Foreign Exchange Act Screening: Cross-Border Transaction Obligations for Japanese Banks and Remittance Providers

The Core ¥100,000 Screening Obligation

Article 17-3 of FEFTA and related cabinet orders require Japanese financial institutions to conduct sanctions screening on overseas remittances above ¥100,000. At the point of each qualifying transfer, the institution must confirm:

• The remittance originator is not a designated person or entity under FEFTA or applicable UNSC resolutions.
• The remittance beneficiary is not a designated person or entity.
• The transaction does not involve controlled goods, services, or technology that require authorisation under FEFTA’s export control provisions.

The ¥100,000 threshold applies per transaction. There is no annual cumulative threshold, and there is no aggregation provision — each qualifying transaction triggers the obligation independently of the customer’s total transaction volume over any given period.

Transaction-Level vs Relationship-Level Screening

One of the most common FEFTA compliance gaps at mid-market institutions is the conflation of relationship-level screening (conducted at customer onboarding when the correspondent banking or customer relationship is established) with the transaction-level screening obligation that FEFTA creates.

Screening a customer’s counterparties at the time a correspondent banking relationship is established does not satisfy the obligation to screen each qualifying cross-border transaction as it occurs. The reason is straightforward: sanctions designations change. A beneficiary bank or individual that was undesignated when the relationship was established may be designated subsequently. Unless each qualifying transaction is screened at execution against current list versions, the institution carries compliance risk on every transaction processed between the designation date and the next scheduled re-screening.

FEFTA compliance requires one of the following architectures:

• Real-time transaction-point screening: every qualifying overseas remittance is screened against current list versions at the moment of execution, before the transfer is released.
• Continuous monitoring with immediate transaction halt: the customer book is continuously monitored against real-time list updates, and any match triggers an immediate review process that includes evaluation of pending transactions.

OFAC Secondary Sanctions: A Parallel Obligation

FEFTA screening operates alongside — not as a substitute for — OFAC compliance obligations for Japanese institutions with US dollar correspondent banking relationships. OFAC’s secondary sanctions programmes — Global Magnitsky, sectoral sanctions, and country-specific designations — can apply to transactions processed through US correspondent accounts even where neither the Japanese institution nor its customer is a US person.

The legal exposure arises when a Japanese institution processes a USD-denominated cross-border transaction through a US correspondent bank, where the originator or beneficiary is on the OFAC SDN list. The US correspondent bank faces primary OFAC exposure; the Japanese institution faces secondary sanctions risk through its correspondent relationship.

Japanese institutions processing USD transactions should maintain OFAC screening as an independent parallel obligation, with documented screening records for each qualifying transaction covering both FEFTA and OFAC list coverage.

Funds Transfer Service Providers: Enhanced Obligations

Registered funds transfer service providers (資金移動業者) under the Payment Services Act carry both the FEFTA cross-border screening obligations described above and the Travel Rule requirement under FATF Recommendation 16. For qualifying transfers, funds transfer providers must:

• Screen each transaction against applicable sanctions lists under FEFTA before execution.
• Collect, verify, and transmit originator and beneficiary information (full name, account number, and — for international transfers — address or identification number) with the transfer, in compliance with the Travel Rule.
• Maintain records of all originator and beneficiary information transmitted for five years.

Meeting both obligations simultaneously requires integrated systems — the FEFTA screening, Travel Rule data collection, and record retention cannot each run as separate manual workflows without creating gaps and inconsistencies.

Documentation Requirements

Each FEFTA-mandated screening event must be documented with the following:

• The date and time of the screening.
• The specific lists screened and their version or update date at the time of screening.
• The result of the screening — clear result, or alert with disposition notes including the reviewing officer’s identity and the basis for the clearance decision.
• The approving officer’s identity for transactions where a near-match alert was reviewed and cleared.

This documentation must be retained for the period required by FEFTA — typically five years — and be retrievable and presentable to the FSA on request within a reasonable timeframe. Institutions relying on manual documentation of individual transactions face both operational risk and evidence quality limitations as transaction volumes grow.

Frequently Asked Questions

This article was accurate at the time of publication in June 2026 and is intended for general informational purposes only. It does not constitute legal, regulatory or compliance advice. Organisations should seek qualified professional guidance in relation to their specific obligations.