Japan has failed to address deficiencies in its measures to halt money laundering and terrorist financing, and should step up its efforts to do so, the Financial Action Task Force said.
The measures should include “necessary legislation,” the FATF, which is sponsored by the Organisation for Economic Co-operation and Development, said in a statement posted on its website.
The biggest deficiencies include the incomplete criminalization of terrorist financing and an incomplete mechanism for freezing terrorist assets, it said, without being more specific.
The task force is an international organization established in 1989 to coordinate efforts to combat money laundering and terrorist financing. Its secretariat is based in Paris and its decision-making body meets three times a year, according to its website.
“The FATF is concerned by Japan’s continued failure to remedy the numerous and serious deficiencies,” the task force said. “The FATF will continue to monitor Japan’s progress.”
The caution comes more than five years after the FATF and the Asia-Pacific Group on Money Laundering produced a study of Japan’s steps to fight money laundering and counterterrorist financing.
That report flagged concerns including the low rate of money-laundering prosecutions and the low number of inspections of non-bank financial institutions.
The difference between this warning and being included on the FATF’s list of “high-risk or non-cooperative jurisdictions” is that the caution is intended to quickly promote necessary legal changes, according to a document from the Finance Ministry supplied to reporters in Tokyo Friday. If the changes happen, there will be no further action, according to the ministry.
There are no developed countries on the FATF list of high-risk jurisdictions, which includes Iran, North Korea, Syria, Pakistan and Turkey.
Regulators from Hong Kong to the United States are stepping up efforts to curb money laundering, including boosting steps to catch risk-management failures at banks. The U.S. Office of the Comptroller of the Currency in January proposed a policy shift that will remove hurdles to targeting lenders with certain enforcement actions.
The Hong Kong Monetary Authority told chief executives of lenders in the city in an April 2013 letter to strengthen their anti-money laundering controls and systems.
It said it would double its team of specialists, which mainly comprises examiners for carrying out on-site checks at banks, to 22 people over the year.