Digital Money Laundering in Japan Soared in 2018

March 25, 2019

Japan’s National Police Agency (NPA) has disclosed that reports of suspicious cryptocurrency transactions in the country skyrocketed in 2018.

Data released by the NPA indicated that 7,096 cases of suspicious transactions were reported by cryptocurrency exchanges in 2018, up 961% from the previously reported figure of 669 cases over the shorter period of April to December 2017.  The number is also 20% higher than the 5,944 reported cases in the first 10 months of 2018.

Among the 7,096 suspect cases last year, some exchanges noted the use digital currencies in the drugs trade and other illegal activities. The report also indicated the use of different names and birth dates with identical ID photos or accounts being logged in from overseas locations, despite using Japanese addresses.  

In April 2017, Japan passed a law recognizing Bitcoin as a method of legal payment, while mandating the licensing of crypto exchanges and the reporting of transactions suspected to involve money laundering and drug trafficking.

The recognition of crypto as legal tender also meant the applicability of regulations governing banks and financial institutions to cryptocurrency exchange platforms. Those platforms were required to comply with strict anti-money laundering (AML) and Know-Your-Customer (KYC) requirements, along with annual audits. Other requirements included meeting the stated capital and cyber security requirements to ensure consumer protection, while still supporting financial technology innovation.

Notably, despite the sharp increase in reports, only 1.7% of the total reported suspicious activities involved cryptocurrency transactions when fiat currency was included.

The NPA said it had received 417,465 reports of suspected money laundering and other illegal transactions last year, mostly involving banks and other financial institutions.

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