Silviase/jgov_v1.4_full_ann huggingface dataset:
## Chapter 4

# Reports of Suspicious Transactions

The Act on Prevention of Transfer of Criminal Proceeds requires specified business operators to file a report to competent administrative authorities when a transaction is suspected to be related to criminal proceeds (lawyers, judicial scriveners, certified administrative procedures specialists, certified public accountants and certified public tax accountants are not subject to this obligation). The Suspicious Transaction Reporting System was specified for the first time under the Anti-Drug Special Provisions Law in light of developments related to international countermeasures against money laundering. As it was later expanded to cover crimes other than drug-related ones, the system was specified under the Act on Punishment of Organized Crimes, and it is now specified under the Act on Prevention of Transfer of Criminal Proceeds. This measure was made an obligation for the first time in the Anti-Drug Special Provisions Law and was taken over in the Act on Prevention of Transfer of Criminal Proceeds through the Act on Punishment of Organized Crimes.

## Section 1 System Outline

## 1 Purpose

The Suspicious Transaction Reporting System aims to support investigation on money laundering and its predicate offenses as well as terrorist financing, to prevent the misuse of financial or other services provided by specified business operators and to trust of business activity.

## 2 Flow of Suspicious Transaction Reporting

Suspicious transactions reported by specified business operators are collected at JAFIC and NPSC via their competent administrative authorities. JAFIC collates and analyzes suspicious transaction reports (STRs) to disseminate those deemed valuable to receiving investigative authorities such as the Prefectural Police, the Public Prosecutors Office, etc. for their use.

The receiving investigative authorities utilize STRs as clues for initiating an investigation against a specific suspicious activity, or identifying criminal proceeds or sources of illicit funds. JAFIC also provides interested foreign FLUs with information on cross border transactions as necessary, in order to facilitate their analysis or investigation into global scale money laundering.

Furthermore at JAFIC, a detailed analysis of STRs is carried out by using the information accumulated by the police, and the outcomes are supposed to be disseminated to interested investigative authorities.
Figure 4-1 Flow of STRs from Specified Business Operators, through JAFIC to Investigative Authorities

## 3 When STRs are Required

Under Article 8 of the Act on Prevention of Transfer of Criminal Proceeds, it is required that specified business operators promptly file an STR with the competent administrative authorities when there is any suspicion, taking into account information obtained through CDD that assets they received could be criminal proceeds or that the customer could commit acts that constitute crimes under Article 10 of the Act on Punishment of Organized Crimes (concealment of criminal proceeds) or Article 6 of the Anti-Drug Special Provisions Law (concealment of drug-related criminal proceeds) with respect to specified businesses.

Figure 4-2 4-2 Cases where STRs are Required
Figure 4-3 Trend Diagram of Number of STRs (2007-2016)

Note 1: "Number of Reports Received" (2003-2012) is the total number of the reports received by the Financial Services Agency (JAFIO) until March 2007 and those received by the National Public Safety Commission/the National Police Agency (JAFIC) after April 2007.

Note 2: “Number of Reports Disseminated” (2002-2011) is the total number of the reports disseminated by JAFIO to the National Police Agency until March 2007 and those disseminated by JAFIC to investigative authorities etc. after April 2007.

Note 3: The number of reassessed cases refers to the number of cases concerning which it was judged that information that had been withheld from dissemination for such reasons as that the information is relating to a case under investigation could be disseminated as a result of the review and analysis of the information (data collection of the number of reassessed cases started in 2012).

## As a possible underlying factor of this trend, the following can be raised

○Spreading compliance culture among the general public has encouraged financial institutions’ efforts in fighting against anti-social forces and applied stringent monitoring over their financial or other economic activities.

The effect of education on the necessity of reporting suspicious transactions, via seminars, etc. held for financial institutions, etc.

Specifically, financial institutions have allocated much more resources to various AML/CFT measures. In particular, financial institutions with larger submission of STRs are promoting training programs for their employees to improve the individual AML/CFT capability, while having strengthened the IT system to identify suspicious transactions, by increasing the number of personnel in charge of money laundering countermeasures and the introduction of the detection systems for suspicious transactions.

The number of STRs deleted in 2016 was 6,125 and the number of STRs stored as of the end of 2016 was 3,564,719.
## 2 Number of Received Reports by Business Types

The number of suspicious transaction reports that each category of business operators filed in 2016 is shown in Table 4-1. Banks etc. have the highest number of reports with 354,346 cases, or 88.3% of all reports, followed by credit card operators (13,436 cases, or 3.3%) and Shinkin banks and credit cooperatives (13,070 cases, or 3.3%) (see Table 4-1).

