Changes in Japan's AML landscape on the horizon
At the end of last year Japan's Financial Services Agency ("FSA") released its draft of " Guidelines for Anti-Money Laundering ("AML") and Combating the Financing of Terrorism" for public consultation, which has since closed. The guidelines implement a significant shift to a risk based approach to anti-money laundering from a reporting regime which previously only required post-hoc reporting of a suspicious transaction. Although the guidelines are still at their preliminary stage, they can be seen as promoting a more proactive approach to corporate governance and comes ahead of the Financial Action Task Force ("FATF") intergovernmental meeting to be held in Japan in 2019. In conjunction with the main change in the guidelines, the FSA also released draft partial revisions to its complementary guidelines for fourteen different types of financial institutions to take into account this new risk based approach. The main draft provides a new chapter on the risk-based approach and trifurcates this into identification, evaluation and reduction of risk. An overarching theme is to ensure hat these steps are undertaken with a top-down perspective, so that risks are not left unchecked due to disaggregation of AML responsibilities to individual departments. With this in mind, the guideline presents the role of the three lines of defense in this new risk management system for financial institutions, nameley:
- the sales department/customer facing departments;
- compliance and risk management departments; and
- internal audit.
Another interesting element to the draft is the FSA's attempt to future proof the guidelines by encouraging institutions to consider the use of FinTech appropriate to their needs.
The acknowledgement of FinTech as a solution in the fight against money laundering in the FSA's guidelines has also been matched by a growing concern over its use in money laundering. Over the course of our previous updates we have reported on the increased corporate crime enforcement activity in the technology industry. Whilst unrelated to the FSA's draft release, in a recent development towards the end of last year, ten cryptocurrency exchanges in Japan (certified by the FSA) signed an agreement with Tokyo Metropolitan Police Department for "countermeasures against cybercrime" such as sharing information and cooperating with authorities during prevention and investigation measures in the area of tax avoidance and money laundering. The move comes as data released by the National Policy Agency revealed 170 cases in the six months leading up to October 2017 where cryptocurrency was used to launder money.
2018 appears to be a moving year for anti-money laundering efforts in Japan and we urge readers to watch this space.
Japan plans to introduce the right to plea bargain in June
Sources have revealed that the government is planning to introduce the right to plea bargain on 1 June 2018, putting into effect a revised law on criminal proceedings. The legal revision has been part of an overhaul in Japan's criminal proceedings and allows for prosecutors not to indict or seek prosecution for less serious charges if the suspect or defendant gives evidence or depositions against accomplices in drug, gun, fraud, embezzlement, bribery and other cases. Japanese law will only permit plea bargaining if a suspect or defendant agrees with prosecutors and when the consent from the defense lawyer is given.
Japanese supercomputer venture suspected of tax evasion
The President of a Japanese supercomputer venture, Pezy Computing, who has been arrested for allegedly defrauding the government of subsidies is now suspected of evading corporate taxes. Pezy Computing is part of the team that developed the Gyoukoku supercomputer, which was last November ranked the world’s fourth-fastest supercomputer. Motoaki Saito, president of the venture, and former executive Daisuke Suzuki were arrested last month for allegedly inflating outsourcing costs to its affiliates and evading several hundred million yen in taxes.