## I ntroduction

The term “money laundering” refers to the act of hiding the source or beneficial owner of criminal proceeds. Where money laundering is not dealt with, criminal proceeds continue to be utilized in criminal activities and to maintain and enhance crime syndicates. These syndicates are then free to use these funds to interfere with legitimate economic activities. Therefore it is critical to prevent transfers of criminal proceeds.

“Specified business operators” are responsible for verifying and preserving customer identification records in order to secure traceability of criminal proceeds. They are also required to report transactions they suspect may relate to money laundering to the competent administrative authorities. Suspicious transaction reports (STRs) are collected, arranged, and analyzed by the National Public Safety Commission, from which they are disseminated to investigative authorities for use in criminal investigations. In accordance with changes of the laws, the suspicious transaction reporting system is now operated in a manner consistent with the Act on Prevention of Transfer of Criminal Proceeds.

Five years have passed since the full enforcement of the Act on Prevention of Transfer of Criminal Proceeds, and twenty years since the establishment of Japan's suspicious transaction reporting system. Progress over this period has been significant in terms of: development of the system, number of suspicious transactions reported, number of arrests made based on STRs, and other factors. In addition, the amended Act on Prevention of Transfer of Criminal Proceeds will be enforced in April 2013, further boosting Japan's anti-money laundering initiatives.

Meanwhile, money laundering methods and trends in crime continue to change. And terrorist financing, which refers to the provision of funds to support or facilitate terrorists and their activities, has also been recognized as a serious threat to the global financing systems. To adapt to these situations, the Financial Action Task Force, an international organization responsible for money laundering and terrorist financing strategies, amended its Recommendations on measures to be taken by the each country in February 2012. Japan's AML/CFT regimes must continue to develop in a similar manner: that is by keeping abreast of related trends in Japan and other countries, taking into consideration the opinions of various sources on the subject, and utilizing this information for further development.

At the same time, it has remained true since the establishment of the suspicious transaction reporting system that the understanding and cooperation of the public, such as specified business operators and their customers, as well as crackdowns by investigative authorities, are crucial factors in efficient implementation of countermeasures against money laundering and terrorist financing.

This Report provides information on countermeasures against money laundering and terrorist financing on an annual basis, facilitating understanding and cooperation amongst the public. By extension, it is our hope that this report helps to achieve the objectives of the Act on Prevention of Transfer of Criminal Proceeds of ensuring safety and peace of national life and contributing to the sound development of economic activities by preventing the transfer of criminal proceeds and other measures.

## (note)

Strictly speaking, administrative work related to the enforcement of the Act on Prevention of Transfer of Criminal Proceeds is carried out by the Director for Prevention of Money Laundering or an employee of the agency with such occupatil title, but in this article, the organization, including employees of the agency, is described as the "Director for Prevention of Money Laundering" for convenience, except in special instances. Furthermore, this organization is referred to under its common international title, JAFIC (Japan Financial Intelligence Center).

February, 2013

河合信之

Nobuyuki Kawai

Director for Prevention of Money Laundering