Japan joined the Global Forum in 2009. Japan underwent its Second Round of EOIR Peer Review in 2018 (Japan’s 2018 Report),1 which assessed its legal and regulatory framework in force as at 24 April 2017 and its practical implementation, including in respect of EOI requests received and sent during the review period from 1 April 2014 to 31 March 2017. Japan received an overall rating of Largely Compliant and the individual Elements were rated as follows:
Enhanced Monitoring Report on the Implementation of the Standard on Transparency and Exchange of Information on Request 2025
Report
Table of contents
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Japan
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A.1 |
A.2 |
A.3 |
B.1 |
B.2 |
C.1 |
C.2 |
C.3 |
C.4 |
C.5 |
Overall |
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Determinations |
i.p.b. |
i.p. |
i.p. |
i.p. |
i.p. |
i.p. |
i.p. |
i.p. |
i.p. |
n.a. |
LC |
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Ratings |
PC |
C |
LC |
C |
C |
C |
C |
C |
C |
C |
Status of implementation of recommendations issued in the peer review report
Japan received three in-box recommendations in relation to Elements A.1 and A.3.
This monitoring report assesses the actions taken by Japan to address the recommendations issued in its EOIR Peer Review Report and the peer input received for the monitoring period 2023-2024.
The report concludes that one recommendation is “considered provisionally addressed in the context of the monitoring process, subject to detailed validation” and two recommendations are “in the process of being addressed” and advises on actions required.
Element A.1: Availability of ownership and identity information
1. Scope of entities for which beneficial ownership information is available
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Recommendation (A.1, framework) |
Japan should take further measures to ensure that beneficial owners of all companies and partnerships are identified in line with the standard. |
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Underlying factor |
In Japan, although some beneficial ownership information is available under the tax laws, the availability of beneficial ownership information is mainly based on the AML/CFT legislation, which obliges financial institutions to carry out customer due diligence (CDD) procedures to ensure that the beneficial ownership information on their customers is accurate and up to date. However, while stock companies and LLPs [Limited Liability Partnerships] must have a bank account with a local bank or local branch of a foreign bank at the time of incorporation, they do not have the legal obligation to maintain that local bank account during their lifetime. In addition, judicial scriveners, certified public accountants and certified tax accountants, although AML-obligated, are exempt from the obligation of identifying and maintaining the beneficial ownership information on their clients. Accordingly, it is not ascertained that beneficial ownership information on companies and partnerships is required to be maintained in Japan in all cases. (see paragraphs 52, 53, 57 and 83 of the Japan’s 2018 Report for more information) |
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Summary of actions reported |
Since January 2022, Japan operates the “Beneficial Ownership of Legal Persons List System” as part of which the Commercial Registry Office stores beneficial ownership lists of stock companies and can issue copies with certifying statements to them. A private-public study group worked on improvements to the operation and convenience of the system in 2024. Japan amended the Prevention of Transfer of Criminal Proceeds Act in December 2022, extending the obligation to identify beneficial owners of clients at the time of transactions to judicial scriveners, certified public accountants and certified tax accountants. These measures were included in the Anti-Money Laundering guidelines for specific professional groups, and professional supervisory bodies have published related checklists and supporting materials. In practice, almost 90% of corporate tax returns are filed through a certified tax accountant, even in years where the relevant entity made no profit. All domestic companies are subject to corporation tax. Within the scope of providing those services, certified tax accountants are obliged to identify the beneficial owners of their clients and maintain such information. Japan has a National AML/CFT/CPF Action Plan for financial years 2024-2026 which requires ministries to take action on improving the availability of beneficial ownership information, including through enhanced use and operation of the beneficial owner list system and improved due diligence measures of AML-obliged persons. |
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Conclusion |
