Mar 04 2008 Nathan Lynch
The Japanese government has extended the country's anti-money laundering law to cover a range of new business sectors just two weeks in advance of a "mutual evaluation" visit from the Financial Action Task Force. As of this month the laws will cover a range of "high-risk" sectors, including real estate agents, jewellers, private mail box management firms, lawyers and accountants. In the past, the AML laws had applied only to financial services firms.
Following the changes, which took effect this week, the law's customer identification requirements will apply to the range of firms listed above. Real estate agents, jewellers and private mail box management firms, meanwhile, will also have to report suspicious transactions to the country's financial intelligence unit, the Japan Financial Intelligence Centre. Lawyers and accountants were excluded from the suspicious transaction reporting requirement following strong opposition from the Japan Federation of Bar Associations.
The newly regulated entities will have to verify their customers' identity when a range of "high-risk" transactions take place, including property transfers and jewellery sales involving more than ¥2m ($19,000). The customer ID records must be kept for a period of seven years, the legislation states. The penalties for breaches of the AML law include fines of up to ¥3m ($28,500) and two years in jail.
The Japanese AML regime has experienced significant changes in recent months, in anticipation of the "mutual evaluation" exercise from the FATF and the Asia-Pacific Group on Money Laundering. In January the Japanese Bankers' Association issued a set of AML guidelines for banks to monitor transactions based on customer and transaction types. The risk-based guidelines call for enhanced due diligence for transactions that are linked to countries which are the subject of United Nations sanctions. They also call on banks to look out for other risk indicators, such as potential links to organised crime groups, customers with multiple accounts and one-off transactions.
The JBA also called on banks to conduct enhanced due diligence against lawyers and accountants that manage accounts on behalf of their clients. A spokesman for the JBA declined to comment on how the January guidelines would work alongside the recent expansion of the country's AML law.
Mutual evaluation
From next week, the FATF and APGML will begin their two-week "mutual evaluation" exercise, measuring Japan's AML and terrorist finance systems against the FATF's "40+9" recommendations.
The APGML said that the evaluation would consist of two main components. "First, the on-site visit involving meetings with key governmental and private sector agencies, including banks, other financial institutions, the real estate, legal and accountancy professions; and second, the examination of the report of the visit by the full FATF and APG plenaries," it noted.
The results of the mutual evaluation exercise will be published in following the APGML's annual meeting in July.
