More than 80 Japanese banks have declared interest in joining JPMorgan Chase’s blockchain-based payment information network, the Interbank Information Network (IIN), making the country’s banking sector possibly the largest national player in the system powered by Quorum, a permissioned blockchain.
The Japanese banking industry’s access to the network comes amid long-standing accusations of Japan’s unwillingness to implement severe anti-money laundering (AML) measures, reports Bloomberg.
Daizaburo Sanai, an executive director at JPMorgan Chase, said that Japanese banks could benefit from joining the initiative, as the network makes the screening of cash recipients “faster and more efficient”.
The U.S. investment banking giant launched the IIN as a pilot project in 2017, and it “is the firm’s first scalable, peer-to-peer network powered by blockchain technology. From minimizing friction in the cross-border payments process to enabling payments to reach beneficiaries faster and with fewer steps, IIN serves to address the longstanding challenges of interbank information–sharing.”
The network currently comprises some 365 lenders worldwide, according to JPMorgan Chase.
The Financial Action Task Force (FATF), an inter-governmental entity set up in 1989 to set standards and promote effective implementation of measures to combat money laundering, terrorist financing and related threats to the global financial system, has long called on Japan to implement improved AML and counter terrorist financing regulations.
Upon the release of its Mutual Evaluation Report of Japan in 2008, the FATF said in a statement it was “concerned by Japan’s continued failure to remedy the numerous and serious deficiencies … despite Japan’s high-level political commitment.” Some of the key identified deficiencies included the country’s incomplete criminalization of terrorist financing, the lack of satisfactory customer due diligence requirements, and the incomplete mechanism for the freezing of terrorist assets, among others.
After its June 2014 plenary meeting, the FATF again called “on Japan to enact adequate anti-money laundering and counter terrorist financing legislation,” according to a statement. Amid international pressure, in November 2014, the Japanese parliament passed a law to freeze financial and real estate deals by terrorist organizations and individuals involved in terrorist activities.