Source: 2003
Released by the Bureau for International Narcotics and Law Enforcement Affairs
Although Japan is not a major producer of drugs, it is one of the largest methamphetamine markets in Asia, with approximately 600,000 addicts and 2.18 million casual users nationwide. During 2003, Japanese authorities seized 447 kilograms of methamphetamine and over 341,360 tablets of MDMA (Ecstasy), an increase of nearly 100 percent over 2002 figures.
Japan is not a significant producer of narcotics. Very modest scale licit cultivation of opium poppies, coca plants, and cannabis for research is strictly monitored and controlled by the Ministry of Health, Labor and Welfare. Methamphetamine is Japan's most widely abused drug. Approximately 90 percent of all drug arrests in Japan involve this substance. In spite of this significant methamphetamine abuse problem, there is no evidence of clandestine manufacturing in Japan. Ephedrine, the primary precursor for the manufacture of methamphetamine in Asia, is strictly controlled under Japanese law.
Authorities continue to estimate methamphetamine trafficking into Japan to be between 10-20 metric tons per year. (Based on 2.18 million users consuming 11 grams per person annually.) Through October 2003, law enforcement officials seized 447 kilograms of methamphetamine. Authorities believe the majority of the methamphetamine smuggled into Japan is refined and/or produced in the People's Republic of China (PRC), Taiwan, the Philippines, and North Korea.
Methamphetamine trafficking remains a significant source of income for Japanese organized crime. The illegal immigrant population in Japan also participates actively in drug trafficking. Importation of heroin from Southeast Asia through Japan decreased significantly in 2003, though seizures of marijuana and hashish increased nearly 100 percent and 75 percent respectively. Heroin, marijuana and hashish use remains significantly lower than use of other illegal drugs in the country.
Policy Initiatives. DEA Tokyo worked closely throughout the year with Japanese officials to add several synthetic drugs of abuse to the list of prohibited drugs in Japan. In addition, DEA-Japanese cooperation also succeeded in closing a loophole in Japanese law, which had permitted the legal sale in Japan of other controlled substances, including a hallucinogen present in certain species of mushrooms.
Accomplishments. On August 5, 2003, U.S. Attorney General John Ashcroft and Japan's Justice Minister Mayumi Moriyama signed the U.S.-Japan Mutual Legal Assistance Treaty (MLAT) in Washington D.C. Ratification of the MLAT is now before the U.S. Senate and the Japanese Diet. The MLAT will pave the way for Japan's Justice Ministry and National Police Agency to directly ask the U.S. Justice Department for cooperation and information and vice versa. Presently, Japanese law stipulates that the Foreign Ministry serves as the intermediary to seek Japanese assistance in investigating criminal cases.
Law Enforcement Efforts. Japanese authorities seized 447 kilograms of methamphetamine in the first eleven months of 2003. Police counternarcotics efforts tend to focus on Japanese organized crime groups, the main smugglers and distributors of drugs. Police and prosecutors are hesitant to pursue cases in which the likelihood of a conviction is uncertain. In addition to smuggling and distribution activities, law enforcement officials are starting to pay increased attention to drug-related financial crimes. The Financial Services Agency received 13,725 reports of suspicious transactions in 2002.
Between 1992, when the Asset Seizure Law took effect, and 1999, the NPA has seized a total of about $7.23 million in drug proceeds in 82 investigations. However, the NPA and Customs advise that financial seizure statistics are no longer maintained. Japanese authorities seize money primarily as trial evidence. After conviction, judges may levy fines, impose tax penalties, or order the outright confiscation of narcotics related proceeds, but statistics on these actions are not maintained.
Corruption. There were no reported cases of drug-related corruption in Japan in 2003.
Agreements and Treaties. Japan is a party to the 1988 UN Drug Convention, the 1961 UN Single Convention on Narcotic Drugs, the 1972 Protocol amending the Single Convention, and the 1971 UN Convention on Psychotropic Substances. An extradition treaty and a customs mutual assistance agreement are in force between the United States and Japan. As noted above, in 2003 the United States and Japan concluded a mutual legal assistance treaty.
Cultivation/Production. Although Japan is not a significant cultivator or manufacturer of controlled substances, it is a major producer of 60 types of dual-use precursor chemicals. For example, Japan is one of only a handful of countries that produce ephedrine, a chemical used to treat nasal/breathing problems. Ephedrine is also an essential ingredient in methamphetamine. Japan is a member of the Chemical Action Task Force (CATF) and controls 28 chemicals. The DEA Country Attache in Japan, working closely with his Japanese counterparts, closely monitors end users of precursors.
