The entrance to Central Government Building No. 2, which houses the National Police Agency, is seen in this file photo taken in Tokyo in 2019. (Mainichi/Kazuo Motohashi)

       TOKYO (Kyodo) -- An intergovernmental body tasked with combating money laundering and terrorist funding on Monday urged Japan to take stronger countermeasures, pointing out that some small financial institutions have a limited understanding of the risks.

       The Financial Action Task Force also urged Japanese police and prosecutors to prioritize the investigation of serious money laundering cases and improve the rate of prosecution, prompting the government to draw up an action plan to improve countermeasures.

       The latest report by the Paris-based body was released after an on-site review it conducted in 2019 and follows its previous report on Japan in 2008.

       The FATF placed Japan in a second group requiring "enhanced follow-up," among 19 countries including the United States and China that were evaluated as having "significant deficiencies" or "making insufficient progress" and required to implement improvement measures over the next three years.

       Eight economies including Britain and Italy were categorized as part of the "regular follow-up" group, while Iceland and Turkey were placed in the worst group subject to international cooperation review, in the FATF's evaluation of 29 of 37 member countries and regions.

       With the latest evaluation, Japan set up a council to compile measures against money laundering and terrorism financing, jointly chaired by the Finance Ministry and the National Police Agency, and has drawn up a three-year action plan.

       The plan includes boosting cooperation among supervising authorities and renewing the government's risk assessment of the transfer of criminal proceeds, the ministry said.

       "Crimes such as money laundering have been getting more complicated and globalized in recent years, so Japan is required to review its countermeasures constantly based on domestic and overseas trends," Finance Minister Taro Aso said in a statement.

       "This is also essential for us to become an international financial center open to the world, as upheld in our growth strategy," Aso added.

       In the report, the FATF recognized that Japan generally "has a good understanding of the main elements of money laundering and terrorism financing risks," but referred to a low level of understanding of the risks among some financial institutions other than megabanks, as well as supervisors and law enforcement agencies.

       The report added that the nation's limited understanding of at-risk nonprofit organizations has prevented authorities from taking a targeted approach to supporting their countermeasures.

       "This has placed Japanese NPOs at risk of being unwittingly involved" in terrorist funding activity, it warned, demanding that the government monitor or supervise depending on the risks.

       The FATF was established in 1989 in response to mounting concern over money laundering, on the initiative of the Group of Seven nations.

       The release of the report for Japan was initially scheduled in August 2020 but was delayed by a year due to the coronavirus pandemic.

       Font Size S M L Print Timeline 0