Source: 2005
Released by the Bureau for International Narcotics and Law Enforcement Affairs
I. Summary
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. These 2004 figures are the same as those of 2003. During 2004, Japanese authorities seized 387 kilos of methamphetamine and over 413,000 tablets of MDMA (Ecstasy), an increase in Ecstasy seizures of 21 percent (71,640 tablets) from 2003 figures.
II. Status of Country
Japan is not a significant producer of narcotics. f Licit cultivation of opium poppies, coca plants, and cannabis for research is done on a modest scale and 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.
Japanese (GOJ) authorities unofficially estimate that 10-20 metric tons of methamphetamine are trafficked annually into Japan. This estimate is unchanged from 2003, which stated that the GOJ estimated that 2.18 million users consume 11 grams per person annually. Through October 2004, law enforcement officials seized 378 kilograms of methamphetamine. GOJ authorities believe the majority of the methamphetamine smuggled into Japan is refined and/or produced in the People's Republic of China (PRC), Taiwan, and the Philippines. Some illicit methamphetamine also probably comes from North Korea, but relative quantities are hard to determine.
Methamphetamine trafficking remains a significant source of income for Japanese organized crime. The illegal immigrant population in Japan also participates actively in drug trafficking. As in 2003, heroin imports from Southeast Asia into Japan significantly decreased this year, with 23 grams of heroin and 174 grams of opium seized through October 2004. Heroin, marijuana and hashish use continues to be significantly lower than that of other illegal drugs in the country.
Seizures of cocaine increased significantly in 2004, with 86 kilos seized through October, compared with 2.3 kilos seized in 2003. The large increase over the previous year is mainly due to two significant seizures of cocaine originating from Colombia, 44 kilos and 28 kilos respectively. The 44-kilo seizure was taken from a Panamanian-flagged tuna vessel, and the 28-kilo seizure from a Federal Express shipment.
III. Country Actions Against Drugs in 2004
Policy Initiatives. DEA Tokyo works closely with the GOJ to add synthetic drugs of abuse to Japan's list of prohibited drugs. During 2002-2003, the GOJ enacted legislation making possession, sale, and/or use of Benzylpiperazine (BZP), trifluoromethylphenylpiperazine (TFMPP), Psilocybin ("magic mushrooms"), Gamma Hydroxybutyrate (GHB), and 4-Methylthioamphetamine (4-MTA) illegal. Japanese officials are currently considering adding Ketamine, AMT, BZP, and 5-MeO-DIPT (Foxy Methoxy) to the list of prohibited drugs.
The DEA is renewing its agency-wide emphasis on money laundering investigations related to drug trafficking and will host a money laundering seminar in Tokyo in April 2005.
Accomplishments. DEA Tokyo promotes regional cooperation through the Asian Drug Enforcement Conference (ADEC) and the International Drug Enforcement Conference. DEA Tokyo continues to serve as an advisory, support and training resource to the Japan National Police Agency (NPA) in the planning and production of the annual ADEC conference, as well as several other regional seminars held annually in Japan. ADEC's primary objectives are to promote the exchange of strategic intelligence regarding international drug trafficking organizations and establish a regional network of law enforcement officials and agencies dedicated to drug enforcement efforts. In February 2004, 130 officials from 28 countries, and members of the UNODC and INTERPOL attended the 9th annual ADEC conference hosted by the NPA.
In July 2004, the Suspicious Transaction Reporting Office (STRO) of the Commercial Affairs Department, Singapore Police Force and the Japan Financial Intelligence Office (JAFIO) established a cooperative framework for the exchange of financial intelligence related to money laundering or terrorist financing. In December 2004, the JAFIO and the U.S. Financial Crimes Enforcement Network signed a similar agreement facilitating information exchange regarding suspicious transactions possibly linked to terrorist financing and/or money laundering/narcotics trafficking.
The U.S.-Japan Mutual Legal Assistance Treaty (MLAT) was signed in 2003 and ratified in 2004. The MLAT paves the way for Japan's Ministry of Justice and NPA to directly ask the U.S. Justice Department for cooperation and information and vice versa.
