Kavan Choksi- Cryptocurrency Transfer Legislation in Japan Targets Money Laundering

The Government of Japan will launch remitted rules next spring that will be targeted to cub criminals from deploying cryptocurrency exchanges for laundering money, as per Nikkei. There will be revisions made to The Act on Prevention of Transfer of Criminal Proceeds where the customer information between the two exchange operators will be shared. This move is intended to track money transfers by individuals engaged in criminal or illegal activities. 

Kavan Choksi throws light on the amendment of the Act 

Business and finance expert, Kavan Choksi, states that the draft amendment to the Act has been submitted to the extraordinary Diet Session that took place on the 3rd of October this year. This bill has added cryptocurrencies to the rules of money transfer, also known as travel rules, expected to be implemented in May 2023. 

Recommendations by The Financial Action Task Force or the FATF 

The Financial Action Task Force, known as the FATF in short, is a global organization that closely examines measures for anti-money laundering. It recommended nations should adopt the above rule in 2019, and nations like Singapore, the USA, Germany, and many other countries have already incorporated this legislation. The EU is scheduled to follow in their footsteps soon. 

Salient features of the amendment 

The amendment to the Act will make it mandatory for cryptocurrency exchanges to give the information of the customer, including the name and residential address, when transferring cryptocurrency to the other business. This legislation has the objective of determining where and when criminals share cryptocurrency. 

Non-compliance with this law will invite corrective orders and administrative guidance. Those exchange operators who will break or violate the law will be subjected to criminal penalties under their local jurisdiction. 

The above legislation will also be applicable to stablecoins- this is a type of cryptocurrency with its value linked to any legal tender. The distribution of these crypto coins will be subjected to a system for registration that is going to commence next spring. This is the same time when the amended Fund Settlement Act, which was passed during the ordinary session of the Diet this year, will take effect. 

Japan and the system of cryptocurrency 

In anticipation that the use of cryptocurrencies will spread extensively in Japan, its government will implement a more comprehensive monitoring system for this asset class. Business and financial management specialist Kavan Choksi adds cash transactions that take place between banks are traced and recorded by The Society for Worldwide Interbank Financial Telecommunications or SWIFT for international money transfers and the Zengin System for money transfers occurring domestically. In both of the above cases, the information of the customer should be recorded. 

In addition to the above, there will be a revision at the same time to The Act on Prevention of Transfer of Criminal Proceeds and The International Terrorist Asset-Freezing Act. All of these Acts pertain to money laundering to prevent criminal activities, and the amendments will be done to all three of them at the same time. 

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