April 9, 2021
The Financial Action Task ForceJapanese Bankers Association

Comments on the FATF Guidance on proliferation financing risk
assessment and mitigation

The Japanese Bankers Association 1 (the “JBA”) appreciates the opportunity to comment on theFinancial Action Task Force’s (“FATF”) Public Consultation on FATF Guidance on proliferation
financing risk assessment and mitigation (“the Consultative Document”), released on March 1, 2021.
I. General Comments
It’s beneficial for making the guidance explicit that financial institutions should have in place
processes to identify, assess, monitor, manage and mitigate proliferation financing risks, which may
be done within the framework of their existing targeted financial sanctions and/or complianceprograms, as well as national supervisors should oversee financial institutions by understanding it
well. While this theme is present in the amended Interpretive Notes and is diluted throughout theguidance, it would be much more effective if featured prominently in the executive summary of theguidance in order for financial institutions not to create a duplicative risk assessment programs by
misunderstanding it.
Although the guidance states it, in the context of Recommandation1 and the guidance, theproliferation financing risk refers strictly and only to the potential breach, non-implementation orevasion of the targeted financial obligations referred to in Recommendation 7, the obligations ofwhich apply to two country-specific regimes for DPRK and Iran. These jurisdictions are subject toeconomic sanctions and some financial institutions already have comprehensive sanctions and AML
risk assessment program requirements and already conduct them.
A well-designed risk assessment program looks at the full range of illicit finance whether it relates toproliferation finance, AML, sanctions, human trafficking, narcotics, etc. A proper financial crime
program looks holistically across threat areas and develops and implements controls that can deal
with the ever-changing world of illicit finance.
1The Japanese Bankers Association (JBA) is a premier financial organization whose members consist of banks, bank holding companies and bankers
associations in Japan. As of April 9, 2021, The JBA has 115 Full Members (banks), 3 Bank Holding Company Members (bank holding companies),
73 Associate Members (banks & bank holding companies), 58 Special Members (regionally-based bankers associations) and one Sub Associate
Member for a total of 250 members.

1II. Specific comments
1．Objectives and scope/ Paragraph 4This Guidance consists of the following three sections: “Section 1: Assessment of proliferation
financing risks”, “Section 2: Mitigation of proliferation financing risks” and “.Section 3:
Supervision of proliferation financing risk assessment and mitigation”. It would be more effective if
Section 1 describe the guidance for countries as explicitly distinguished from for financial
institutions and DNFBPs as is the case with Section 2.

２．Box 1. Question for consultation
It would be much more effective if the introduction section describe the guidance for countries as
explicitly distinguished from for financial institutions and DNFBPs in addition to the distinction
between sanctions-centered PF and broader PF activity outside the context of targetedjurisdictions/designated persons.

３．Section 1: Assessment of proliferation financing risks/Paragraph 28
We understand that the source of funding for proliferation financing is the country, (which isdifferent from money laundering but recognized as a shared typology with country sponsoredterrorism – e.g. Iran) but the means of illicit funds transfer are not dissimilar, as this paragraphindicates, to other types of illicit activity, including the use of fronts/shells etc.

４．Section 1: Assessment of proliferation financing risks/Paragraph 30
We understand that there are many thousands of dual-use goods on the CCL (Commerce Control
List), for example, (many of which are quite benign) it is the exporter rather than the bank involvedthat has the responsibility for identification and classification of these goods. We think it is notreasonable to expect financial institutions to mine transactional data involving dual use goods as partof a risk assessment process.

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