Japan to enforce FAFT rules to prevent cryptos from being used for money laundering
(Kitco News) - Authorities in Japan are preparing to enact new rules on money transfers in a bid to prevent the use of cryptocurrencies for money laundering, according to a report from the local news agency Nikkei.
The move is set to take place on Oct. 3, when an amendment to the Act on Prevention of Transfer of Criminal Proceeds will be revised to add crypto to the travel rules on money transfers.
The new rule change will require exchange operators to collect customer information for transactions involving cryptocurrencies and stablecoins and share that information with other exchange operators.
Once implemented, these changes will bring Japan into alignment with Financial Action Task Force (FATF) recommendations. FAFT is an intergovernmental money laundering and terrorist financing watchdog.
The same changes will also be added to the Foreign Exchange and Foreign Trade Act and the International Terrorist Asset-Freezing Act and will go into effect in May 2023.
The new amendment lays out the ability for regulators to issue “administrative guidance and corrective orders” to exchanges that break the new rules, including doling out criminal penalties for violations of the corrective orders. It will also incorporate recommendations the FAFT updated in 2021 regarding virtual asset service providers into Japanese law.
On the global front, FAFT has an uphill battle ahead of it as a report in April indicated that just over half of the countries surveyed by the FATF had adequate Combating the Financing of Terrorism (CFT) and Anti-Money Laundering (AML) laws and regulations.
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For Japan’s part, efforts to regulate cryptos have intensified in recent months, with the parliament passing a law to limit the issuance of stablecoins by non-bank institutions in June, while the Ministry of Economy, Trade and Industry opened a Web3 Policy Office to foster the Web3 business environment in July.
The country’s tax authority, the Financial Services Agency (FSA), is focused on three major policy perspectives for financial regulators to consider concerning crypto-assets: financial stability, user protection, and AML/CFT.
According to a paper by Tomoko Amaya, Vice Minister for International Affairs at the FSA, “a regulatory framework has been developed from all three policy perspectives. Most recently, amendments of relevant laws have been enacted and will enter into force by June 2023 to provide a regulatory framework for digital-money type stablecoins.”