Table 4-1 Number of Received STRs by Each Business Type

Year	2012	2013	2014	2015	2016
Category	Number of reports	%	Number of reports	%	Number of reports	%	Number of reports	%	Number of reports	%
Financial Institutions etc.	360,513	98.9%	344,147	98.5%	366,779	97.2%	385,639	96.5%	387,399	96.6%
Depository Institutions	348,831	95.7%	329,127	94.2%	349,204	92.5%	366,965	91.9%	369,936	92.2%
Banks etc.	333,868	91.6%	313,435	89.7%	332,443	88.1%	351,009	87.9%	354,346	88.3%
Shinkin Banks and Credit Cooperative	13,521	3.7%	14,089	4.0%	15,018	4.0%	13,188	3.3%	13,070	3.3%
Labour Banks	357	0.1%	290	0.1%	298	0.1%	371	0.1%	453	0.1%
Norinchukin Banks etc.	1,085	0.3%	1,313	0.4%	1,445	0.4%	2,397	0.6%	2,067	0.5%
Insurance Companies	1,837	0.5%	3,002	0.9%	3,817	1.0%	2,918	0.7%	2,310	0.6%
Financial Instruments Business	5,998	1.6%	7,373	2.1%	7,732	2.0%	8,951	2.2%	8,528	2.1%
Money Lending Business	1,628	0.4%	1,872	0.5%	3,349	0.9%	4,427	1.1%	5,263	1.3%
Fund Transfer Companies	380	0.1%	363	0.1%	807	0.2%	585	0.1%	539	0.1%
Commodity Futures Traders	3	0.0%	53	0.0%	16	0.0%	9	0.0%	16	0.0%
Currency Exchanging Operators	1,835	0.5%	2,119	0.6%	1,574	0.4%	1,633	0.4%	627	0.2%
Electronic Monetary Claim Recording Institutions	1	0.0%	1	0.0%	0	0.0%	0	0.0%	3	0.0%
Other	0	0.0%	237	0.1%	280	0.1%	151	0.0%	177	0.0%
Financial Leasing Operators	109	0.0%	62	0.0%	86	0.0%	160	0.0%	214	0.1%
Credit Card Operators	3,664	1.0%	5,086	1.5%	10,608	2.8%	13,666	3.4%	13,436	3.3%
Real Estate Agents	10	0.0%	1	0.0%	1	0.0%	9	0.0%	8	0.0%
Dealers in Precious Metals and Stones	28	0.0%	7	0.0%	5	0.0%	10	0.0%	27	0.0%
Postal Receiving Service Providers	42	0.0%	57	0.0%	34	0.0%	24	0.0%	6	0.0%
Telephone Receiving Service Providers	0	0.0%	0	0.0%	0	0.0%	0	0.0%	1	0.0%
Telephone Forwarding Service Providers	0	0.0%	0	0.0%	0	0.0%	0	0.0%	0	0.0%
Other	0	0.0%	1	0.0%	0	0.0%	0	0.0%	0	0.0%
Total	364,366	100.0%	349,361	100.0%	377,513	100.0%	399,508	100.0%	401,091	100.0%

## 3 Number of Received Reports Classified by Methods

According to reports of suspicious transaction by method, report by electronic application
using the e-governance on-line window (e-Gov), or other means (for example, sending documents etc. to the competent administrative authorities) are described in Table 4-3.

Table 4-2 Number of Received Reports Classified by Method

Year	2012	2013	2014	2015	2016
Notification Method	Number of reports	%	Number of reports	%	Number of reports	%	Number of reports	%	Number of reports	%
Electronic Application	236,882	65.0%	255,258	73.1%	295,640	78.3%	366,843	91.8%	387,724	96.7%
Other Methods	127,484	35.0%	94,103	26.9%	81,873	21.7%	32,665	8.2%	13,367	3.3%
Total	364,366	100.0%	349,361	100.0%	377,513	100.0%	399,508	100.0%	401,091	100.0%

JAFIC will continue working on further prevalence of the online reporting at all opportunities in order to reduce burdens on specified business operators associated with the reporting obligation.

## Section 3 Dissemination and Use of STRs in 2016

## Paragraph 1 Dissemination

JAFIC collects, arranges and analyzes all STRs that will contribute to the investigation of money laundering, predicate offenses or other offenses, and disseminates them to LEAs.

