Japan told to do more to combat money laundering and terrorist financing

Japan has failed to address deficiencies in its measures to halt money laundering and terrorist financing, and should step up its efforts to do so, an international watchdog said.

The measures should include "necessary legislation", the Financial Action Task Force (FATF), which is sponsored by the Organisation for Economic Co-operation and Development, said. The biggest deficiencies include the incomplete criminalisation of terrorist financing and an incomplete mechanism for freezing terrorist assets, it said, without being more specific.

"The FATF is concerned by Japan's continued failure to remedy the numerous and serious deficiencies," the task force said. "The FATF will continue to monitor Japan's progress."

The caution comes more than five years after the FATF and the Asia-Pacific Group on Money Laundering produced a study of Japan's anti-money-laundering measures and steps to counter terrorist financing. That report flagged concerns including the low rate of money-laundering prosecutions and the low number of inspections of non-bank financial institutions.

"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," it said.

The FATF, an intergovernmental body established in 1989 and backed by 34 countries and jurisdictions including the United States, Germany and France, said one of Japan's biggest deficiencies was an "incomplete criminalisation of terrorist financing".