## Section4 FATF Mutual Evaluation of Japan

## Paragraph1 Implementation of the Third FATF Mutual Evaluation of Japan

The FATF Mutual Evaluation of Japan was conducted three times; the first and second round was in the past, and the third round was in late 2007 to late 2008 with JAFIC and related government agencies responding. The mainly process and procedure of the FATF Mutual Evaluation for assessed countries are: 1. response to the Mutual Evaluation Questionnaire (MEQ), 2. On-site visit to directly confirm the actual status by assessors, 3. discussion at the FATF Plenary meeting. Japan provided the response to the MEQ in January 2008, and underwent on-site visit in Tokyo and Osaka in March of the same year. In October 2008, at the Plenary meeting in Brazil, the third round of mutual evaluations for Japan was concluded. Since all Mutual Evaluation Reports (MER) and executive summaries are to be published, the results of the evaluation of Japan are also published on the FATF website (http://www.fatf-gafi.org/) and the Ministry of Finance website (http://www.mof.go.jp/jouhou/kokkin/fatfhoudou_201030.htm).

## Paragraph2 Outline of the Results

For each of 49 Recommendations there are four possible levels of compliance, C (Compliant), LC (Largely Compliant), PC (Partially Compliant), NC (Non-Compliant). The results of Japan are shown in Table 5-2, C was received for 4 recommendations, LC for 19, PC for 15, and NC for 10 (Furthermore, Japan has one recommendation that did not apply (N/A)).

For the recommendation regarding the FIU (Financial Intelligence Unit, Recommendation 26), the need to further strengthen personnel was pointed out, but also was positively evaluated for FIU function being transferred to the National Public Safety Commission / National Police Agency (JAFIC) from the Financial Services Agency (Rating: LC).

For the recommendation regarding customer due diligence by financial institutions (Recommendation 5), assessors pointed out that the measures such as certification of beneficial owner and purpose of transaction, and ongoing customer due diligence, should be directly regulated by law, and the additional customer identification should be introduced on identifying without photograph (Rating: NC).

## Paragraph3 Plans for the Future Schedule

For the procedures regulated by FATF, every 2 years after the discussion of their MER, assessed countries must provide an update to the FATF Secretariat describing the general statistics and new measures that have been adopted and implemented to deal with the identified deficiencies in relation to any of the FATF Recommendations that are rated PC or NC.

Also, Regular Follow up procedure will apply to assessed countries where six "core" Recommendations (Recommendation 1, 5, 10, 13 or Special Recommendation II or IV) are rated either PC or NC, and the assessed countries would report back to the Plenary and provide information on the actions it has or is taking to address the factors / deficiencies underlying any of the FATF Recommendations that are rated PC or NC two years after the MER is discussed. Where the Plenary agrees that the assessed country has implemented 16 Recommendations (core Recommendations, Recommendation 3, 4, 23, 26, 35, 36, 40, Special Recommendation I, III, and V) at a level essentially equivalent to a C or LC, the country will be removed from the follow-up process. FATF members are encouraged to make necessary improvements and to seek removal from the follow-up process within three years after the adoption of the MER.

Regular Follow up procedure applies to Japan because of the Recommendation 5 rated NC and