Silviase/jgov_v1.4_full_ann huggingface dataset:
Chapter 4 Reports of Suspicious Transactions 35

Section 1 System Outline 35
1 Purpose 35
2 Flow of Suspicious Transaction Reporting 35
3 Cases in which Reporting is Required 36
4 List of Reference Cases of Suspicious Transactions 37
5 Analysis of Bank Account Used for Crime 37
6 Information Security Measures 37

Section 2 Situation of STRs in 2012 38
1 Change in the Number of Reported Cases 38
2 Number of Reports by Business Types 39
3 Number of Reports Classified by Methods 40

Section 3 Dissemination and Use of STRs in 2012 41
Paragraph 1 Dissemination 41
Paragraph 2 Use of STRs in the Prefectural Police 41
Paragraph 3 Use of Reports by National Investigative Authorities etc. 46

## Chapter 5 Crackdown on Offences Related to Money Laundering

Section 1 Arrests made for the violation of the Act on Prevention of Transfer of Criminal Proceeds in 2012 48
Section 2 Cleared Cases of Money Laundering in 2012 49
Paragraph 1 Cleared Cases of Money Laundering under the Act on Punishment of Organized Crimes 49
1 Number of Cleared Cases 49
2 Modus Operandi of Money Laundering observed in Cleared Cases 50
3 Money Laundering Cases related to Boryokudan Gangsters. 51
4 Money Laundering conducted by Foreign Visitors to Japan 54
Paragraph 2 Cleared Cases of Money Laundering under the Anti-Drug Special Provisions Law 54
Section 3 Temporary Restraining Order for Confiscation of Criminal Proceeds before Institution of Prosecution in 2012 55
Paragraph 1 Temporary Restraining Order under the Act on Punishment of Organized Crimes 56
Paragraph 2 Temporary Restraining Order under the Anti-Drug Special Provisions Law 59
Section 4 Application of Provisions of Confiscation and Collection of Equivalent Value in 2012 60
Paragraph 1 Application of Provisions of Confiscation and Collection of Equivalent Value under the Act on Punishment of Organized Crimes 60
Paragraph 2 Application of Provisions of Confiscation and Collection of Equivalent Value under the Anti-Drug Special Provisions Law 60
Section 5 Concealment of Cross-Border Capital Movements 61

## Chapter 6 Promotion of International Cooperation

Section 1 Activities of International Institutions 63
Paragraph 1 FATF 63
1 FATF 63
2 Activities 64
(1) Main Activities 64
(2) FATF Recommendations 64
(3) Mutual Evaluation 65
3 Mutual Evaluation of Japan 65
(1) Implementation of the Third FATF Mutual Evaluation of Japan 65
(2) Outline of the Mutual Evaluation Results 65
(3) Follow-up of the Mutual Evaluation Results 66
4 Participation of JAFIC 66
Paragraph 2 APG 69
1 APG 69
2 Activities 70
3 Participation of JAFIC 70
Paragraph 3 Egmont Group 70
1 Egmont Group 70
2 Activities of the Egmont Group 70
3 Participation of JAFIC 71
Section 2 Progress of the International Cooperation in 2012 72
Paragraph 1 Participation in the Activities of International Organizations 72
Paragraph 2 Information Exchange with Foreign FIUs 72
1 Establishment of the Framework for Exchange of Information 72
2 Status of Information Sharing 73
3 Discussions 74
Note: Unless otherwise noted, statistics and other numbers shown, including in charts and figures, are taken from National Police Agency surveys.
Overview of History of Anti-Money Laundering and Countering the Financing of Terrorism(AML/CFT) Measures

Money-Laundering activity, which hides the source or attribution of criminal proceeds, is a highly covert activity, which is difficult to detect.

The international society continues to enhance and develop systems to prevent and detect money laundering and terrorist financing, as well as cooperates with each other to deal with these issues.

Japan has also worked to reinforce AML/CFT measures in line with international initiatives. Various systems and activities described in this report have delivered positive results through such international cooperation on money laundering and terrorist financing initiatives as well as through domestic efforts.

## Section 1 AML/CFT Measures in International Society

## 1 Anti-Money Laundering Measures as Countermeasures against Narcotic Drugs

Through the 1980s, the global spread of narcotics abuse was taken as a crisis in the international society, prompting a variety of initiatives from different angles to address the issue. One of the main causes was the existence of illegal transactions by transnational drug-trafficking organizations linking production of narcotics to the consumption of them. 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 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances” (hereinafter referred to as “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, which made clear an internationally consistent effort.

