Japan is leveraging multi-layered public-private partnerships to tackle sophisticated financial crime ahead of its 2028 FATF review.

Japan's Financial Services Agency (FSA) recently published its annual report, "Initiatives and Challenges in Combating Money Laundering and Financial Crimes (June 2025)".

The report confirms that with the March 2024 deadline for foundational AML/CFT readiness now passed, the focus for financial institutions has shifted from building frameworks to proving their effectiveness.

Underpinning this new phase is a critical theme woven throughout the report: the deepening and diversification of Japan's Public-Private Partnerships (PPPs).

As the country looks ahead to its fifth FATF Mutual Evaluation, scheduled for August 2028, its collaborative model is evolving from a centralised liaison group into a multi-layered ecosystem designed to tackle increasingly sophisticated financial crime.

An analysis of the report reveals several key pillars of this enhanced collaborative framework.

Formalised public-private dialogue

The cornerstone of Japan's PPP efforts remains the “Public-Private Partnership Meeting for Advancing Anti-Money Laundering Measures”, established in April 2018.

This forum convenes senior officials from the FSA, the National Police Agency (NPA), the Ministry of Finance, the Ministry of Justice, and the Bank of Japan (BOJ), alongside major financial industry associations.

It serves as the primary channel facilitate the exchange of information on AML initiatives between the public and private sectors, with the Japan Bankers Association (JBA) serving as the secretariat.

During these sessions, relevant ministries provide updates on national AML policies including inspections and supervision, National Risk Assessments (NRA), and the status of discussions at the FATF or other international conferences.

The meeting's scope has over time expanded to reflect the changing financial landscape. In 2024, participation widened to include the Japan Payment Service Association and the Japan Virtual and Crypto assets Exchange Association (JVCEA), ensuring that insights from the digital payments and crypto sectors and their progress in implementing AML measures are included in the meetings.

Continuous feedback loop

This high-level engagement is complemented by more frequent, operational discussions. The FSA holds regular study sessions and opinion exchange meetings with industry associations, some of which have distributed materials summarising the content of these sessions, including Q&As and other reference documents for their members.

Additionally, certain associations have offered support to their members in collaboration with the FSA, conducting independent surveys on compliance with guidelines and supporting members that have fallen behind.

The FSA has also engaged in continuous outreach through seminars and events organised by industry associations and private companies, with the goal of enhancing understanding of AML measures and strengthening institutional frameworks.

The FSA has actively addressed a wide range of topics, including follow-up actions after the FATF's Fourth Mutual Evaluation of Japan, national AML measures, countermeasures against specific types of fraud, and the risk management systems required within financial institutions.

These initiatives create regular touchpoints and a continuous feedback loop to address emerging issues in financial crime and AML, while also ensuring that policy is informed by on-the-ground realities.

Collaboration is also becoming more localised. Since 2023, regional forums have been established to facilitate information sharing on AML measures among neighbouring financial institutions.

The FSA actively supports and participates in these forums, to convey government perspectives, facilitate the exchange of viewpoints, and enable smaller institutions to share best practices and common challenges in a trusted environment.

Catalysing innovation and information sharing

Japan's PPP model has also enhanced focus on catalysing technology adoption and building robust information-sharing mechanisms.

To accelerate technological uplift, the government has established a subsidy programme, the "Project to Promote Advanced Measures against Money Laundering".

This initiative provides funding to support the development and implementation of systems, particularly those using AI, that can be utilised by multiple financial institutions to enhance transaction monitoring and reduce false positives.

In April 2024, after solicitation of subsidy recipients and an external expert review, subsidies were granted to two selected operators, marking a tangible government investment in shared technological infrastructure.

A landmark information-sharing framework is also under development. The FSA’s new report highlights that the JBA is creating a mechanism to share information on fraudulent accounts among its member banks.

This initiative aims to enable financial institutions to more effectively detect mule accounts, accounts held by the same criminal entity, and accomplice accounts across the banking system.

While legal and practical details are still being finalised with relevant authorities, this represents a significant step towards real-time, cross-institutional collaboration to disrupt fraud networks.

The FSA has indicated that the future ambition is to expand this framework beyond banks to include other deposit-taking institutions and even crypto-asset exchanges.

Public awareness and customer engagement

The final layer of the PPP strategy involves a unified approach to public communication. To address the challenges financial institutions face with ongoing customer due diligence (CDD), a cross-industry publicity campaign was launched.

Led by the JBA and involving other banking associations, the NPA, and the FSA, the campaign uses unified messaging across multiple media channels to explain to the public why they are being asked to update their information, thereby fostering cooperation and reducing friction on the frontline.

This collaborative public outreach extends to specific crime risks. The FSA, NPA, and the Immigration Services Agency (ISA) have jointly created multi-language leaflets for foreign residents, warning them about the risks of account misuse and explaining that transaction restrictions may be applied to accounts after their period of stay has expired, aiming to curb the use of such accounts in criminal activities.

As Japan moves towards its next FATF evaluation, these multi-layered PPP initiatives will be crucial. They demonstrate a commitment not just to having rules in place, but to building a resilient and adaptive ecosystem where government and industry work in concert to protect the integrity of the financial system.

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By Hiroshi Ozaki, Executive Advisor & Senior Manager for KPMG AZSA LLC. This article was written based on the author's personal views and knowledge and does not represent the official position or opinion of any company or organisation.