Silviase/jgov_v1.4_full_ann huggingface dataset:
Chapter 4 Reports of Suspicious Transactions 44

Section 1 System Outline 44
1 Purpose 44
2 Flow of Suspicious Transaction Reporting 44
3 When STRs are Required 45
4 Identification of Suspicious Transactions 46

Section 2 Situation of STR Filings in 2016 46
1 Transition of the Number of STR Filings 46
2 Number of Received Reports by Business Types 48
3 Number of Received Reports Classified by Methods 48

Section 3 Dissemination and Use of STRs in 2016 49
Paragraph 1 Dissemination 49
Paragraph 2 Use of STRs in the Prefectural Police 49
Paragraph 3 Utilization of Reports by National Investigative Authorities 53

## Chapter 5 Crackdown on Money Laundering

Section 1 Arrests Made for Violation of the Act on Prevention of Transfer of Criminal Proceeds in 2016 55
Section 2 Cleared Cases of Money Laundering in 2016 56
Paragraph 1 Cleared Cases of Money Laundering under the Act on Punishment of Organized Crimes 56
1 Number of Cleared Cases 56
2 Modus Operandi of Money Laundering Observed in Cleared Cases 57
3 Money Laundering Cases related to Boryokudan (General name for Japanese gangster organizations) 58
4 Money Laundering conducted by Foreign Visitors to Japan 59
Paragraph 2 Cleared Cases of Money Laundering under the Anti-Drug Special Provisions Law 60
Section 3 Temporary Restraining Order for Confiscation of Criminal Proceeds before Institution of Prosecution in 2016 61
Paragraph 1 Temporary Restraining Order under the Act on Punishment of Organized Crimes 61
Paragraph 2 Temporary Restraining Order under the Anti-Drug Special Provisions Law 63
Section 4 Application of Provisions of Confiscation and Collection of Equivalent Value in 2012 64
Paragraph 1 Application of Provisions of Confiscation and Collection of Equivalent Value under the Act on Punishment of Organized Crimes 64
Paragraph 2 Application of Provisions of Confiscation and Collection of Equivalent Value under the Anti-Drug Special Provisions Law 64
Section 5 Cases of Cross-Border Money Laundering 65

## Chapter 6 Promotion of International Cooperation

Section 1 Activities of International Institutions 66
Paragraph 1 FATF 66
1 Organization 66
2 Activities 66
(1) Main Activities 66
(2) FATF Recommendations 67
(3) Mutual Evaluation 67
3 Mutual Evaluation 69
4 JAFIC's Participation 69
Paragraph 2 APG 69
1 Organization 69
2 Activities 69
3 JAFIC's Participation 69
Paragraph 3 Egmont Group 70
1 Organization 70
2 Activities of the Egmont Group 71
3 JAFIC's Participation 71
Section 2 Progress of the International Cooperation in 2016 72
Paragraph 1 Participation in the Activities of International Organizations 72
Paragraph 2 Information Exchange with Foreign FlUs 72
1 Establishment of the Framework for Exchange of Information 72
2 Situation of Information Exchange 74

Note 1: Unless otherwise noted, statistics and other numbers shown, including in charts and figures, are taken from National Police Agency surveys.

Note 2: The number of cases is different from that of arrests and counts cases reported by prefectural police.
## Overview of History of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Measures

Money laundering refers to attempts to evade the discovery of money obtained through illicit means, especially criminal proceeds, and arrests by investigative authorities by concealing the sources or beneficial owners of the money. If effective measures are not taken against money laundering, criminal proceeds continue to be utilized for further crimes or to become rife with organized crimes or terrorism. Money laundering also could pose serious threats to sound economic activities. Therefore, in order to ensure the safety and peace of national life and the sound development of economic activities, it is critical to take positive steps for AML/CFT.

The international community has continued to develop AML/CFT regimes in an effort to prevent and eradicate money laundering and terrorist financing (ML/TF), according to which Japan has also been working on it in cooperation with the international community.

