Japan’s Financial Services Agency (FSA) is the main regulator of the entire country’s financial sector and is responsible for maintaining the stability of the industry. Based in Tokyo, the FSA was established in July 2000 within a department of the Prime Minister’s Office. It oversees the Japanese government’s banking, insurance, and securities and exchange operations. It is responsible for the supervision and regulation of the banking, insurance, securities and exchange sectors. The Agency is in charge of supervision, oversight and transparency of the financial system. It also supervises certified public accountants and audit oversight organizations in Japan through the Securities and Exchange Surveillance Commission. It is also responsible for protecting market participants from fraud and money laundering.

What is Japan’s FSA Function?

-The FSA has significant authority and responsibilities over Japanese banks, insurance companies and other financial institutions.

-It supervises these financial institutions to ensure that stability is maintained within the financial system and that they comply with both Japanese and international laws.

-Decides jointly with the government on the development of new financial legislation.

-Conducts audits to determine whether AML/CFT (Anti-Money Laundering and Combating the Financing of Terrorism) rules and financial legislation are being observed.

-It sets certain minimum standards on business accounting and corporate finance and establishes rules for securities trading.

-It conducts AML/CFT work with international organizations to take global regulatory harmonization one step further.

The FSA is structured to meet challenges and respond effectively to threats to financial markets.

The FSA’s management functions are allocated to three main offices:

Office of Management and Strategic Development: Responsible for developing policy strategies, preparing administrative procedures and Financial supervision of organizations.

Office of Policy and Markets: Responsible for revising and developing the market policy of the Japanese FSA and creating a new regulatory framework to manage Fintech developments.

Office of Supervision: Responsible for  day-to-day supervision of financial institutions

When a company breaches FSA regulations, the regulator has the power to restrict operations,  fines and imprisonment.

What is Japan’s Financial Service Agency’s Regulatory Approach?

Japan is among the world’s leading countries in terrorist financing and money laundering and is a member of the FATF. The FSA takes a risk-focused approach to bring all financial institutions in Japan into compliance with its AML/CFT policies, according to the 40 Recommendations and in accordance with international standards. The FSA uses special screening mechanisms for financial institutions, international sanctions, negative media and politically important persons. The FSA discussed the results of its assessment round with the FATF in 2020.

The FSA is also in a prominent position in dealing with cryptocurrencies and exchanges. Following major cryptocurrency thefts in 2018, it ordered the closure of some exchanges to change and improve regulations. Japan’s FSA provides online supervision and oversight to ensure that financial institutions comply with CFT and AML legislation. It also periodically announces the legal measures it has taken.

An Example of FSA in Action

Japan’s Financial Services Agency (FSA) has pressured exchanges to stop trading certain cryptocurrencies to prevent money laundering and curb criminal activity, according to Forbes in April 2018. It took steps to block the use of certain cryptocurrencies and ordered some exchanges to cease operations. Following a major theft at the Coincheck exchange in Tokyo, the FSA ordered the exchange to investigate the theft. After the investigations, a report was prepared with urgent measures to be taken.