In addition, 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 measures to be applied in the fields of law enforcement, criminal justice, and the financial system. “The 40 Recommendations” required early ratification of “the UN New Narcotics Convention”, development of domestic laws stipulating anti-money laundering
## 4 Countermeasures Against Changes in Modus Operandi of Money Laundering

In accordance with development of anti-money laundering measures, the trend of money laundering itself has also been changing. The FATF put the highest emphasis in its consideration on the hiding 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 non-financial businesses and professions. Furthermore, in February 2012, the revised International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation (The FATF Recommendations) were adopted and fully integrated the counter-terrorist financing measures (9 Special Recommendations) with the anti-money laundering measures (40 Recommendations) and include counter-financing of proliferation measures. The Recommendation also tightened the requirements on politically exposed persons in older to take measures to combat corruption.

To assess compliance by member countries/jurisdictions, mutual evaluations have been undertaken through the peer review process. Evaluations are conducted on criteria such as money laundering and terrorist financing legislation; FIU systems; arrest records on money laundering cases and/or terrorist financing cases.

In addition, the FATF studies new methods of money laundering engineered in various countries and regions in the world since then, such as money laundering using new payment systems, alternative remittance systems, trade-based money laundering, etc. and has provided multiple advice on countermeasures through publishing reports and other methods.

## Section 2 AML/CFT Measures in Japan

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

Anti-money laundering measures in Japan have been developed step by step in accordance with initiatives of the international society. 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 Law concerning Special Provisions for the Narcotics and Psychotropics Control Law etc. and Other Matters for the Prevention of Activities Encouraging Illicit Conduct and Other Activities Involving Controlled Substances through International Cooperation" (hereinafter referred to as "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 pointed out a negative view on the limit of predicate offences for money laundering to illegal drug crimes. It was extremely difficult for
Transnational Organized Crime and International Terrorism", with the Chief Cabinet Secretary as head thereof, publicized "the Action Plan for Prevention of Terrorism" including consideration of the implementation of the re-revised Recommendations in December 2004. In November 2005, the abovementioned Headquarters decided that the National Police Agency would make a draft of law for implementation of the re-revised Recommendations and that the FlU would be transferred from the Financial Services Agency to the National Police Agency. In addition, the competent administrative authorities would provide guidance and supervision regarding suspicious transactions to relevant sectors.

The National Police Agency drafted, in cooperation with relevant ministries and agencies, a bill by using for reference the Customer Identification Act and a portion of the Act on Punishment of Organized Crimes, and submitted it to the 166th National Diet session in February 2007. "The Act on Prevention of Transfer of Criminal Proceeds" was then adopted in March of that year. Partial enforcement of the law stipulating the transfer of the Flu was carried out in April of the same year, while the remaining, such as the extension of the scope of application to business operators required to implement customer identification and other measures was enforced in March, 2008.

Since then, the National Police Agency, along with the cooperation of concerned government ministries and agencies, has amended legislation as appropriate on countermeasures against money laundering and terrorist financing, including the Act on Prevention of Transfer of Criminal Proceeds and its sub-regulations as well as various other ordinances in order to appropriately respond to changes in social conditions and to address the deficiencies identified in the FATF Mutual Evaluation of Japan.

In April 2011, upon consideration of discussions on recommendations made under the 3rd FATF Mutual Evaluation of Japan, and in light of damages caused by billing fraud in Japan, the following amendments were made to the Act on Prevention of Transfer of Criminal Proceeds: additional points to verify on transactions of specified business operators; addition of call forwarding service providers to the list of specified business operators; addition of measures for accurate verification at the time of transactions; and strengthening punishments on illicit transfer of passbooks. In addition, necessary amendments were made to sub-regulations in 2012.
# Section 3 Establishment of the Japan Financial Intelligence Center (JAFIC)

## Paragraph 1 Background of Establishment

The scope of business operators required to take anti-money laundering measures was extended by the Act on Prevention of Transfer of Criminal Proceeds from financial institutions etc. to those and real estate agents, dealers in precious metals and stones, and other business operators.

Therefore, based on factors including the following, it was determined that the National Police Agency should have the functions of an FIU:

• The business operators subject to these obligations, and the type of business of these operators, no longer falls under the jurisdiction of the Financial Services Agency alone.

• The National Police Agency plays a major role in countering the boryokudan and other organized crime syndicates and in countermeasures against terrorism, and is better equipped to accurately analyze information.

