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Last month it was revealed that a Bangladeshi former associate professor at Kyoto’s Ritsumeikan University was wanted by police for his suspected involvement in the Dhaka terrorist attack that killed 20 people in a cafe, including seven Japanese. Mohammad Saifullah Ozaki had been teaching business administration but disappeared from Japan sometime last year. He was finally fired in March.

Police in both countries are investigating whether Ozaki sent money to groups with suspected Islamic State links. While there is growing attention in Japan on physically preventing terrorist attacks, especially ahead of the Tokyo 2020 Olympics, this case shows how funding from Japan to suspected terrorists abroad is also a problem.

Japan has laws to halt terrorism funding, but are they sufficient?

What are the main laws used to block fund transfers to terrorist organizations abroad?

In November 2014, Japan passed three bills to crack down on terrorism funding and money laundering.

Two of the three amended the Terrorism Financing Act, established in 2002, and the law on the Prevention of the Transfer of Criminal Proceeds.

The third is designed to freeze terrorist assets by criminalizing the provision of direct or indirect financing to terrorists, including goods and real estate. It also allows the government to freeze assets quickly and requires both the financial and nonfinancial sectors to practice better due diligence on customers by forcing them to adopt better security processes and procedures.

The laws were enacted in response to international criticism that Japan drags its feet on terrorist financing. After the Sept. 11, 2001, attacks in New York and Washington D.C., the Financial Action Task Force was set up under the OECD to combat money laundering and terrorist financing. In its June 2014 report, it expressed concern about Japan’s “continued failure to remedy the numerous and serious deficiencies” in tackling the issue.

Curbing all forms of such financing continues to be a big issue when the world’s financial and central bank chiefs meet.

Koji Kanazawa, a lawyer with Tokyo-based Chuo Sogo Law Office P.C. who is licensed to practice in Japan and New York, said the new laws are important as they criminalize all assets, not just money. Financing that provides land, buildings, goods, and services to those who intend to commit terrorist acts is now illegal.

How are the laws applied?

The original 2002 terrorism financing law was intended to punish the funding of offenses constituting “public intimidation,” or those committed with the intent to make a threat to the public, the State or a local public entity, or a foreign government, municipality or any other organization established on the ground of an international agreement.

Specific examples cited by the act include the murder or injury of people via lethal weapons, capturing or abducting them, or taking them hostage. It also outlaws attacks on airplanes, ships, roads, parks, trains and bus stations, as well as infrastructure including natural gas and nuclear power facilities.

The new laws are applied to parties identified by the United Nations Security Council as connected to terrorist groups. At present, Japan has frozen the financial assets of 394 individuals and 80 organizations the U.N. has found linked to the Taliban, al-Qaida and ISIL (also known as the Islamic State group or Daesh). The assets of another seven individuals and 18 groups linked to other terrorists and terrorist groups have also been frozen, the Foreign Ministry said.

What are laws’ weaknesses?

First and foremost is the difficulty of confirming that money sent from an account in Japan actually ended up in the hands of an individual or organization on a terrorist watch list.

The sophistication of international financing for terrorist networks is such that distinguishing between transfers to a legitimate account (say, for a relative, charity or family business) is extremely difficult. This is so even with the best of cooperation and the investigative resources needed from authorities in Japan and overseas.

Kanazawa also said the laws require that those providing the financing had intended to facilitate terrorist acts. This could be difficult to prove in court if there is no evidence that said financing relates directly to terrorist attacks. But he noted that the second of the two amendments to the 2002 law, the one that cracks down on transferring criminal proceeds, takes effect in October. This will require Japanese banks and financial institutions to increase their scrutiny of customers.

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