Statement on Amendments to the Act on Prevention of Transfer of Proceeds from Crimes
The bill to amend the Act on the Prevention of Transfer of Proceeds from Crimes (the "Act") was enacted on April 27, 2011 and the amended Act will take effect as of April 1, 2013. The Financial Action Task Force evaluated Japan's implementation of the third amendments of 2006 to the Forty Recommendations. Japan was rated as non-compliant with respect to customer due diligence. The "Study Group Concerning Customer Due Diligence by Business Operators to Combat Money Laundering" proposed the amendments to the Act in response to such evaluation.
The Act was initially enacted on March 29, 2007. On March 1, 2007, the Japan Federation of Bar Associations (the "JFBA") adopted its own regulations entitled "Rules regarding the Verification of Clients' Identity and Record-Keeping" (the "Rules"). Among various obligations that are required by the Forty Recommendations, the JFBA determined to perform the duties to verify the identity of clients and to keep records, but not to report suspicious transactions. As a self-regulatory body, we are committed to regulating ourselves and not be regulated by the government. We adopted the Rules so that lawyers shall not be, knowingly or unknowingly, involved in money laundering nor be used by money launderers.
Subsequently, the Act delegated the rule-making authority with regard to lawyers to the JFBA. The Act also exempted professions from obligations to report suspicious transactions. Our members have observed the Rules and consequently have not been involved in money laundering nor been used by money launderers.
In anticipation of the implementation of the amended Act, the JFBA approved at its extraordinary members meeting held on December 7, 2012 the full amendments to the Rules. The JFBA also adopted at a meeting of the board of directors held on December 20, 2012, new regulations implementing the Rules ("Implementing Regulations").
Article 11, Paragraph 1 of the Act requires that the rules with respect to lawyers should be comparable to those of the other professions. The JFBA's amendments are to track the amendments made by the Act with regard to the other professions and to satisfy the requirements under the Act.
The amended Rules impose on our members the obligation to carefully examine if the purpose of an engagement relate to money laundering or not. If our member believes that it relates to money laundering, he or she is obliged to persuade the client to abandon the achievement of that purpose. These rules are particular to lawyers and the Act does not impose these obligations to the other business operators. In light of the role of our profession in society, we determined not only to merely verify the identity of clients but to actively avoid a transfer of criminal proceeds.
The third Forty Recommendations permitted professions to adopt a risk based approach. The fourth Forty Recommendations which were adopted in February 2012 materially reinforced the risk based approach. We anticipate that this approach will be broadly accepted in the international community. The FATF has published the risk based approach guidance for lawyers. We have incorporated this approach in the amended Rules and plan to refer to this approach in the implementation of the amended Rules.
We will provide necessary information and training to our members so that they may not be, knowingly or unknowingly, involved in money laundering nor be used by money launderers. We will continue to oppose any attempt for the government to regulate lawyers and any attempt to impose obligations to report suspicious transactions.
December 20, 2012
Japan Federation of Bar Associations