The number of STRs disseminated to LEAs has kept growing every year mainly because the number of suspicious transaction reports deemed to contribute to the investigation of money laundering crimes and predicate offenses for such crimes has increased as a result of efforts by specified business operators to strengthen the system to monitor anti-social forces and transfer of illicit funds. The number of STRs disseminated to LEAs was 443,705, a record high, in 2016, an increase of 8,650 (2.0 %) from the previous year. (See figure 4-3) In 2016, there was no request from an investigative authority to view or copy an STR or to have a copy sent to it.

## Paragraph 2 Use of STRs in the Prefectural Police

The number of cases cleared by Prefectural Police that were initiated with information in STRs (“STR-initiated cases”) was 1,091 in 2016, a decrease of 5 cases (0.5%) from the previous year.
Table 4-3 Number of STR-initiated Cases by Type of Crime

Year	2012	2013	2014	2015	2016
(i) Fraud-related crimes	719	781	833	900	925
Fraud	479	460	511	503	496
Violation of Act on Prevention of Transfer of Criminal Proceeds	240	321	322	397	429
(ii) Illegal stays	108	123	74	68	42
Violation of Immigration Act	108	123	74	68	42
(iii) Drug crimes	16	17	26	38	41
Violation of Stimulants Control Act	16	17	16	31	33
Violation of Anti-Drug Special Provisions Law	0	0	7	3	4
Violation of Cannabis Control Act	0	0	1	0	3
Violation of Act on Ensuring the Quality, Efficacy and Safety of Drug and Medical Devices, etc.	0	0	2	4	1
(iv) Money laundering offenses	6	4	16	23	21
Violation of Organized Crime Punishment Act (concealment of criminal proceeds, etc.)	4	3	8	13	16
Violation of Organized Crime Punishment Act (receipt of criminal proceeds, etc.)	2	1	8	10	5
(v) Counterfeiting crimes	6	9	21	25	19
False statement on licenses	0	1	4	5	8
Illegal preparation and supply of private electromagnetic records	2	8	10	12	8
Forgery of signed public documents	4	0	7	8	3
(vi) Loan sharks	6	9	9	6	14
Violation of Money Lending Business Act	5	8	6	4	8
Violation of Investment Deposit and Interest Rate Act	1	1	3	2	6
(vii) Gambling-related offenses	0	0	0	2	5
Operating a gambling site for profit	0	0	0	2	2
Habitual gambling	0	0	0	0	2
Gambling	0	0	0	0	1
(viii) Entertainment business-related offenses	4	0	0	4	4
Distribution of obscene materials	0	0	0	3	2
Violation of Amusement Business Act	4	0	0	1	2
(ix) Other criminal offenses	2	4	5	3	11
Theft	2	3	4	3	10
Embezzlement	0	1	1	0	1
(x) Other special criminal offenses	4	7	9	6	9
Violation of Banking Act	1	5	5	4	3
Violation of Tradmark Act	1	1	2	1	1
Violation of Travel Agency Act	0	0	0	0	1
Violation of Mobile Phone Improper Use Prevention Act	1	0	0	0	1
Violation of Construction Recycling Act	0	0	0	0	1
Violation of Financial Instruments and Exchange Act	0	0	0	1	1
Violation of Copyright Act	1	1	2	0	1
(xi) Others	15	8	8	21	0
Total	886	962	1,001	1,096	1,091

Note 1: The violations of the Act on Ensuring the Quality, Efficacy and Safety of Drugs and Medical Devices, etc. in the table include cases in which the predecessor Act before the name change, the Pharmaceutical Affairs Act, was applied).
The following describes each type of the violation.

( i ) Fraud-related crimes (fraud and violations of the Act on Prevention of Transfer of Criminal Proceeds) totaled 925 cases, the largest number that comprises 84.8% of all cases, which included arrests for bank passbook smuggling, fraudulent receipt of welfare benefits, fraudulent receipt of traffic insurance benefits, and fraud in relation to goods sales and investments and so forth.

(ii) Illegal stays (violations of the Immigration Control Act) totaled 42 cases, which included cases of foreign nationals who had overstayed, who had worked without working qualifications, or who had used of forged residence cards, etc.

(iii) Drug crimes (violation of the Stimulants Control Act and the Act Concerning Special Provisions for the Narcotics and Psychotropics Control Act for the Prevention of Activities Encouraging Illicit Conducts and Other Activities Involving Controlled Substances through International Cooperation) totaled 41 cases, which included arrests for the possession, assignment and/or receipt, or unauthorized sale of stimulants, etc.