The various AML/CFT regimes put in place and the follow-up activities we have made for their effective implementation as described in this report could, therefore, illustrate our dedication to the global challenge in fighting against ML/TF and robust domestic efforts.

## Section 1 AML/CFT Efforts in the International Community

## 1 Anti-Money Laundering as a Countermeasure against Narcotic Drugs

Through the 1980s, the global spread of narcotics abuse was taken as a crisis in the international community, prompting a variety of initiatives to address the issue. Especially in fighting against illegal transactions by transnational drug-trafficking organizations, it was recognized as important to inflict damage on the source of their funds, by all measures, such as confiscating illegal proceeds from drug manufacturing and trafficking and effectively preventing their money laundering activities. In this context, the UN New Narcotics Convention was adopted in December 1988 and required each state to criminalize activities such as hiding drug crime proceeds and to establish relevant regulations to confiscate such proceeds.

At the Arch Summit in July 1989, in order to deepen international cooperation on money laundering initiatives related to drug crimes, the major developed countries decided to establish the FATF. In April 1990, urged by the need for standardizing measures in different countries, the FATF devised "The 40 Recommendations", as standards for anti-money laundering
related to the measure to prevent the physical cross-border transportation of funds was added to these recommendations which made them “The 9 Special Recommendations”.

## 4 Countermeasures against Changing Money Laundering Trend

In accordance with development of measures, the trend of money laundering has also been changing such as the employment of new tactics of concealing of funds using business sectors other than financial institutions. As a result, the FATF revised in June 2003 "The 40 Recommendations," extending the scope of operators required to implement the Recommendations to designated non-financial businesses and professions (DNFBPs). Furthermore, in February 2012, the 40 Recommendations and 9 Special Recommendations were integrated and upgraded as the new 40 Recommendations in order to properly address the proliferation of weapons of mass destruction as well as additional threats of corruption including bribery by public officials and appropriation of property.

At the Lough Erne Summit in June 2013, the participating countries agreed on the G8 Action Plan Principles to prevent the misuse of companies and legal arrangements in light of the fact that companies and legal arrangements are being misused for money laundering and tax evasion due to a lack of transparency over their ownership and control.
# Section 2 AML/CFT in Japan

## 1 Enforcement of “the Anti-Drug Special Provisions Law”

Anti-money laundering measures in Japan have been developed in accordance with increasing AML/CFT awareness among the international community. Firstly, in June 1990, the then Director-General of the Banking Bureau at the Ministry of Finance issued a notice which demanded that financial institutions verify customers' identity. Next, "the Anti-Drug Special Provisions Law" was enforced in July 1992 as one of the domestic laws implementing "New Narcotics Convention", aiming mainly at dealing with drug crime proceeds. This law criminalized money laundering activities connected with drug crimes for the first time in Japan and established the suspicious transaction reporting system (regarding drug crime proceeds) by financial institutions etc. in response to "The 40 Recommendations."

## 2 Enforcement of “the Act on Punishment of Organized Crimes”

The first FATF mutual evaluation of Japan in 1994 recommended remedial actions to be taken for the limited scope of predicate offenses for money laundering that had targeted only drug crimes. As a practical matter, it was extremely difficult for reporting entities to determine if each transaction was actually related to drug crimes in reporting suspicious transactions, resulting in fewer suspicious transaction reports. This ineffectiveness was partially caused by the fact that there was no system in place to collect reported information or to disseminate it to investigative authorities.

To address these problems, “the Act on Punishment of Organized Crimes” was enforced in February 2000 in Japan based on “The 40 Recommendations” as revised in 1996. This law represented progress in regulations against criminal proceeds on several points. Firstly, the scope of predicate offenses for money laundering was extended to include other serious crimes besides drug-related crimes. Secondly, the scope of crimes subject to the suspicious transaction reports regime was also extended to include other serious crimes besides drug crimes. Thirdly, the law mandated the Financial Supervisory Agency (later reorganized to the Financial Services Agency) to serve as the FLU of Japan, and the Japan Financial Intelligence Office (JAFIO) was established within the agency, accordingly.