Drug Flow/Transit. With all-but-insignificant exceptions, all drugs illicitly trafficked in island-nation Japan are smuggled from overseas. According to the National Police Agency, the PRC, the Philippines, Taiwan and North Korea are principle sources. 58.2 percent of this year's methamphetamine seizures are thought to have come from China; 33.7 percent from Hong Kong, and 8 percent from unknown sources. Illicit methamphetamine supplies in Japan appear to be down, as prices have increased sharply (25 percent) from the last quarter of 2003, and purity of street methamphetamine is also down sharply, according to Japanese National Police.
Domestic Programs (Demand Reduction). Domestic programs focus primarily on interdiction. Drug treatment programs are small and are generally run by private organizations. The Japanese Government provides narcotics-related counseling designed to prevent drug use and support the rehabilitation of addicts at prefectural health centers and mental health and welfare Centers. Prefectural governments also employ part-time narcotics counselors. The Japanese Government continued to support a number of drug awareness campaigns, including a five-year campaign drawn up in 1998 by the Headquarters for the Promotion of Measures to Prevent Drug Abuse, an office headed by the Prime Minister. This program is designed to inform the public about the growing use of stimulants in Japan, especially among junior and senior high school students. Under this plan, the Ministry of Health and Welfare, along with prefectural governments and a variety of private organizations, continued to administer national publicity campaigns using ads that run on television, radio and electronic scoreboards used at major sporting events. The plan also promotes drug education programs at the community level, including a program that organizes talks between students and former narcotics officers and another poster campaign that targets students attending high school baseball games.
Policy Initiatives. U.S. goals and objectives include:
The Road Ahead. The United States and Japan will continue to explore new cooperative counternarcotics initiatives.
Japan is an important world financial center, and as such is at major risk for money laundering. The principal sources of laundered funds are narcotics trafficking and financial crimes (illicit gambling, extortion, abuse of legitimate corporate activities, and all types of property-related crimes) as well as the proceeds from violent crimes, mostly linked to Japan's criminal organizations, e.g., the Boryokudan. The National Policy Agency of Japan estimates the aggregate annual income from the Boryokudan's illegal activities is approximately $10 billion, $3.38 billion of which is derived from income from the trafficking of methamphetamine. U.S. law enforcement reports that drug-related money laundering investigations initiated in the United States periodically show a link between drug-related money laundering activities in the United States and bank accounts in Japan. The number of Internet-related money laundering cases is increasing. In some cases, criminal proceeds were concealed in bank accounts obtained through the Internet market.
Prior to 1999, Japanese law only criminalized narcotics-related money laundering. The Anti-Drug Special Law, which took effect in July 1992, criminalizes drug-related money laundering, mandates suspicious transaction reports for the illicit proceeds of drug offenses, and authorizes controlled drug deliveries. This legislation also creates a system to confiscate illegal profits gained through drug crimes. The seizure provisions apply to tangible and intangible assets, direct illegal profit, substitute assets, and criminally derived property that have been commingled with legitimate assets. The limited scope of the law and the burden required of law enforcement to prove a direct link between money and assets to specific drug activity severely limits the law's effectiveness. As a result, Japanese police and prosecutors have undertaken few investigations and prosecutions of suspected money laundering. Many Japanese officials in the law enforcement community, including Japanese Customs, believe that the Boryokudan have been exploiting Japan's financial institutions.
Pursuant to the 1999 Anti-Organized Crime Law, which came into effect in February 2000, Japan expanded its money laundering law beyond narcotics trafficking to include money laundering predicates such as murder, aggravated assault, extortion, theft, fraud, and kidnapping. The new law also extends the confiscation laws to include the additional money laundering predicate offenses and value-based forfeitures. It also authorizes electronic surveillance of organized crime members and enhances the suspicious transaction reporting system.
To facilitate exchange of information related to suspected money laundering activity, the Anti-Organized Crime Law established the Japan Financial Intelligence Office (JAFIO) on February 1, 2000, as Japan's financial intelligence unit. Financial institutions in Japan report suspicious transactions to the JAFIO, which analyzes them and disseminates them as appropriate. JAFIO also issued "Examples of Typical Suspicious Transactions" as a guideline for financial institutions. The guideline was revised in March 2002 to add more specific suspicious transaction cases, such as transactions carried out by Boryokudan and their associates. Additionally, JAFIO held meetings with financial institutions in various regions in October and November 2003 to introduce current money laundering methods and trends, with the intent of improving the quality of suspicious transaction reports. JAFIO continued in 2003 to try to improve its collection and analysis of relevant data from banks by encouraging feedback from law enforcement authorities. In addition, in January 2003, the Law on Customer Identification and Retention of Records on Transactions by Financial Institutions took effect, which reinforced and codified the customer identification and record keeping procedures which banks had practiced on their own for years.
