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Money laundering techniques are becoming increasingly sophisticated around the world. There is an urgent need to strengthen countermeasures.
Money laundering is the act of obscuring the origin of funds or evading investigations by transferring money obtained through crimes to bank accounts under false names or moving funds from one account to another.
The Financial Action Task Force (FATF), an international organization that monitors anti-money laundering measures in various countries and regions, has released an evaluation report on Japan.
Citing insufficient efforts by small and medium-sized financial institutions to counter money laundering, the FATF has put Japan in the “enhanced follow-up” category, the second tier in the watchdog’s three-stage rubric. The United States, China and Switzerland are among other nations that have received the same classification. Countries and regions in this category are urged to make improvements in many fields.
In the FATF’s previous evaluation in 2008, Japan received the lowest rating among the seven major industrialized nations and was considered to be lax on money laundering.
Recognizing that Japan has made some improvements, the latest report did not place the country in the worst category of warranting monitoring, but cited problems such as inadequate ongoing customer due diligence at all but the largest financial institutions.
The government must take the report’s findings seriously and continue efforts to upgrade measures against money laundering.
In recent years, a shinkin credit association in the Kanto region was found to have remitted a large sum of funds to unidentified accounts overseas. In another incident, a regional bank in western Japan was reportedly found to have fraudulently transferred money to North Korea via Hong Kong.
North Korea and other countries are using increasingly sophisticated methods to evade economic sanctions to obtain funds. Japan must take measures to stop the country being exploited as a loophole.
It is easy to open a bank account in Japan. There are about 800 million accounts in this country and it is said that there are many cases in which dormant accounts that have not been used for a certain period are sold for use by crime syndicates and organizations that commit phone fraud.
Financial institutions confirm the identity of customers when they open accounts, but follow-up checks are difficult to conduct. Even if they send letters to customers to reconfirm details such as the purpose of using an account, they say they usually do not receive a response.
Financial institutions are urged to make further efforts to confirm the identity of account holders, including making phone calls and visits. To reduce the number of dormant accounts, it will also likely be important for the government to raise customer awareness.
The Financial Services Agency, the Japanese Bankers Association and other entities have been developing a system that uses artificial intelligence to detect suspicious transactions. It is hoped that the government will offer support, as system investment is a heavy burden for small and midsize financial institutions.
Rapidly spreading smartphone payment services and cryptocurrencies such as bitcoin can also become easy targets for money laundering. However, relevant businesses have been slow in dealing with this issue. The FSA should conduct intensive inspections and provide guidance.
— The original Japanese article appeared in The Yomiuri Shimbun on Sept. 9, 2021.
