Japan’s financial regulators are considering on-site inspections of regional banks that do not have sufficient steps in place against money laundering, sources with knowledge of the plan said Wednesday.
If financial institutions fail to beef up anti-money laundering efforts, the Financial Services Agency may take administrative action, such as issuing a business improvement order, according to the sources.
The watchdog’s move to impose stricter checks comes in response to a call by the Financial Action Task Force, an international standard-setting body for promoting measures against money laundering and terrorist financing. The task force is expected to examine Japan’s efforts to fight money laundering in 2019.
Japan’s regulators have already asked financial institutions handling overseas money transfers to check for suspicious transactions by customers based on the amount and purpose of their remittances.
The country has revised a law to block the transfer of criminal proceeds, and the FSA launched in February a section aimed at supporting financial institutions improving their anti-money laundering measures.
In March, banks were ordered to report to the FSA on how they have carried out steps against money laundering.
Some small- and mid-sized financial institutions that lack experience and expertise in overseas remittances are believed to have processed transactions potentially linked to money laundering, the sources said.