Source: 2006
Released by the Bureau for International Narcotics and Law Enforcement Affairs
I. Summary
Japan is not a significant producer of narcotics, but it is target country for traffickers in a wide variety of narcotics. Methamphetamine ("meth") is Japan's most widely abused drug. MDMA (ecstasy) is of growing concern in Japan; several large seizures occurred in 2004 and ecstasy is now readily available in Tokyo nightclubs. Heroin and cocaine are also available in Japan, but they are relatively unpopular. The Japanese legal system discourages proactive investigative techniques for pursuing drug traffickers; consequently, Japanese law enforcement is forced to be primarily reactive in their investigations. Despite legal and bureaucratic restrictions, Japanese law enforcement is emerging as a prominent partner with United States and international law enforcement agencies in pursuit of large-scale international drug trafficking organizations (DTOs). Furthermore, Japan has taken a leadership role within the Asia-Pacific region by hosting training and seminars. DEA Tokyo acts as an advisory, support and training resource to Japanese law enforcement agencies, and conducts joint multinational investigations with its Japanese partners. Japan is a party to the 1988 U N Drug Convention.
II. Status of Country
Japan is not a significant producer of narcotics. 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, but there is no evidence of domestic clandestine manufacturing. GOJ authorities believe the majority of methamphetamine smuggled into Japan is refined and/or produced in the People's Republic of China (PRC), North Korea, Taiwan, Indonesia and the Philippines. Recently, seizures of methamphetamine coming from the U.S. have been made at Japan's international airports. Canada emerged as a significant source of methamphetamine and marijuana in 2004. Methamphetamine trafficking remains a significant source of income for Japanese organized crime. Approximately 80 percent of all drug arrests in Japan involve methamphetamine. The National Police Agency (NPA) estimates there are 600,000 methamphetamine addicts, and between one and three million casual users nationwide. Although not a producer of methamphetamine, Japan is one of the largest markets for methamphetamine in Asia. Government of Japan (GOJ) authorities unofficially estimate that between ten and twenty metric tons of this substance is trafficked annually into Japan.
III. Country Actions Against Drugs in 2005
Policy Initiatives. DEA Tokyo has worked closely with the GOJ to add synthetic drugs of abuse to Japan's list of prohibited drugs. In 2005, the GOJ banned 5- MeO-DIPT ("foxy methoxy") and Alpha-methyltryptamine ("AMT"). Since 2002, legislation has made illegal the possession, sale, and/or use of Benzylpiperazine ("BZP"), trifluoromethylphenylpiperazine ("TFMPP"), Psilocybin ("magic mushrooms"), Gamma Hydroxybutyrate ("GHB"), and 4- Methylthioamphetamine ("4-MTA"). Japanese officials are currently in the process of adding ketamine to the list of prohibited drugs.
Compared to past years, Japanese law enforcement has made greater attempts to be proactive in its approach to drug law enforcement.
Law Enforcement Efforts. Police counternarcotics efforts tend to focus on Japanese organized crime and foreigner operated DTOs, the main smugglers and distributors of drugs. In August 2004, DEA Tokyo initiated a joint investigation with NPA's Drugs & Firearms Control Division, the Kanagawa Prefecture Police, and U.S. Naval Criminal Investigative Service (NCIS) to intercept multiple packages containing MDMA ecstasy tablets mailed from Seattle to a U.S. military base in Japan. This resulted in the arrests of two U.S. nationals and the seizure of 50,000 tablets of MDMA, which was sourced to violators in Vancouver, Canada.
Despite restrictive and cumbersome laws against the proactive use of informants, undercover operations, and telephone intercepts, Japan's Ministry of Health, Labor and Welfare's Narcotics Control Department conducted an extensive undercover operation between January and July 2005 that resulted in the arrests of 60 local drug peddlers. Overall, drug-related arrests (January-June, 2005) increased 6.9 percent over the same time frame last year. Through September 2005, Japanese authorities have seized approximately 126 kilograms of methamphetamine, compared to the 612 kilograms seized in 2004.
The popularity of ecstasy continued to grow. It is readily available in Tokyo's nightclubs. Through September 2005, approximately 350,000 MDMA tablets were seized. MDMA seizures this year are on pace to exceed the 414,768 seized in 2004. Heroin imports from Southeast Asia remain low; only 32 grams of heroin and 1,579 grams of opium were seized through September 2005. Heroin, opium, and cannabis use continues to be significantly lower than that of other illegal drugs in the country. However, the growing number of arrests involving marijuana and hashish indicates the increasing popularity of these substances. Through September 2005, approximately 253 kilograms of marijuana and approximately 158 kilograms of hashish have been seized in Japan. Cocaine seizures remain low, with approximately 2.7 kilograms seized through September 2005. This amount is much lower than the anomalous 86 kilograms seized in 2004, and slightly higher than the 2.3 kilograms seized in 2003.
Corruption. As a matter of government policy, the GOJ does not encourage or facilitate the illicit production or distribution of narcotics, psychotropic drugs, controlled substances, or the laundering of proceeds from illegal drug transactions.
Agreements and Treaties. Japan is a party to the 1988 UN Drug Convention, the 1961 UN Single Convention as amended by its 1972 Protocol, 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. Japan has signed but has not yet ratified the UN Convention on Transnational Organized Crime and the UN Convention Against Corruption.
The U.S.-Japan Mutual Legal Assistance Treaty (MLAT) was signed in 2003 but is not yet in force. The MLAT will allow Japan's Ministry of Justice to share information and cooperate with the U.S. Department of Justice in connection with investigations, prosecutions and other proceedings in criminal matters.