The Financial Services Agency (FSA) supervises public-sector financial institutions and securities transactions. The FSA classifies and analyzes information on suspicious transactions reported by financial institutions, and provides law enforcement authorities with information relevant to their investigation. Japanese banks and financial institutions are required by law to record and report the identity of customers engaged in large currency transactions. There are no secrecy laws that prevent disclosure of client and ownership information to bank supervisors and law enforcement authorities. Under the 1998 Foreign Exchange and Foreign Trade Control Law, banks and other financial institutions had to report transfers abroad of thirty million yen (approximately $275,229) or more. In April 2002, Parliament enacted the Law on Customer Identification and Retention of Records on Transactions with Customers by Financial Institutions, and revised the Foreign Exchange and Foreign Trade Law, so that financial institutions, as of January 2003, are required to make positive customer identification for both domestic transactions and transfers abroad in amounts of more than two million yen (approximately $18,439.) Banks and financial institutions are also required to maintain records for seven years.
Japanese financial institutions have cooperated, when requested, with law enforcement agencies, including U.S. and other foreign government agencies investigating financial crimes related to narcotics. In 2003, the U.S. and Japan concluded a Mutual Legal Assistance Treaty (MLAT). Japan has not adopted "due diligence" or "banker negligence" laws that make individual bankers responsible if their institutions launder money, but there are administrative guidelines in existence that require due diligence. The law does, however, protect bankers and other financial institution employees who cooperate with law enforcement entities.
The 1998 Foreign Exchange and Foreign Trade Control Law requires travelers entering and departing Japan to report physically transported currency and monetary instruments (including securities, and gold weighing over one kilogram) exceeding one million yen (approximately $9,174), or its equivalent in foreign currency, to customs authorities. Failure to submit a report, or submitting a false or fraudulent one, can result in a fine of up to 200,000 yen (approximately $1,835) or six months' imprisonment. However, the reporting requirement is enforced only sporadically.
In response to the events of September 11, 2001, the FSA used the anti-money laundering framework provided in the Anti-Organized Crime Law to require financial institutions to report transactions where funds appeared to both stem from criminal proceeds, and to be linked to individuals and/or entities suspected to have relations with terrorist activities. The 2002 Act on Punishment of Financing of Offenses of Public Intimidation added terrorist financing to the list of predicate offenses for money laundering and provided for the freezing of terrorism-related assets. It was enacted in July 2002. Japan signed the UN International Convention on the Suppression of the Financing of Terrorism on October 30, 2001, and accepted it on June 11, 2002. After September 11, 2001, Japan froze accounts related to the Taliban. Since then, Japan has regularly frozen assets and accounts linked to terrorists listed by the UN and others.
Underground banking systems operate widely, especially in immigrant communities. Such systems violate the Banking Law and the Foreign Exchange Law. The police have investigated 35 underground banking cases in which foreign groups transferred illicit proceeds to foreign countries. The aggregate value of such transfers has amounted to 420 billion yen (approximately $3.5 billion) since the beginning of 1992. About 120 billion yen ($1 billion) have been illegally transferred to China and Korea, and about 90 billion yen ($750 million) to Peru.
Japan has not enacted laws that allow for sharing of seized narcotics assets with other countries. However, the Japanese Government cooperates with efforts by the United States and other countries to trace and seize assets, and makes use of tips on the flow of drug-derived assets from foreign law enforcement efforts to trace funds and seize bank accounts.
Japan is a party to the 1988 UN Drug Convention. In December 2000, Japan signed the UN Convention against Transnational Organized Crime (UNTOC), which came into force internationally in September 2003. The bills for ratification of the UNTOC are scheduled to be submitted to the Diet in 2004. Japan is a member of the Financial Action Task Force. The JAFIO joined the Egmont Group of FIUs in 2000. Japan is also a member of the Asia/Pacific Group on Money Laundering. In 2002, Japan's FSA and the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission signed a nonbinding Statement of Intent (SOI) concerning cooperation and the exchange of information related to securities law violations. The SOI assists in the investigation and prosecution of securities and futures fraud, predicate offenses to money laundering. Japan has actively supported anti-money laundering efforts in developing countries in Asia. For example, in 2003 Japan provided assistance to the Philippines and to Indonesia for the development of their anti-money laundering framework, and is expected to continue to do so through 2004.
Japan has many legal tools and agencies in place to successfully detect, investigate, and combat money laundering. In order to strengthen its anti-money laundering regime, the Government of Japan should stringently enforce the Anti-Organized Crime Law. Japan should enact penalties for noncompliance with the Foreign Exchange and Foreign Trade Law, adopt measures to share seized assets with foreign governments, and enact banker "due diligence" provisions.