The Act on Prevention of Transfer of Criminal Proceeds clarified that the National Public Safety Commission (NPSC), which exercises administrative supervision over the National Police Agency and is aided by it, is responsible for prompt and appropriate collection, arrangement, analysis, and dissemination of suspicious transaction reports filed by specified business operators. The Act also granted the NPSC a function related to the handling of STRs including its dissemination to foreign FIUs as well as a function to complement supervisory measures against specified business operators. JAFIC was established within the Organized Crime Department, the Criminal Investigation Bureau of the National Police Agency, as Japan's new FIU to perform these functions on April 1, 2007, in tandem with the partial enforcement of the Act.

## Paragraph 2 Mission and Structure

JAFIC is in charge of the following tasks provided in the Act on Prevention of Transfer of Criminal Proceeds (responsibility of the NPSC)

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

- Dissemination of information to foreign FLUs;

- 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 and various measures such as “the Guideline for Promotion of the Criminal Proceeds Control” etc. It also participates in discussion of international standards related to AML measures.

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.
Figure 1-2 Structure of JAFIC

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 crimes etc.

## Paragraph 3 Partners

Specified business operators including financial institutions should take initial anti-money laundering measures according to the Act on Prevention of Transfer of Criminal Proceeds. In addition to the collection, arrangement, analysis, and dissemination of financial information, JAFIC endeavors to publicize the actual conditions of money laundering and legal systems and relevant countermeasures so that specified business operators can conduct customer due diligence measures and gain cooperation from the 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 in cooperation with industry organizations. On the other hand, investigative authorities and other bodies, such as the police, detect money laundering offences and predicate offences and confiscate
Figure 1-3 Anti-money Laundering Measures in Organization

criminal proceeds within their respective jurisdictions.

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

The “Ministerial Meeting Concerning Measures against Crime” which was launched by a Cabinet Meeting Agreement in September 2003, frequently discusses anti-money laundering measures. Also, for the purpose of promoting effective and appropriate measures against transnational organized crimes and international terrorism in a comprehensive and active manner, the “Headquarters for the Promotion of Measures against Transnational Organized Crime and International Terrorism” was established in a Cabinet Meeting in August 2004.

## Paragraph 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 for Promotion of the Criminal Proceeds Control” are composed of four principles and six promoting items as follows:

## 1 Principles for Countermeasures against Criminal Proceeds

(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 Promoting Items of Countermeasures against Criminal Proceeds

(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 police should provide information on the transfer of criminal proceeds, instruction and advice to specified business operators and 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

Measures to prevent the transfer of criminal proceeds shall be properly carried out, 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

International cooperation should be strengthened by various ways such as exchanging information with foreign FlUs, responding to revisions of international recommendations, and supporting foreign countries in implementing international recommendations.

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

Countermeasures against

Money Laundering

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

(1) Criminalization of money laundering

(2) Confiscation of criminal proceeds

(3) Imposing CDD and other necessary obligation on Financial Institutions and DNFBPs (Designated non-Financial Businesses and Professions)

Among these standards, (1) and (2) are aimed at the direct effects of weakening, in particular, the financial foundations of criminal organizations to target assets generated through crimes, while the purpose of (3) is to prevent money laundering itself by making it easier to trace the transfer of illegal funds and making it more difficult to avoid prosecution and confiscation.

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

Figure 2-1 Relationships of the Act on Prevention of Transfer of Criminal Proceeds, 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 Customer Identification Act and a portion of the Act on Punishment of Organized Crimes in order to deal with changes in money laundering techniques more effectively and comprehensively in a way consistent with global standards set out by the FATF 40 Recommendations 2003 at that time. The act provides for preventive measures in combating money laundering and terrorist financing, by enforcing obligations on CDD, record keeping, filing STRs, etc. by financial institutions and DNFBPs.

In 2011, the following amendments were made to the Act for the first time since it was enacted in 2007: addition of verifying details for transactions; addition of telephone forwarding service providers to the list of specified business operators; addition of measures for accurate verification at the time of transactions; and increased punishments on illicit

Figure 2-2 Overview of the Act on Prevention of Transfer of Criminal Proceeds

$ ^{*} $ 1 Amongst financial institutions etc., those operators involved in foreign exchange are required to provide notification on money remitters in addition to the above.

$ ^{*} $ 2 Professions such as judicial scriveners, certified administrative procedure specialists, certified public accountants, and certified tax accountants are required to verify the information in ①only.

$ ^{*3} $ The Japan Federation of Bar Associations defines, in its bylaws, measures to ensure accurate verification on transactions, and preparation/preservation of verification records and transaction records by lawyers. These rules are based on examples of judicial scriveners and other professions contained in the Act on Prevention of Transfer of Criminal Proceeds.