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 refine ephedrine, a chemical used to treat nasal/breathing problems. Ephedrine is also an essential ingredient in methamphetamine. DEA Tokyo works closely with its Japanese counterparts to monitor end users of dual use precursors.
Drug Flow/Transit. With few exceptions, all drugs illicitly trafficked into Japan are smuggled from overseas. According to the NPA Taiwan, China, the Philippines, Canada, the U.S. and North Korea are principal sources.
Domestic Programs (Demand Reduction). Drug treatment programs are small and generally run by private organizations. GOJ provides narcotics-related counseling focused on drug prevention and supports the rehabilitation of addicts at prefectural (regional) 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 the country, especially among junior and senior high school students. The Ministry of Health and Welfare, along with prefectural governments and private organizations, continues to run national publicity campaigns and to promote drug education programs at the community level.
IV. U.S. Policy Initiatives and Programs
Policy Initiatives. U.S. goals and objectives include strengthening law enforcement cooperation related to controlled deliveries and drug-related money-laundering investigations, encouraging more demand reduction programs, encouraging effective use of existing anticrime legislation and available investigative tools against drug traffickers, and encouraging the effective use of government agencies responsible for financial transaction oversight.
The Road Ahead. DEA Tokyo will work closely with its Japanese counterparts to offer support in conducting investigations on international drug trafficking, money laundering, and other crimes. DEA will continue to pursue an aggressive education and information-sharing program with Japanese law enforcement agencies to foster knowledge of money laundering investigations, and their relationship to narcotics trafficking and terrorist financing.
Japan is a large and important world financial center. Although the Japanese government continues to strengthen legal institutions to permit more effective enforcement of financial transaction laws, Japan still faces substantial risk of money laundering by organized crime and other domestic and international criminal elements. The principal sources of laundered funds are narcotics trafficking and financial crimes (illicit gambling, loan-sharking, extortion, abuse of legitimate corporate activities, internet fraud schemes, 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 methamphetamine.
U.S. law enforcement investigations 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 an Internet market. Laws enacted in 2004 now make online sales of bank accounts illegal.
The Financial Services Agency (FSA) and Ministry of Finance are working on measures, expected to be promulgated in 2006, to enable authorities to more closely monitor domestic and international money remittances. In a related move, the Cabinet office published a counterterrorist action plan on December 10, 2004 that states Japan's intention to fully implement certain Financial Action Task Force Special Recommendations on Terrorist Financing by the end of June 2006. Specific measures will be announced this year.
On November 17, 2005, the Japanese Government's (GOJ) headquarters for the Promotion of Measures Against Transnational Organized Crime and Other Relative Issues and the headquarters for International Terrorism agreed that relevant ministries would submit a bill to the 2007 ordinary session of the Diet to enhance compliance with the revised FATF Forty Recommendations and the FATF Nine Special Recommendations on Terrorist Financing.
Drug-related money laundering was first criminalized under The Anti-Drug Special Law that took effect in July 1992. This law also mandates the filing of suspicious transaction reports for suspected proceeds of drug offenses, and authorizes controlled drug deliveries. The 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 narrow scope of the Anti-Drug Special 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 taking advantage of this limitation to launder money.
Japan expanded its money laundering law beyond narcotics trafficking to include money laundering predicates such as murder, aggravated assault, extortion, theft, fraud, and kidnapping when it passed the 1999 Anti-Organized Crime Law, which took effect in February 2000. 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 for approval, and remains under consideration. The amendment would expand the predicate offenses for money laundering from approximately 200 offenses to nearly 350 offenses, with almost all offenses punishable by imprisonment.
Japan's 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. 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.
To facilitate the exchange of information related to suspected money laundering activity, the FSA established the Japan Financial Intelligence Office (JAFIO) on February 1, 2000, as Japan's financial intelligence unit. Financial institutions in Japan forward suspicious transaction reports (STRs) to JAFIO, which analyzes and disseminates STRs as appropriate. At the end of 2005, the GOJ announced plans to transfer JAFIO from the FSA to the National Police Agency, possibly in April 2007.
In 2005, JAFIO received 98,935 STRs, up slightly from the 95,315 STRs received in 2004. Of these, JAFIO disseminated 66,812 STRs to law enforcement authorities in 2005. Some 86 percent of the reports were submitted by banks, 7 percent by credit cooperatives, 4.6 percent from the country's large postal savings system, 1.2 percent from non-bank money lenders, and almost none from insurance companies.
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. In terms of international information exchange on money laundering, in 2004, JAFIO received 75 requests for information from foreign FIUs and provided responses to 70 of the requests.
Japanese financial institutions have 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 legally responsible if their institutions launder money, there are administrative guidelines that require due diligence. Japanese law protects bankers and other financial institution employees who cooperate with law enforcement entities.
In April 2002, the Diet 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 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.
In 2004, the FSA cited Citibank Japan's failure to properly screen clients under anti-money laundering mandates as one of a list of problems that caused the FSA to shut down Citibank Japan's private banking unit banking unit. In February 2004, 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.
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 has regularly searched for and designated for asset freeze any accounts that might be linked to all the suspected terrorists and terrorist organizations listed on the UN 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 has signed but not ratified the UN Transnational Organized Crime Convention. Japan is a member of the Financial Action Task Force. JAFIO became a member of 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 January 2006 the FSA and the U.S. SEC and CFTC signed an amendment to their SOI to include financial derivatives.
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. The GOJ should also become a party to the UN Transnational Organized Crime Convention.