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Japan: Amendment to the act on prevention of transfer of criminal proceeds

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On November 30 2018, the Act on Prevention of Transfer of Criminal Proceeds was amended in order to introduce new methods of verifying the identity of customers. The Act aims to prevent services provided by specified business operators under the Act, such as financial institutions, from being used for money laundering by criminal organisations.

Overview of the Act before amendment

Under the Act, specified business operators are required to verify the identity of customers with whom they engage in transactions. For example, banks are required to verify the identity of customers before opening accounts for them.

The methods of verification are also prescribed in the Act. The method of verifying the identity of customers in the case of a non-face-to-face transaction was the receipt and confirmation of certain verification documents, such as a driver's licence or passport, by mail, and sending transaction-related documents to the address of the customers by registered mail, and so on. The problem with this method was that specified business operators had to bear the costs of printing and mailing. In addition, given the development of fintech business and the increase in online transactions, there was a hope that more efficient methods of verification that were better suited to fintech businesses would be introduced.

Newly introduced methods of verification – online verification

Through the revision of the Act, four new methods of online identity verification were introduced for the circumstances mentioned above: (i) the receipt of facial photos and verification document images; (ii) the receipt of facial photos and IC chip storage information; (iii) the receipt of verification document images or IC chip storage information and enquiries at the banks at which the customers hold accounts, and so on; and, (iv) the receipt of verification document images or IC chip storage information and the transfer of a specified amount of money to the customers' accounts.

By using these newly introduced methods, the verification of customer identity can be completed by way of the internet alone; for instance, when opening bank accounts via the internet. In particular, methods (i) and (ii) above are likely to be very convenient, since the verification process can be completed immediately via the relevant application ('application' here includes apps for smart phones).


Fumiaki Ohashi