The amendment of the Criminal Proceeds Act extended beneficial ownership identification duties to professionals which were previously not subject to this obligation and there is a high level of engagement with certified tax accountants which has potentially expanded the scope of coverage of beneficial ownership requirements. However, there is still no obligation to continuously engage an AML-obliged person and the definition of beneficial ownership is not fully in line with the standard. There is a new “Beneficial Ownership of Legal Persons List System” overseen by the company registrar. It is not sufficient for ensuring availability of beneficial ownership information for all relevant entities and arrangements, as (i) the system applies only to stock companies, including special limited liability companies, (ii) it is voluntary, covering only a small portion of them, and (iii) its definition of beneficial ownership is not in line with the standard. Japan has made some progress to address the recommendation. However, the steps taken do not sufficiently demonstrate material progress despite the elapse of more than three years since the last peer review. Hence, Japan should submit a schedule for completion of steps to address the recommendation and an update on its progress made to address the recommendation by 31 March 2026. |
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Status determined |
In the process of being addressed |
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Actions required |
Japan should submit a schedule for completion of steps to address the recommendation and an update on its progress made to address the recommendation by 31 March 2026. In particular, Japan should –
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2. Oversight and enforcement of new customer due diligence rules for AML-obliged persons
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Recommendation (A.1, practice) |
Japan should monitor the effective implementation of the new CDD [customer due diligence] rules by AML-obligated persons, notably by ensuring that adequate oversight and enforcement activities are carried out. |
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Underlying factor |
Prior to 1 October 2016, the definition of beneficial owner(s) of legal entities and arrangements under the Customer Due Diligence (CDD) requirements allowed for a legal entity or arrangement to be a beneficial owner, which was not in line with the standard. With effect from 1 October 2016, Japan introduced amendments to the CDD obligations, which introduced, amongst others, a definition of beneficial owner(s) of legal entities and arrangements in line with the standard to a large extent. The Financial Services Agency amended the Supervisory Guidelines in July 2016 in accordance with the amendments of the Prevention of Transfer of Criminal Proceeds Act. In addition, due to the short period of time since the full application of the new rules, the adequacy of the oversight and enforcement in practice could not be fully assessed. (see paragraphs 61-63, 71-72 and 156 of the Japan’s 2018 Report for more information) |
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Summary of actions reported |
The relevant authorities’ Anti-Money Laundering guidelines include clear supervisory expectations on risk assessments and preventive measures to be taken by AML-obliged persons. All financial institutions, except a limited few that pose minimal risks, are subject to annual off-site monitoring of their compliance with AML obligations by the Financial Services Agency, which is complemented by risk-based on-site inspections. Between July 2022 and June 2023, the agency conducted 195 on-site inspections (out of 2 026 financial institutions subject to off-site monitoring), issued 143 administrative orders requiring reports about improvement of AML compliance and 2 enforceable orders. Between July 2023 and June 2024, the agency carried out 125 on-site inspections (out of 2 055 financial institutions subject to off-site monitoring), resulting in 56 administrative orders and 1 enforceable order. On-site inspections consist of a review of financial institutions’ reported actions and supporting documentation on their compliance with all customer due diligence requirements stipulated in the AML/CFT Guidelines. If deficiencies are identified, the Financial Services Agency issues the report order to financial institutions and financial institutions must submit a cause analysis, corrective measures and timelines for implementation, which the Financial Services Agency follows up on. There is an almost 100% rate of financial institutions reporting to have completed the actions required by the AML/CFT Guidelines, including addressing deficiencies identified by the Financial Services Agency. The Financial Services Agency follows up on and verifies this status of completion through inspections on a risk basis. Enforceable orders were applied in 2024 in two cases related to failures of beneficial ownership identification and record keeping. By March 2026, Japan is planning to put in place a risk-based supervision and inspection system for non-financial AML-obliged persons. |
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Conclusion |
Japan has made progress to address the recommendation. Regular monitoring and enforcement actions with regards to financial institutions’ due diligence duties have been reported and administrative and enforceable orders have been issued. The supervisory and enforcement system for other AML-obliged persons, including those newly subject to beneficial ownership identification obligations, is in the process of being established. Japan should report further progress in the next self-assessment. |
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Status determined |
In the process of being addressed |
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Actions required |
In its next self-assessment in 2028, Japan should –
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Element A.3: Availability of banking information
3. Oversight and enforcement of new customer due diligence rules for banks