(iv) Money laundering offenses (violation of the Act on Punishment of Organized Crimes and Control of Crime Proceeds (concealment and receiving of criminal proceeds) totaled 21 cases, which included arrests for concealment and receiving of criminal proceeds obtained through fraud, loan shark crimes, etc.

(v) Counterfeiting crimes (false entries in the original of an electromagnetic notarized deed and use of such deed, etc.) totaled 19 cases, which included arrests for sham marriage.

(vi) Loan sharks (violation of the Money Lending Business Act and the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates) totaled 14 cases, which included arrests for unregistered business operation and loan-sharking.

(vii) There were five cases of gambling-related offenses (habitual gambling, opening and operation of gambling sites for profit), in which arrests were made in connection with gambling using online casino sites and gambling activity by Boryokudan members.

(viii) There were four cases of entertainment business-related offenses (distribution of obscene material, and violations of the Act on Control and Improvement of Amusement Business), which included possession of obscene DVDs for sales purpose, entertainment business-related offenses in areas where the operation of entertainment business outlets is prohibited, and unlicensed engagement in entertainment business.

(ix) Other criminal offenses (theft and embezzlement) totaled 11 cases, which included arrests for serial thefts from vending machines, and fraudulent cash withdrawal from ATMs using other persons' cash cards obtained through illegal means.

(x) Other special criminal offenses (violation of the Banking Act or the Trademark Act, etc.) totaled 9 cases, which included arrests for unauthorized overseas remittances by foreign residents in Japan in violation of the Banking Act.
In 2016, there were 25 money laundering offense arrests which were also STR-initiated cases. $ ^{(Note)} $ By predicate offense type, fraud accounted for 40.0% of the total. (See Table 4-4)

Note: STR-initiated ML cases are 21, other STR-initiated predicate offenses and ML cases are 4.

Table 4-4 Number of Cases in which STRs Led to Arrests Made for Money Laundering Crimes

Year	2012	2013	2014	2015	2016
Predicate offenses
Fraud	7	6	16	16	10
Violation of the Money Lending Business Act	1	1	1	2	6
Distribution of obscene objects	0	0	0	1	2
Violation of the Banking Act	0	3	3	1	2
Habitual gambling	0	0	0	0	2
Violation of the Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates	0	0	1	4	1
Violation of the Anti-Prostitution Act	0	0	0	0	1
Receipt of stolen goods for value	0	0	0	0	1
Others	7	2	4	8	0
Total	15	12	25	32	25

In 2016, the number of cases that reached confiscation and collection of equivalent value based on STRs stood at 2 (see Figure 4-5).

Table 4-5 Number of Cases that Reached Confiscation and Collection of Equivalent Value Based on STRs

Year Classification	2012	2013	2014	2015	2016
Confiscation	8	5	3	5	2
Collection of Equivalent Value	(5)	(1)	2(2)	1(1)	(1)
Total	8(5)	5(1)	5(2)	6(1)	2(1)

Note 1: The numbers in brackets are the number of cases that fall under both “confiscation” and “collection of equivalent value” cases. These numbers are not included in the numbers in the “confiscation” columns.

2: The years show the years in which arrests were made.

In the investigations not initiated with STRs, STRs are still a valuable source of information used by Prefectural Police in countering organized crime.

The number of STRs used for investigation by Prefectural Police was 284,914 in 2016, an increase of 19,568 cases (7.4%) from the previous year (see Table 4-6).
Table 4-6 Number of STRs Used for Investigative Purposes

Year Classification	2012	2013	2014	2015	2016
Number of STRs used in investigation of initiated cases	3,811	3,781	4,608	6,308	5,961
Number of STRs used in investigation of cases other than the abovementioned cases	184,510	190,063	238,868	259,038	278,953
Total	188,321	193,844	243,476	265,346	284,914

Note 1: The number of STRs used in investigation of initiated cases shows the number of such information used when making an arrest.

Note 2: In cases where an investigation was started using STRs but did not lead to an arrest, said STRs are counted as STRs used in investigation of cases other than the abovementioned cases.

JAFIC tries to have a clear picture of fund movement resulting from illicit activities of anti-social forces such as Boryokudan by employing various sophisticated and comprehensive analysis methods against STRs in a way, for example, linking separated STRs by customer IDs indicating identical particulars and making use of information accumulated by police or publicly available information.

