Domestic VASP Act on Prevention of Transfer of Criminal Proceeds + FATF Travel Rule Domestic Implementation (2023-)

Overview

Domestic VASPs are obligated under the Act on Prevention of Transfer of Criminal Proceeds (AML Act) to carry out customer identification, transaction monitoring, and suspicious transaction reporting. FATF Recommendation 16 (Travel Rule) was fully implemented by the 2023-06 revised AML Act enforcement, requiring KYC data transmission between sender and receiver for virtual asset transfers ≥ 10 万円 equivalent. The AML/CFT framework operates under a three-tier structure of FSA supervision + JAFIC (National Police Agency) information aggregation + JVCEA self-regulation.

4 Pillars of AML Act Obligations

1. Customer identification (KYC): Verification of customer-specific particulars (name, address, date of birth) + transaction-time confirmation (remittances > 200 万円 / transfers > 10 万円)
2. Transaction record retention: 7 years (customer identification + transaction details)
3. Suspicious transaction reporting: Filed via JAFIC (National Police Agency Criminal Proceeds Transfer Prevention Office)
4. AML framework establishment: Internal controls + staff training + annual risk assessment update

Travel Rule Domestic Implementation

• Effective date: 2023-06-01 (revised AML Act)
• Scope: Crypto asset transfers ≥ 10 万円 equivalent
• Data transmitted: Sender (name, address, account number) + recipient (name, account number)
• Technical stack: Via vendors including TRUST (TRP) / VASPnet / Sumsub / Notabene
• Domestic VASP compliance: All 27 社 are connected to VASPnet (domestic standard) or TRUST

Interoperability with Foreign Counterparts

• US → Japan: Coinbase / Kraken / Gemini etc. connect via Notabene to VASPnet
• Singapore → Japan: MAS-regulated VASPs connect in the same manner
• Unregistered foreign → Japan: Data transmission not possible → Foreign exchanges not compliant with the Travel Rule have incoming transfers rejected (domestic VASP side blocks receipt)

Risks and Challenges

• Sunrise issue: Divergence in implementation timelines across countries (US lagging at federal level; EU with MiCA 2024 full implementation)
• Non-custodial wallet problem: Difficulty with KYC for transfers to self-hosted wallets (ongoing debate at MAS / FCA)
• Privacy concerns: Risk of inferring sender’s financial position from on-chain BTC/ETH transparency combined with KYC data cross-referencing

Cross-links

• jvcea-self-regulatory-overview
• jp-vasp-regulatory-timeline
• fsa-vasp-registration-system
• jp-vasp-cold-storage-segregation-rules
• fatf-travel-rule-overview
• fatf-travel-rule-cross-border-stack
• carf-1099da-end-of-crypto-anonymity