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Recommendation (A.3, practice) |
Japan should monitor the effective implementation of the new CDD [customer due diligence] rules by banks, notably by ensuring that adequate oversight and enforcement activities are carried out. |
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Underlying factor |
Prior to 1 October 2016, the definition of beneficial owner(s) of legal entities and arrangements under the Customer Due Diligence (CDD) requirements allowed for a legal entity or arrangement to be a beneficial owner, which was not in line with the standard. With effect from 1 October 2016, Japan amended the definition of beneficial owner(s) of legal entities and arrangements in line with the standard to a large extent. The Financial Services Agency amended the Supervisory Guidelines in July 2016 in accordance with the amendments of the Prevention of Transfer of Criminal Proceeds Act. In addition, due to the short period of time since the full application of the new rules, the adequacy of the oversight and enforcement in practice could not be fully assessed. (see paragraphs 121, 139 and 147-155 of the Japan’s 2018 Report for more information) |
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Summary of actions reported |
In addition to the general supervisory and monitoring actions mentioned under Recommendation 2 above, the Financial Services Agency conducts ongoing supervision of Global Systematically Important Banks and high-risk large banks, including permanent off-site monitoring and frequent meetings. The agency conducted on-site inspections of 41 banks between July 2022 and June 2023 and of 28 banks between July 2023 and June 2024, representing between 15% to 22% of banks. |
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Conclusion |
Japan has taken actions to address the recommendation. The Financial Services Agency conducts regular off- and on-site monitoring of banks’ due diligence actions, including checks of supporting documentation and follow-up on corrective actions. There is an almost 100% rate of banks reporting to have completed the actions required by the AML/CFT Guidelines, including addressing deficiencies identified by the Financial Services Agency. The Financial Services Agency follows up on and verifies this reported status of completion through inspections on a risk basis. |
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Status determined |
Considered provisionally addressed in the context of the monitoring process, subject to detailed validation |
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Actions required |
No immediate action required. |
EOIR experience
Over the monitoring period, Japan received 147 requests and sent 1 485 requests. France, Viet Nam and the Netherlands were the top three partners in respect of incoming requests. China; Hong Kong, China; and Korea were the key partners in respect of outgoing requests. Japan reported providing full and final responses to all the received requests not subsequently withdrawn and indicated no pending requests.
Eleven members provided peer input on Japan. Peers reported general satisfaction in respect of their EOIR experience with Japan.
New developments having a bearing on the EOIR standard
No recent developments that could have a bearing on the EOIR standard (other than those reported to address recommendations) have been reported by Japan or have otherwise come to light.
Next steps
Japan should continue taking actions towards implementing the standard effectively.
The following next steps are expected from Japan:
For the recommendation where lack of material progress has been identified for more than three years since the last review, Japan should submit to the PRMG - i) a schedule for completion of steps to address the recommendation and ii) an update, including details on the progress of such recommendation by 31 March 2026
Recommendation 1, on the scope of entities for which beneficial ownership information is available (Element A.1).
Submit its next self-assessment in 2028 under the second round of enhanced monitoring.
See Chapter 1 (Scope and methodology), section on “PRMG decisions – Statuses determined and actions required”, which explains the next steps expected on recommendations that are “considered provisionally addressed in the context of the monitoring process, subject to detailed validation”.
Views/response of the monitored jurisdiction
Japan would like to express its sincere gratitude to the Secretariat for their hard work and professionalism throughout the enhanced monitoring process. Japan is also grateful to all members of the Peer Review and Monitoring Group for their valuable input and comments on Japan’s enhanced monitoring report and for their positive recognition of Japan’s progress since the baseline review.
Japan agrees with the contents of the report. Japan fully understands the importance of making robust progress on all recommendations. Japan looks forward to reporting material progress in the next reporting.
Japan reiterates its commitment to enhancing international tax transparency and strengthening cooperation with other jurisdictions.
Note
Copy link to Note← 1. OECD (2018), Global Forum on Transparency and Exchange of Information for Tax Purposes: Japan 2018 (Second Round): Peer Review Report on the Exchange of Information on Request, Global Forum on Transparency and Exchange of Information for Tax Purposes, OECD Publishing, Paris, https://doi.org/10.1787/9789264302778-en.