To date, JAFIC has come to recognize the fact that anti-social forces were involved in the legitimate financial services behind affiliated businesses, or repeatedly conducted a large amount of cross border wire transfers.

Although it can be assumed that sources of the funds handled by anti-social forces originate mainly from criminal activities, in most cases, the connection with the predicate offenses is obscured by sophisticated fund manipulation creating considerable layers of fund operation. Its recent study showed that anti-social forces managed to cover up the true nature behind affiliated businesses and engaged in fund management in consultation with experts of that area, and thus it has been made quite difficult to locate the financing activity of anti-social forces.

JAFIC is taking strong initiatives to combat anti-social forces, coordinating various cooperative works with investigative authorities, customs, SESC or foreign FlUs.

## Paragraph 3 Utilization of Reports by National Investigative Authorities

## 1 The Public Prosecutor's Offices

STRs are shared among public prosecutor's offices nationwide and are used in cases sent by investigative authorities as well as in conducting secret investigation. STRs are useful for identifying criminal facts in investigating further crimes and accomplices in the context of their utilization such as for corroborating statements by offenders and associated parties and identifying bank accounts suspected of use in crime.

STRs are also used for a wide range of activities, including monitoring the flow of funds of Boryokudan and other crime organizations and examining the actual state of organized crime.
## 2 The Narcotics Control Department

The Health, Labour and Welfare Ministry’s Narcotics Control Department utilizes STRs in order to obtain identification information concerning offenders and other relevant people in relation to investigation of narcotics smuggling and keep track of the transfer of criminal proceeds in addition, it utilizes STRs in a wide range of other activities, including investigations of smuggling cases involving foreign suspects, which have been increasing in recent years.

## 3 The Japan Coast Guard

The Japan Coast Guard utilizes STRs to analyze the relationship with those which are reported to bear a high risk of committing a crime, as well as to promote the prevention of organized smuggling of restricted items and immigrants, thus striving to take thorough frontline measures for preventing such crimes.

## 4 Customs

Customs makes a database of STRs, which is shared between customs offices across the country. STRs can be used for investigations on violation of the Customs Act by associating them with various types of information obtained individually by customs offices. Customs takes strong initiatives to stop smuggling of items such as ones that may threaten public safety and security.

## 5 The Securities and Exchange Surveillance Commission (SESC)

SESC conducts investigations into malicious activities which harm the fairness of transactions including financial instrument transactions, such as fraudulent securities reports (fraudulent accounting), insider trading, market manipulation and other fraudulent means. In investigations of criminal cases, SESC independently identifies and analyzes relevant accounts and fund flows, etc. When doing so, it actively uses STR in order to identify the facts of the offenses.
# Crackdown on Money Laundering

In order to take effective anti-money laundering measures, it is essential to understand the scale and modus operandi of money laundering.

In Japan, money laundering is criminalized as follows: the control of management of enterprises of legal persons and other entities through illicit proceeds (Article 9), the concealment of criminal proceeds (Article 10) and the receipt of criminal proceeds (Article 11) which are all stipulated in the Act on Punishment of Organized Crimes, and also the concealment of drug-related criminal proceeds (Article 6) and the receipt of drug-related criminal proceeds (Article 7) both stipulated in the Anti-Drug Special Provisions Law. They include typical money laundering activities such as transferring criminal proceeds to a certain place so that these proceeds would not be traceable and depositing criminal proceeds in a bank account under the name of another person, although all the activities to transfer criminal proceeds are not yet covered.

In addition, penalties for violation of supervision mechanisms issued by competent administrative authorities to specified business operators (excluding lawyers) and penalties for the transfer or receiving of bank account passbooks are stipulated in the Act on Prevention of Transfer of Criminal Proceeds.

The anti-money laundering achievements in Japan can be grasped to some extent by looking into the number of cleared cases related to money laundering and the amounts of criminal proceeds confiscated.

## Section 1 Arrests Made for Violation of the Act on Prevention of Transfer of Criminal Proceeds in 2016

The Act on Prevention of Transfer of Criminal Proceeds stipulates penalties to ensure the effectiveness of supervisory mechanisms put in place by the competent administrative authorities over specified business operators (excluding lawyers) and penalties on the trade of savings passbooks, and the police are enhancing its efforts to crack down on such practices. Numerous money laundering crimes involve the illicit use of savings passbooks and foreign exchange cards, etc. in the name of another party. The number of arrests made for the illicit transfer of savings passbooks in 2016 was 1,979 cases, an increase of 360 cases (22.2%) from the previous year (see Table 5-1).