## 3 Enforcement of “the Act on Punishment of Financing of Offenses of Public Intimidation” and “the Act on Customer Identification by Financial Institutions”, and Amendment of “the Act on Punishment of Organized Crimes”

As a major development after the terrorist attacks in the US, “the Act on the Punishment of Financing of Offenses of Public Intimidation” was enforced in July 2002 as a domestic law to join “the International Convention for the Suppression of the Financing of Terrorism”, criminalizing terrorist financing and collecting of funds for terrorism. At the same time, “the Act on Punishment of Organized Crimes” was partially amended, so that the terrorist financing/fund collection offense was included in predicate offenses. Moreover, terrorist funds were stipulated as criminal proceeds, which means that assets suspected of terrorist funds are
statement in June 2014, the Act for Partial Amendment of the Act on Prevention of Transfer of Criminal Proceeds was enacted and was enforced in full in October 2016, and Japan has addressed all issues thus pointed out. The amended Act includes provisions for clarification of the determination method of suspicious transactions, enhanced verification at the time of the conclusion of correspondence contracts and expansion of the obligation for business operators to make efforts to develop necessary systems.

The National Police Agency, together with other relevant government ministries and agencies, has as appropriate amended AML/CFT-related legislation including the Act on Prevention of Transfer of Criminal Proceeds and its subordinate decrees as well as various other ordinances, thereby responding to changes in social conditions and addressing the deficiencies identified in the FATF Mutual Evaluation Report (MER) of Japan.

Major legal amendments in 2016 are detailed in Chapter 2 (Legislative Regime on AML/CFT).
under the division. Internationally, the Japan Financial Intelligence Center (JAFIC) is recognized as the FIU of Japan.

## 2 Mission and Structure

JAFIC is tasked with the following works in accordance with the Act on Prevention of Transfer of Criminal Proceeds.

· Collection, arrangement, analysis and dissemination of information on suspicious transactions to investigative authorities etc.

· Dissemination of information to foreign FlUs;

· Investigation and analysis of the status of transfer of criminal proceeds and formulation of the national risk assessment report

· Provision of information and complement of supervisory measures by administrative authorities to ensure that specified business operators take required measures;

JAFIC also plans and examines the legal system related to AML/CFT and various measures such as “the Guideline for Promotion of the Criminal Proceeds Control”. It also participates in various international AML/CFT standard setting activities.

The structure of JAFIC is illustrated in Fig. 1-2. It is currently composed of about 100 employees under the Director for Prevention of Money Laundering.

On the other hand, the “Task Force for fact-finding concerning criminal proceeds” is established in each Prefectural Police in charge of tracing criminal proceeds and investigating money laundering and other crimes.
Figure 1-2 Structure of JAFIC

## 3 Partners

Specified business operators should take initial measures against ML/TF according to the Act on Prevention of Transfer of Criminal Proceeds. In addition to the analysis of financial information, JAFIC endeavors to get across knowledge or ideas it has accumulated with regard to the actual conditions of ML/TF or legal systems and relevant countermeasures so that specified business operators can perform CDD in better harmony with the general public.

Relevant ministries and agencies in charge of supervising business operators not only exercise the supervisory function to secure the fulfillment of obligations, but also provide support by issuing Lists of Reference Cases of Suspicious Transactions and holding seminars together with industry organizations. On the other hand, investigative authorities such as police, make contributions in the area of punishment of money laundering or predicate offenses or confiscation of their proceeds.

These ministries and agencies carry out their duties in each position in cooperation with each other by sharing useful information, discussing issues in preventing money laundering and other ways.

For the purpose of promoting effective and appropriate measures against transnational orga-
nized crimes and international terrorism in a comprehensive and active manner, the “Head-quarters for the Promotion of Measures against Transnational Organized Crime and International Terrorism” was established in a Cabinet Meeting in August 2004.

