Japan enacted the Act on the Prevention of Transfer of Criminal Proceeds 2007. The Act was amended on
28 Apr 2011 and came into force on 01 Apr 2013. Several other laws implemented for Anti-Money Laundering measures include the Anti-Drug Special Prevention Law 1992 and Act on the Punishment of Organised Crime 2000. The Act on The Prevention of Transfer of Criminal Proceeds is being updated and will be enacted in Oct 2016.
Japan Financial Services Agency (“FSA”)
The FSA has issued comprehensive supervisory guidelines for the financial sector. Although they are general guidelines for financial institutions, it contains some guidance regarding Anti-Money Laundering compliance.
Financial institutions are required to verify the identity of customers upon undertaking the specified transactions from pre-existing customers, where customer identification was not undertaken before the
implementation of the Act on Prevention of Transfer of Criminal Proceeds.
The most recent FATF Mutual Evaluation on Japan was published in Oct 2008
Yes, customer identification is not required for one-off cash transactions below JPY2m (approx. USD16,950) and one-off wire transfer transactions below JPY100,000 (approx. USD850).
The following information has to be verified from valid customer identification documents such as a driving licence, passport, alien registration card or any other acceptable documents:
name, address and date of birth. In addition, the following additional information has been required since 01 Apr 2013, based on the amended Act:
b) purpose of the business relationship;
c) verification that natural persons acting on behalf of account holder are so authorised; and
d) for higher risk customers described in the ordinance, verify asset and/or income of the customer.
The following information has to be verified from valid identification documents such as certificate of registration, seal registration certificate or any other acceptable documents: name and
location of the head or main office.
In addition, the following information/procedures have been required since 01 Apr 2013, based on the amended act:
a) business contents;
b) purpose of the business relationship;
c) identity of beneficial owner;
d) verify that natural persons acting on behalf of the legal entity are so authorised; and
e) for higher risk customers described in the ordinance, verify asset and/or income of the customer.
For legal entities, the beneficial owners owning more than 25% of its shares or voting rights are required to be identified and verified.
Enhanced due diligence is required where: a) the Specified Operator suspects that the counterparty of the transaction may impersonate a customer or its representative; b) the Specified Operator suspects that the counterparty of the transaction may be disguising identification items at the execution of the transaction; or c) transactions with a Customer originating in Iran or North Korea. Where such circumstances apply the Specified Operator must conduct customer due diligence again. Additionally, when the transaction amount is above JPY2m (approx. USD16,950), the Specified Operator must verify the assets and/or income of the customer.
There is no legal obligation to undertake enhanced due diligence in respect of business relationships or transactions involving PEPs.
There is a requirement in the ordinance that financial institutions undertake enhanced due diligence with respect to correspondent banking relationships. Additionally, guidelines issued by the FSA expect financial institutions to appropriately assess the prospective foreign financial institutions before entering into the correspondent banking relationships.
No, relationships with shell banks are not explicitly prohibited. However, guidelines issued by the FSA require that financial institutions ascertain that prospective foreign financial institutions are not shell
Upon initiating non face-to-face transactions such as internet or telephone banking, financial institutions are required to verify a customer’s address by sending registered mail or conducting a site visit.
Yes, an administrative penalty may be received from the respective authorities.
under the Personal Information Protection Law (2003), personal information is defined as information of a living individual, such as the name, the date of birth, and/or any other descriptions by which a specific individual can be identified (including information that can be easily collated with other information so that a specific individual can be identified);
yes. The FSA Guideline defines ‘sensitive information’, and requires financial institutions not to obtain such information. See “Guidelines for Personal Information Protection in the Financial Field”
The definition of sensitive information includes both criminal records and medical data. As noted at A29, financial institutions are restricted in obtaining such information from customers.
customer’s address by sending registered mail or conducting a site visit
Japanese citizens are not required to have identification documents with them within the territory of Japan.
It is advisable to avoid using electronic signatures for documents related to real property transfers and wills.
Yes, Japanese law allows electronic signatures for most types of agreements.
Summary of law
In Japan, a signature cannot be denied enforceability simply because it is in electronic form. It is considered a two-tier jurisdiction because it gives digital signatures the same status as handwritten signatures but also recognizes simple electronic signatures as legal and enforceable. Countries that follow this model give companies the opportunity to select different forms of signatures and customize their business processes based on the form that is most convenient and appropriate for each use case.
While the use of a red seal stamp is common for signatures, electronic signatures are supported by the Law Concerning Electronic Signatures and Certification Services. Also, Japanese evidence rules generally permit the parties to an agreement to agree on the form of acceptance of that agreement.
The amendments in 2011 expanded the types of information requested as part of the KYC process. Where previously, under the Act on Prevention of Transfer of Criminal Proceeds, the customer identification information for verification was as follows. Natural person: Name, address, date of birth. Legal person: Name, location of the head or main office.
Despite the fact that the AML regime in Japan is not risk based, some aspects of this approach are incorporated into the guidelines issued by the FSA. Banks are expected to establish and maintain an
internal control environment to detect, monitor, and analyse suspicious customers, considering various factors such as customer attributes, transaction types and customer business profiles. In addition, the Japanese Bankers Association issued the “Guidance Note on the Risk based Approach” in Nov 2007 for combating money laundering and terrorist financing. The Guidance Note is available for member banks and advises on the implementation of the risk based approach.
Upon receiving copies of identification documents, financial institutions are required to use registered mail (which cannot be forwarded) to complete the customer identification process. The customer
identification process is considered complete unless the registered mail is returned to the financial institution as being undelivered.