Justice, the United Kingdom's National Crime Agency, and treaty partners under mutual legal assistance frameworks exemplified by bilateral agreements with Australia and Germany. Coordination protocols reflect interoperability goals similar to those in the Schengen Agreement for cross-border policing and judicial cooperation under instruments like the Mutual Legal Assistance Treaty (MLAT).

Enforcement, Penalties, and Compliance Measures

Enforcement powers empower the Financial Services Agency (Japan), prosecutors from the Tokyo High Public Prosecutors Office, and regulatory inspectors to impose administrative sanctions, fines, and suspension of licenses against institutions including SBI Holdings and Rakuten Bank for non-compliance. Criminal penalties can lead to prosecution under statutes enforced by the Supreme Court of Japan and trials before district courts such as the Osaka District Court. The regime also contemplates remedial compliance measures modeled on settlements handled by the U.S. Securities and Exchange Commission and corporate monitorship practices seen in transnational enforcement.

International Cooperation and Amendments

Amendments in 2014, 2016, and 2021 addressed virtual currencies and enhanced cross-border coordination with jurisdictions such as South Korea, China, and members of the G7 to align with recommendations from the Financial Action Task Force and commitments under the G20 summit declarations. The law enables information sharing under frameworks like the Asia/Pacific Group on Money Laundering and harmonizes with standards promoted by the International Monetary Fund and the World Bank to reduce vulnerabilities exploited by transnational criminal networks including those implicated in cases investigated by the Interpol and prosecuted by the International Criminal Court.

Category:Law of Japan