Figure 1-3 Anti-money Laundering Measures in Organization

## 4 Guideline for Promotion of the Criminal Proceeds Control

From the perspectives of damaging the financial bases of criminal organizations, the police have been promoting countermeasures against criminal proceeds by, among others, cracking down on illegal acts and other fund raising activities undertaken by Boryokudan. The Act on the Prevention of Transfer of Criminal Proceeds is expected to make these countermeasures more effective with the cooperation of a wide range of business operators who may deal with criminal proceeds. The National Police Agency, playing a central part in enforcing the act, issued “the Guideline for Promotion of the Criminal Proceeds Control” with the notice of the Deputy Commissioner General of the National Police Agency in April 2007 with a view to enhancing countermeasures against criminal proceeds taken by police departments across the country.

Fundamental items in carrying out measures against criminal proceeds indicated by the guideline are composed of four core principles, six key areas and confidentiality of STR information as follows:
## 1 Core Principles for AML/CFT

(1) Promotion of voluntary efforts by specified business operators and of public awareness

(2) Analysis and utilization of information on criminal proceeds

(3) Promotion of crackdown on crimes related to criminal proceeds and deprivation of criminal proceed

(4) Promotion of international cooperation on criminal proceeds control

## 2 Key Areas

(1) Arrangement of the system for the promotion of countermeasures

The National Police Agency and each prefectural police should develop a system necessary for countermeasures against criminal proceeds. Each prefectural police establish a Task Force for fact-finding concerning criminal proceeds and develop the investigation system for crimes related to criminal proceeds in each relevant division.

(2) Promotion of voluntary efforts by specified business operators and public awareness

The National Police Agency should provide information on the transfer of criminal proceeds and on implementation methods for the measures prescribed in the Act on Prevention of Transfer of Criminal Proceeds, instruction and advice to specified business operators. The National Police Agency and each prefectural police force should conduct public relations and educational activities to deepen general understanding about importance of criminal proceeds control.

(3) Collection, arrangement and analysis of information on criminal proceeds

The National Police Agency should collect, arrange, analyze and disseminate information on criminal proceeds. Each prefectural police should collect the information necessary for effective countermeasures against criminal proceeds by maintaining close cooperation among relevant divisions.

## (4) Promotion of countermeasures against criminal proceeds

The National Police Agency should provide instruction to and coordinate among prefectural police departments which investigate crimes related to criminal proceeds, as well as clarify actual conditions of criminal organizations etc. In order to cut off the source of funds for criminal organizations etc., each prefectural police department should promote investigation where STRs are utilized, and attempt to make arrests in a proactive manner by applying the Act on Punishment of Organized Crimes, the Anti-Drug Special Provisions Law and other laws, while it should also promote information collection activities.

## (5) Promotion to deprive Criminal Proceeds

Each prefectural police force shall carry out measures to prevent the transfer of criminal proceeds by not only arresting suspects, but also by detecting criminal proceeds and utilizing the temporary restriction order before institution of prosecution. Also, close coordination with the Public Prosecutor's Office shall be further strengthened with regards to the deprivation of criminal proceeds.

## (6) Promotion of international cooperation

The National Police Agency should take initiative in the areas of, for example, inter-FUI
information exchange, compliance with the FATF Recommendations, and support the global compliance in an effort to enhance international cooperation on AML/CFT.

## 3 Confidentiality

Necessary and appropriate measures have to be taken to ensure confidentiality and prevent any leakage with regard to any use of STR information in any phase of their duties.

