Japan

Last Updated: 14/10/2014


CENTRAL AUTHORITY FOR REPORTING

Japan Financial Intelligence Centre (“JAFIC”).

The function of the Financial Intelligence Unit (FIU) under the Act on the Prevention of Transfer of Criminal Proceeds (Act No. 22 of 2007, as amended; the“Act”) is performed by the JAFIC within the National Police Agency, under the supervision of the National Public Safety Commission.  Suspicious transaction reports are filed with the National Public Safety Commission through the relevant administrative agencies, and the JAFIC provides law enforcement agencies with information or the results of its analysis if it deems that the information will contribute to their criminal investigations.


OTHER ANTI-MONEY LAUNDERING REGULATOR(S) 

Japan Federation of Bar Associations (“JFBA”).

Under Article 11 of the Act, the JFBA is responsible for making specific AML regulations applicable to lawyers.


ARE LAWYERS COVERED BY ANTI- MONEY LAUNDERING LEGISLATION?

Yes. The Act regulates "Specified Business Operators", which include lawyers (bengoshi) and foreign legal consultants (gaikokuho jimu bengoshi).  However, Article 11 of the Act authorises the JFBA to make rules applicable to lawyers and foreign legal consultants.


LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.

1.         Laws Applicable to Money Laundering

Money laundering is criminalised under the following two statutes:

(i)         Law concerning Special Provisions for the Narcotics and Psychotropic Control Law, etc., and Other Matters for the Prevention of Activities Encouraging Illicit Conducts and Other Activities Involving Controlled Substances through International Cooperation” (compilation of various existing and drug related laws, the “Anti-Drug Special Provisions Law”); and,

(ii)         Act on the Punishment of Organized Crime, Control of Crime Proceeds and Other Matters (the “Act on the Punishment of Organized Crime”), which applies to the offences listed in the annex, irrespective of whether they arise in relation to organized crime.

These laws apply to all persons including lawyers.
 

2.    Preventive Measures

(iii)        The Act on the Prevention of Transfer of Criminal Proceedsregulates Specified Business Operatorsincluding lawyers.  However, Article 11 of the Act authorizes the JFBA to promulgate rules applicable to lawyers.

(iv)        The Rules Concerning Client Identity Verification and Record Preservation (Rules of the JFBA No. 95; the “Rules”)set the framework of the preventive measures to be taken by lawyers and foreign legal consultants.

(v)       The Regulations Concerning Client Identity Verification and Record Preservation (Regulations of the JFBA No. 154: the “Regulations”) set out details of the requirements for verification of clients’ identity and record keeping to be undertaken by lawyers and foreign legal consultants


ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

Any lawyer practicing in Japan must be registered with the JFBA as a lawyer (bengoshi) or a foreign legal consultant (gaikokuho jimu bengoshi). Preventive measures applicable to lawyers under the Rules and Regulations are applicable only to lawyers (bengoshi) and foreign legal consultants (gaikokuho jimu bengoshi) registered with the JFBA.


LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.

The JFBA published Japanese translations of the following FATF documents as reference materials for its members:


IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

Yes, the JFBA is responsible for supervision of its members.


DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.

1.   Verification of Clients’ Identity

Lawyers are required to identify and verify the identification data of their clients (if the client is a natural person, by his/her name, address and date of birth, and if the customer is a legal person, by its name and location of head office or main office), based on “documents prepared by the government or other authorities,” if administering a client's account in a financial institution or other assets in excess of JPY 2 million "in connection with handling legal matters." In particular, customer identification is required in the following situations:

  • buying and selling of real estate;
  • investing for the purpose of establishing or managing a company, or contributing similar funds;
  • establishment of a legal person or a similar entity;
  • conclusion of a trust contract; or,
  • buying and selling of a company (Article 2 of the Regulation).

(Article 2 of the Rules)
 

In addition, lawyers are required to identify and verify the identification data in the following circumstances:

  • clients are suspected of pretending to be the client whose identify was verified;
  • clients who are suspected of having falsified matters relating to verification; and
  • acts with clients who reside or are located in Iran and North Korea or other acts involving transfer of assets to parties residing or located in these countries.

(Article 3 of the Rules, Article 5 of the Regulations)
 

2.    Purpose of Instructions

Lawyers are required to consider carefully, when accepting a mandate from clients, whether the purpose of the instruction relates to a transfer of crime proceeds (Article 6 of the Rules). If a lawyer discovers, after accepting an instruction, that the purpose of the instruction relates to a transfer of crime proceeds, the lawyer must explain to the client that it is illegal and persuade the client to abandon the transfer (Article 7 of the Rules).


DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

Yes, lawyers are required to examine the purposes of the instruction (Articles 6 and 7 of the Rules) in addition to the verification of clients’ identities. In this regard, lawyers should regard the “attributes of the client, business relationship with the client and the details of the instruction.”


ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

Lawyers are subject to strict requirements for verification of a client’s identity under the following circumstances:

  • clients are suspected of pretending to be the client whose identify was verified;
  • clients who are suspected of having falsified matters relating to verification; and
  • acts with clients who reside or are located in Iran and North Korea or other acts involving transfer of assets to parties residing or located in these countries.

(Article 3 of the Rules)

In addition to the verification of clients’ identities, lawyers are required to examine the purposes of the instruction (Articles 6 and 7 of the Rules) and should regard, amongst other matters, the “attributes of the client” for these purposes.


ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAINTYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

Yes, the requirements for verification of identity of a client are exempt if the client is:

(1) Government;

(2) Local government;

(3) Incorporated administrative agencies;

(4) Juridical persons in which a national or local government has contributed more than 50% of capital, funds, or other money;

(5) Foreign governments, foreign governmental institutions, foreign local governments, foreign central banks or international institutions of which Japan is a member; and

(6) Entities that are listed or registered on markets that trade securities.

(Article 4, Paragraph 3, Item 3 of the Rules and Article 7 of the Regulations).

The requirements to examine the purposes of the instruction (Articles 6 and 7 of the Rules) are not exempt irrespective of the types of clients.


ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

Yes, if a client is introduced by another business operator, and the other business operator conducts identity verification in accordance with laws and regulations, a lawyer may rely on the information obtained from the other business operator.  However, lawyers should at any time be able to obtain materials in order to verify the identity used by the other business operator, and verify the business operator has taken proper measures in order to verify identity in accordance with laws and regulations. (Article 4, Paragraph 2, Item 1 of the Regulations).


WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

A lawyer is under no circumstances obliged to report suspicious transactions.


DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

Not applicable.


DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

If a lawyer reports a suspicious transaction to the authority without the consent of the client, the lawyer may be subject to the following liabilities:

  • Article 134 of the Penal Code provides that a lawyer who divulges confidential information of another person without cause should be penalised by imprisonment of not more than six months and/or monetary fine of not more than 100,000 yen.
  • Article 23 of the Attorney Act and Article 23 of the Basic Rules on the Duties of Practicing Attorneys requires lawyers to maintain the confidentiality of clients’ information. A breach of the duty may be subject to disciplinary actions.

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

Not applicable.


IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

No. Lawyers shall not divulge any confidential information of clients to the authority.


DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.

Lawyers may not accept an instruction if it is considered to be related to a transfer of criminal proceeds (Article 6, Paragraph 2 of the Rules).

Additionally, if a lawyer discovers, after accepting an instruction, that the instructions relates to a transfer of criminal proceeds, the lawyer must explain that it is illegal and endeavour to persuade the client to abandon the transfer. If the client is not persuaded, the lawyer should withdraw from the engagement (Article 7, Paragraph 2 of the Rules).


ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.

There are no particular requirements to monitor clients.  However, lawyers are required to examine the purposes of an instruction (Articles 6 and 7 of the Rules) each time he or she receives new instruction from existing clients.


DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.

Not applicable.


HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTIONS?

There are two cases reported:

1.         Saitama District Court judgment dated 26 October 2006

(a)        Case

Operators of illegal gambling deposited proceeds from the illegal gambling in a bank account of its manager. In order to avoid confiscation of the deposit, the manager created a disguised debt to a third party, accepted a judgment order issued by a local court to pay a certain sum to a third party and caused the third party to obtain another court order to attach the deposit. A lawyer was accused of assisting the manager to develop and implement the plan so that the proceeds from illegal gambling would be transferred to that third party.

(b)        Judgment

The lawyer was found guilty.

 

2.         Osaka District Court judgment dated 7 February 2007

(a)        Case

Article 27 of the Practicing Lawyers Law prohibits a lawyer (L) from allowing a non lawyer (N) to use its name to engage in the unauthorised practice of law.  The lawyer was found guilty of a breach of Article 27.  N transferred proceeds from the unauthorised practice of law to L.  L was also prosecuted on the grounds that receipt of the proceeds was in breach of the Act on the Punishment of Organised Crime, which prohibits knowing receipt of criminal proceeds.

(b)        Judgment

The lawyer was found not guilty of the accusation of receipt of criminal proceeds. A person who committed a predicate crime should not be considered as receiving crime proceeds for the purposes of a money laundering crime.  The lawyer in this case was found guilty of committing a breach of the Practicing Attorneys Law, which is the predicate crime.  Therefore, the lawyer was not criminally liable as a money launderer.


HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

The Financial Action Task Force and the Asia-Pacific Group on Money Laundering jointly assessed Japan’s anti-money laundering and counter terrorist financing measures. The evaluation was conducted in March 2008 and was released by the FATF on 17 November 2008.

The main findings of the report are as follows:

General Observations:

  • Given the current drug consumption and organised crime problems (notorious predicate offences to anti-money laundering and terrorist financing operations) in Japan, the FATF expressed concerns over the low numbers of convictions;and
     
  • The FATF stated that the offence of terrorist financing should be expanded to include funds collected by non-terrorists, irrespective of whether those funds were collected for the sole purpose of committing terrorist acts.

Lawyer Specific Observations:

The FATF strongly recommended that Japan fully implement the client due diligence obligations and the requirement to establish adequate internal controls. At present, the client due diligence requirements for Designated Non-Financial Businesses and Professions, including lawyers, only addresses client identification requirements.

The JFBA has amended its rules to implement the FATF’s comments on client due diligence requirements. However, the JFBA will not implement obligations to report suspicious transactions.


 

Information provided by:

Tatsu Katayama
Partner,
Anderson Mori & Tomotsune
Tel: +81-3-6888-1042
E-mail: tatsu.katayama@amt-law.com
 

SOURCES:

1.         Japan Financial Intelligence Centre

2.         Japan Federation of Bar Associations