TOKYO, Japan — According to Nikkei, Japan’s anti-money laundering efforts have received a failing grade from an international monitor, giving Tokyo another another incentive to tear down the country’s compartmentalized bureaucracy. The Financial Action Task Force resolved to place Japan under enhanced follow-up at its plenary meeting late last month, a designation for nations with “severe inadequacies” or “insufficient progress,” according to a source familiar with the issue. Following a review in late 2019, the evaluation will be released in August. Japan has made progress since its last inspection in 2008, according to the organisation, with “steps to prevent money laundering and terrorist financing producing benefits.” However, a lack of cooperation among government departments has hampered laws and regulations that may more effectively address the problem. The FATF, which has 39 member nations and regions, publishes what are essentially legally binding recommendations on anti-money laundering and anti-terrorism financing measures. The task force was formed at the Group of Seven summit in Paris in 1989. The task committee is pushing Japan to improve oversight of financial institutions’ efforts to combat money laundering, and is reportedly calling for greater administrative fines and harsher consequences for those who break the law. Financial institutions continue to encounter hurdles with ongoing due diligence, which involves monitoring customers and their transactions for possible problems, as well as understanding of money laundering threats in industries like mobile money transfer services. In response to this latest assessment, Tokyo intends to form a money laundering task force. It will be overseen by the Cabinet Secretariat, but other government agencies, such as the Financial Services Agency and the Justice Ministry, will be involved. Japan also intends to introduce legislation to the Japanese parliament next year that will inflict harsher sanctions. Money laundering efforts need the help of a wide range of government entities, and Japan’s bureaucracy has traditionally failed to coordinate efficiently. The Justice Ministry is in charge of enforcing anti-terrorist financing legislation. The National Police Agency is in charge of customer due diligence requirements, while the Cabinet Office is in control of nonprofits, which might be used to transfer money to criminal organizations. Japan was under pressure to enact stricter rules following the FATF’s poor 2008 evaluation, but the process was slowed by a lack of coordination across agencies. In 2014, the task force released an unprecedented statement expressing concern over Japan’s “continuing failure to fix the numerous and critical shortcomings” in the report. The divisions between government departments had afflicted Tokyo for years, and they resurfaced during the coronavirus pandemic. The spread of the virus was hampered by a lack of communication between local governments and central agencies such as the health ministry. Prime Minister Yoshihide Suga’s administration has pledged to tear down these barriers, and is already taking moves in that direction with plans for a new digital agency and a children’s agency, both of which will operate outside of traditional ministry boundaries. Similar actions will be required to restore worldwide confidence in Japan’s anti-money laundering efforts./n
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