Figure 1-4 Overview of the Guideline for Promotion of the Criminal Proceeds Control

Guideline for Promotion of the Criminal Proceeds Control

Support for and PR / enlightenment of voluntary efforts of specified business operators

National Police Agency

Collection, arrangement and analysis of information on criminal proceeds

Examination of the actual situation of crime organizations

Promotion of International coordination and cooperation

Ensuring confidentiality and information security

Dissemination of information and investigative instruction / coordination

Report of information necessary for promoting countermeasures against criminal proceeds

## Prefectural Police

Establishment of Task Force for fact-finding concerning criminal proceeds

Development of investigative structure for crimes related to criminal proceeds

Promotion of investigation utilizing STRs

PR and enlightenment activities

Collection of information for promoting countermeasures against criminal proceeds

Appropriate implementation of measures to confiscate criminal proceeds

Ensuring confidentiality and information security
# Legislative Regime on AML/CFT

AML/CFT regime in Japan has been developed since the 1980s, in order to achieve the following three objectives:

(1) Imposing CDD and other necessary obligations on financial institutions and DNFBPs (collectively referred to as "specified business operators")

Of these, (1) is for deterring money laundering by facilitating the tracing of criminal proceeds when they are transferred and making it difficult to avoid prosecution or confiscation, while (2) and (3) are primarily targeting criminal organizations to root out their sources of fund.

(1) is realized mainly by the Act on Prevention of Transfer of Criminal Proceeds, while (2) and (3) are realized by the Act on Punishment of Organized Crimes and the Anti-Drug Special Provisions Law.

*Article numbers, etc. mentioned in Section 1 of this chapter are those in the Act after the amendment by the Act for Partial Amendment of the Banking Act, etc. to Address Advances in Information Technology and Other Environmental Changes (Act No. 62 of 2016) (to be enforced on April 1, 2017).

Figure 2-1 Relationships of the Act on Prevention of Transfer of Criminal Proceeds, the Act on Punishment of Organized Crimes, and the Anti-Drug Special Provisions Law
# Section 1 Outline of the Act on Prevention of Transfer of Criminal Proceeds

The Act on Prevention of Transfer of Criminal Proceeds was created based on the two laws; the amended Customer Identification Act and a portion of the Act on Punishment of Organized Crimes in order to address changes in money laundering trends more effectively and comprehensively in a way consistent with global standards set out by the FATF 40 Recommendations in 2003.

The Act provides for preventive measures in combating ML/TF, by imposing obligations on specified business operators to perform CDD, record keeping, filing STRs, etc. In 2011, the following amendments were made to the Act: addition of verifying details for transactions; addition of telephone forwarding service providers to the list of specified business operators; addition of measures for appropriate verification at the time of transactions; and increased punishments on illicit transfer of passbooks, etc. The amended Act was fully enforced on April 1, 2013.

In addition, in 2014, a legal amendment was made to include provisions for clarification of the determination method of suspicious transactions, enhanced verification at the time of the conclusion of correspondence contracts and expansion of the obligation for specified business operators to make efforts to develop internal policies, procedures and controls, etc. and this amendment was fully enforced on October 1, 2016.

## 1 Purpose of the Act (Article 1)

The purpose of the Act is to prevent the transfer of criminal proceeds and to ensure the appropriate enforcement of international treaties, etc., concerning the prevention of terrorist financing and thereby, to ensure the safety and peace of national life and to contribute to the sound development of economic activities by way of devising such measures as the verification of customer identification data, preservation of transaction records or the like, and reporting of suspicious transactions by a specified business operator, as described in 3 below, coupled with other measures stipulated by the Act on Punishment of Organized Crimes and the Anti-Drug Special Provisions Law.

## 2 Criminal Proceeds (Paragraph 1 of Article 2)

The term "criminal proceeds" as used in the Act means criminal proceeds etc. prescribed in Article 2, paragraph 4 of the Act on Punishment of Organized Crimes or drug-related criminal proceeds etc. prescribed in Article 2, paragraph 5 of the Anti-Drug Special Provisions Law.

## 3 Specified Business Operators (Paragraph 2 of Article 2)

Any financial institution or DNFBP which falls under the Act and thus is required to perform CDD and other obligations, should be called "Specified business operators," whose designation would occur in line with the FATF standards and also the domestic business context.