According to a official statement issued on 27 th June at the conclusion of the three-day 3 rd FATF Plenary meeting of FATF-XXV, “The FATF is concerned by Japan's continued failure to remedy the numerous and serious deficiencies identified in its third mutual evaluation report adopted in October 2008, despite Japan's high-level political commitment.”

The statement adds: “The most important deficiencies deal with: the incomplete criminalisation of terrorist financing; the lack of satisfactory customer due diligence requirements and other obligations in the area of preventive measures applicable to the financial and non-financial sectors; the incomplete mechanism for the freezing of terrorist assets; and the failure to ratify and fully implement the Palermo Convention.”

The FATF encourages Japan to promptly address these AML/CFT deficiencies, including through the adoption of the necessary legislation. The FATF will continue to monitor Japan's progress.

According to FATF's 3rd Mutual Evaluation Report on AML/CFT in Japan issued in October 2008, Japan is not implementing an AML/CFT risk-based approach, thus there is no provision mandating enhanced due diligence for higher risk customers, business relationships and transactions nor authorized simplified due diligence.

The report noted several gaps in the record keeping requirements: “small transactions are exempted and financial institutions are not required to keep records on the beneficiary of a transaction nor of business correspondence files and account files. No legal or regulatory provision requires financial institutions to make recorded information available to the competent authorities on a timely basis.”