Law Enforcement Efforts. In August 2004, DEA Tokyo initiated a joint investigation with NPA's Drugs & Firearms Control Division, Kanagawa Prefecture Police and U.S. Naval Criminal Investigative Service to intercept multiple packages containing MDMA tablets mailed from Seattle to a U.S. military base in Japan. This international controlled delivery resulted in the arrests of two U.S. nationals and the seizure of 50,000 tablets of MDMA. The MDMA was sourced to violators in Vancouver, Canada.
Japanese authorities seized 378 (as stated above) kilograms of methamphetamine in 2004. Police counternarcotics efforts tend to focus on Japanese organized crime groups, the main smugglers and distributors of drugs. In addition to smuggling and distribution activities, Japanese law enforcement officials are paying increased attention to drug-related financial crimes. The Financial Services Agency received 18,768 reports of suspicious transactions in 2003.
Between 1992 (when the Asset Seizure Law took effect) and 1999, the NPA 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 GOJ officials being involved in drug-related corruption in Japan in 2004.
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. A mutual legal assistance treaty has been submitted to the Senate for advice and consent to ratification. Japan has signed but has not yet ratified the UN Convention on Transnational Organized Crime.
Cultivation/Production. Japan is a member of the Chemical Action Task Force (CATF) and controls 28 chemicals. 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 refine ephedrine, a chemical used to treat nasal/breathing problems. Ephedrine is also an essential ingredient in methamphetamine. The DEA Country Attaché in Japan, working closely with his Japanese counterparts, closely monitors end users of dual use precursors.
Drug Flow/Transit. With minor exceptions, all drugs illicitly trafficked into Japan are smuggled from overseas. According to the NPA, Taiwan, China, the Philippines, and North Korea are principle sources. China remains the primary source for methamphetamine seized in Japan, with major seizures of methamphetamine also coming from Taiwan and Malaysia. While not previously identified as a significant source of illicit drugs, Canada was the source country of 44.5 kilos of methamphetamine and 60 kilos of marijuana seized through October 2004. There were no confirmed drug seizures linked to North Korea in 2004, though some drugs listed as coming from China may have some connection with North Korea. While methamphetamine prices dropped significantly during the first five months of 2004, prices rose again in June and stabilized at 2003 levels.
Domestic Programs (Demand Reduction). Domestic programs focus primarily on interdiction. Drug treatment programs are small and generally run by private organizations. The Japanese Government provides narcotics-related counseling focused on drug prevention and supports the rehabilitation of addicts at prefectural centers. The Japanese Government continues to support a number of drug awareness campaigns designed to inform the public about the growing use of stimulants in Japan, especially among junior and senior high school students. The Ministry of Health and Welfare, along with prefectural governments and private organizations, continues to administer national publicity campaigns and promote drug education programs at the community level.
IV. U.S. Policy Initiatives and Programs
Policy Initiatives. U.S. goals and objectives include Strengthening enforcement cooperation, including participation in controlled deliveries and drug-related money-laundering investigations; encouraging more demand reduction programs; encouraging effective use of anticrime legislation and government agencies responsible for financial transaction oversight
The Road Ahead. DEA Tokyo will work closely with its Japanese counterparts and offer support in conducting international money laundering investigations. In addition, DEA Tokyo will continue to carry out an aggressive education program with Japanese Customs and NPA officials to foster knowledge of money laundering investigations, and their relationship to narcotics trafficking and terrorist financing.
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), often linked to Japan,s organized criminal organizations. The National Police Agency of Japan estimates the aggregate annual income from organized criminal organizations is approximately $10 billion, $3.38 billion of which is income from the trafficking of methamphetamines.
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 Laws enacted in 2004 now make sales of bank accounts illegal.
Prior to 1999, Japanese law only criminalized narcotics-related money laundering. The Anti-Drug Special Law, which took effect in July 1992, also 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 has 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 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 Japan,s organized crime groups 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 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.
An amendment to the Anti-Organized Crime Law was submitted on February 20, 2004 to the Diet (Japan,s legislature) for approval. The amendment would expand the predicate offenses for money laundering from approximately 200 individual offenses currently, to almost all offenses penalized by imprisonment, with the resulting number of predicate offenses rising to about 350 as a result.
