Anti-money laundering andcounter-terrorist financing
measuresJapan
Follow-up report

Follow-up Report &Technical Compliance Re-Rating
September 2022

November 2021

The Financial Action Task Force (FATF) is an independent inter-governmental body that develops andpromotes policies to protect the global financial system against money laundering, terrorist financing
and the financing of proliferation of weapons of mass destruction. The FATF Recommendations
are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CTF)
standard.
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over any territory, to the delimitation of international frontiers and boundaries and to the name ofany territory, city or area.
The FATF Plenary adopted this report by written process in August 2022.

Citing reference:

FATF (2022), Anti-money laundering and counter-terrorist financing measures – Japan
1st Enhanced Follow-up Report, FATF, Paris
http://www.fatf-gafi.org/publications/mutualevaluations/documents/fur-japan-2022.html© 2022 FATF. All rights reserved.
No reproduction or translation of this publication may be made without prior written permission.
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the FATF Secretariat, 2 rue André Pascal 75775 Paris Cedex 16, France(fax: +33 1 44 30 61 37 or e-mail: contact@fatf-gafi.org).
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|1Japan’s 1st Enhanced Follow-up Report
Introduction
The FATF Plenary adopted the mutual evaluation report (MER) of Japan in June
2021. 1 This FUR analyses Japan’s progress in addressing the technical compliancedeficiencies identified in its MER, relating to Recommendation 2. Re-ratings are given
where sufficient progress has been made.

Overall, the expectation is that countries will have addressed most, if not all, technicalcompliance deficiencies by the end of the third year from the adoption of their MER.
This report does not address what progress Japan has made to improve its
effectiveness.

Findings of the MER

The MER rated Japan’s technical compliance as follows:

Table 1. Technical compliance ratings, June 2021

R1LC
R 11LCR 21CR 31LC

R2PC
R 12PCR 22PCR 32LCR3LC
R 13LC
R 23PC
R 33
LC

R4LC
R 14LC
R 24PCR 34LC

R5PC
R 15LC
R 25PCR 35LC

R6PC
R 16LCR 26LC
R 36
LC

R7PC
R 17N/A
R 27
LC
R 37
LC

R8NC
R 18
LC
R 28PC
R 38
LC

R9C
R 19LC
R 29
C
R 39
LC

Note: There are four possible levels of technical compliance: compliant (C), largely compliant (LC),partially compliant (PC), and non-compliant (NC).
Source: Japan Mutual Evaluation Report, June 2021 www.fatfgafi.org/media/fatf/documents/reports/mer4/Mutual-Evaluation-Report-Japan-2021.pdf

Mr. Michele Antonio Bozza Venturi, AML/CFT, Financial Advisor, Bank of Italy
conducted the analysis of the re-rating.

Section 3 of this report summarises Japan’s progress made in improving technicalcompliance. Section 4 sets out the conclusion and a table showing which
Recommendations have been re-rated.
1 www.fatf-gafi.org/publications/mutualevaluations/documents/mer-japan-2021.html

JAPAN: 1ST ENHANCED FOLLOW-UP REPORT

R 10LC
R 20LC
R 30CR 40LC

2|

Overview of progress to improve technical complianceThis section summarises Japan’s progress to improve its technical compliance byaddressing some of the technical compliance deficiencies identified in the MER.

Progress to address technical compliance deficiencies identified in the MERJapan has made progress to address the technical compliance deficiencies identified
in the MER in relation to R.2. Because of this progress, Japan has been re-rated on thisRecommendation.

Recommendation 2 (originally rated PC)

In its 4th round MER, Japan was rated PC with R.2, due to the absence of clear
responsibility for the definition of AML/CFT policies informed by risks and regularlyreviewed, and for the coordination of AML/CFT actions as well as for combating PFactivities. In addition, despite the regular liaison meetings of data protection andprivacy bodies that involve AML/CFT authorities, it is unclear to what extent
AML/CFT is a focus of these meetings.

Since adoption of its MER, Japan established the Inter-ministerial Council for
AML/CFT & CPF Policy and issued an AML/CFT/CPF action plan, which address
several deficiencies related to its national co-operation and co-ordination framework.

The new National AML/CFT/CPF Action Plan, promoted by the recently established“Inter Ministerial Council for AML/CFT/CPF Policy”, among other, specifically provide
for renewal of the NRA (completed and adopted in 2021) and the development of anational AML/CFT/CPF policy informed by the risks identified in the NRA. The “PolicyDevelopment and Implementation Subcommittee” adopted the draft of a new national
policy on 12 April 2022.2 In addition, the Action Plan includes, among other, action
items for improving Japan’s CPF measures, such as strengthening the enforcement ofasset freezing measures and legislative reforms.
With regard to CFT policy, the Action Plan includes the establishment of a task force
to promote strengthening of TF investigation and prosecution, the enhancement ofrisk understanding on TF of obliged entities, and enhancing implementation of asset
freezing measures. A policy to prevent NPOs from being exploited for terrorism
financing is also included in the Action Plan.

The Inter-Ministerial Council is tasked with the planning and implementation ofmeasures in accordance with national policies, and cooperating and coordinating theefforts for policy development and implementation.
The minor gap identified in the MER pertaining to data protection remains
unaddressed, as it is unclear whether the mandate of the Council would fully satisfy
the requirements of criterion 2.5.

Japan, has largely addressed most of the deficiencies identified it its MER, and minor
deficiencies remain. On this basis, R.2 is re-rated largely compliant.
2 On 19 May 2022, the Council issued a national “AML/CFT/CPF Strategic Policy” addressing thedeficiency in relation to reviewing the Strategy regularly in response to the identified risks. However,the Strategic Policy was only adopted after the deadline for submitting the TC re-rating materials, thenew Strategic Policy could not be taken into account as part of this report.

JAPAN: 1ST ENHANCED FOLLOW-UP REPORT

|3Conclusion
Overall, Japan has made progress in addressing most of the technical compliancedeficiencies identified in its MER in relation to R. 2 and has been upgraded from PC toLC.

Considering progress made by Japan since the adoption of its MER, its technicalcompliance with the FATF Recommendations has been re-evaluated in the following
manner:Table 2. Technical compliance ratings

R1LC
R 11LC
R 21C
R 31
LC

R2LC
R 12PCR 22PC
R 32
LC

R3LC
R 13LC
R 23PC
R 33
LC

R4LC
R 14LC
R 24PC
R 34
LC

R5PC
R 15LC
R 25PC
R 35
LC

R6PC
R 16LC
R 26
LC
R 36
LC

R7PC
R 17
N/A
R 27
LC
R 37
LC

R8NC
R 18
LC
R 28PC
R 38
LC

R9C
R 19
LC
R 29C
R 39
LC

Note: There are four possible levels of technical compliance: compliant (C), largely compliant (LC),partially compliant (PC), and non-compliant (NC).

Japan will remain in enhanced follow up and will continue to inform the FATF ofprogress achieved on improving the implementation of its AML/CFT measures.

JAPAN: 1ST ENHANCED FOLLOW-UP REPORT

R 10LC
R 20
LC
R 30
C
R 40LC

www.fatf-gafi.org
September 2022

Follow-up Report &Technical Compliance Re-Rating
As a result of Japan’s progress in strengthening its measures to fight money
laundering and terrorist financing since the assessment of the country’s framework,
the FATF has re-rated the country on Recommendation 2.

Follow-up report

Anti-money laundering and counter-terrorist financing
measures in Japan