To facilitate the exchange of information related to suspected money laundering activity, Japan,s Financial Services Agency 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 JAFIO, which analyzes them and disseminates them as appropriate. JAFIO also publishes "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 organized criminal groups and their associates.
JAFIO concluded international cooperation agreements during 2004 with Singapore,s Financial Intelligence Unit (FIU) and with FinCEN, establishing cooperative frameworks for the exchange of financial intelligence related to money laundering and terrorist financing. JAFIO already had similar agreements in place with the FIUs of the United Kingdom, Belgium, and South Korea. JAFIO received 95,315 suspicious transaction reports in 2004, more than double the number in 2003. Of these, 64,675 were disseminated to law enforcement authorities. Some 86 percent of the reports came from banks, 8.5 percent from insurance companies, 3.3 percent from the country,s large postal savings system, and 1.2 percent- from non-bank money lenders.
The Financial Services Agency (FSA) and Ministry of Finance are working on measures, expected to be promulgated in 2006, to enable authorities to closely monitor domestic and international money remittances. The Cabinet office published its counterterrorist action plan on December 10, 2004. The plan states that Japan intends to fully implement certain Financial Action Task Force Special Recommendations on Terrorist Financing covering these issues by the end of June 2006. Specific measures will be announced this year.
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.
In April 2002, Parliament enacted the Law on Customer Identification and Retention of Records on Transactions with Customers by Financial Institutions (a "know your customer" law). The law reinforced and codified the customer identification and record keeping procedures that banks had practiced on their own for years. The Foreign Exchange and Foreign Trade Law was also revised so that financial institutions are required to make positive customer identification for both domestic transactions and transfers abroad in amounts of more than two million yen (approximately $19,230). Banks and financial institutions are required to maintain customer identification records for seven years.
Japanese financial institutions have, when requested, cooperated with law enforcement agencies, including U.S. and other foreign government agencies investigating financial crimes related to narcotics. In 2003, the United States and Japan concluded a Mutual Legal Assistance Treaty (MLAT). Although Japan has not adopted "due diligence" or "banker negligence" laws to make individual bankers responsible if their institutions launder money, there are administrative guidelines in existence that require due diligence. Japanese law protects bankers and other financial institution employees who cooperate with law enforcement entities.
In a major 2004 money laundering case, a Japanese banker who had worked for Credit Suisse in Hong Kong was arrested in Hong Kong in June and accused of laundering 4.6 billion yen ($42 million) for a leading criminal organization. In September, the Financial Services Agency (FSA) cited Citibank for failure to comply with laws designed to prevent money laundering (such as failing to properly screen clients). In February, the FSA disciplined Standard Chartered Bank for failing to properly check customer identities and for violating the obligation to report suspicious transactions.
The Foreign Exchange and Foreign Trade 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 $9,615), 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 $1,923) 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 either to stem from criminal proceeds or 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 for the Suppression of the Financing of Terrorism on October 30, 2001, and became a party on June 11, 2002. After September 11, 2001, Japan froze accounts related to the Taliban. Since then, Japan has regularly searched for and designated for asset freeze any accounts that might be linked to the entities and individuals on the UNSCR 1267 Sanctions Committee,s consolidated list.
Underground banking systems operate widely in Japan, 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 $4 billion) since the beginning of 1992. About 120 billion yen ($1.1 billion) have been illegally transferred to China and Korea, and about 90 billion yen ($865 million) to Peru. In November 2004, the Diet approved legislation banning the sale of bank accounts, in a bid to prevent the use of purchased accounts for fraud or money laundering.
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 and the UN Transnational Organized Crime Convention.. Japan is a member of the Financial Action Task Force. JAFIO joined the Egmont Group of FIUs in 2000. Japan has also taken a leadership role as a member in 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.
In terms of international information exchange on money laundering, as of December 2003 JAFIO had received 45 requests for information from foreign FIUs, and had replied with information to 38 requests, according to statistics from JAFIO. Japan has actively supported anti-money laundering efforts in developing countries in Asia. For example, in 2003 and 2004 Japan provided assistance to the Philippines and to Indonesia for the development of their anti-money laundering framework.
The Government of 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, Japan should stringently enforce the Anti-Organized Crime Law. Japan should also 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.