ID Verification in Japan – 10 Things You Need to Know

When it comes to Japan, some of us might not be aware of their specific ways of thinking– especially when it comes to businesses. 

In fact, they had even coined the term the Galapagos syndrome (ガラパゴス化) to refer to developments made in relative isolation from the rest of the world because of a focus on the local market. 

This means that there are products, services, and even processes that had been developed but mostly cater to the Japanese public. 

The eKYC in Japan falls under this perspective. 

As such, if you are looking to enter Japan’s eKYC, it can definitely be a tedious yet necessary process. 

That said, in this post, we will be outlining 10 of the most important things your company needs to know so you can enter Japan’s eKYC. 

What is eKYC? 

eKYC (electronic Know Your Customer) is a process by which a customer’s identity is verified electronically. This is typically done by collecting personal information such as a government-issued ID or a selfie of a customer and then using those to verify the customer’s identity through various means, such as comparing the information to a government database. 

Basically, the purpose of eKYC is to provide a secure and efficient way for businesses to verify the identity of their customers, especially during financial transactions.

Unfortunately, in a 2016 survey, 89% of corporate consumers reported having negative experiences with eKYC. As such, having a more effective eKYC process can help not just the consumers but also businesses alike.

Echoing TRUSTDOCK’s maxim an efficient eKYC system can create a ‘gateway to happiness’ for both your company and your customers.

10 Important Things to Know About eKYC in Japan 

• The legal framework: Japan has a specific legal framework for eKYC, regulated by the Financial Services Agency (FSA) and the Payment Services Act (PSA). eKYC is regulated to verify the identity of customers and prevent money laundering and terrorist financing. This framework is more complex and specific compared to other countries and requires businesses to comply with strict regulations.

• Government-issued ID: Similar to other countries, citizens and residents in Japan can use their passport or driver’s license. In addition, in Japan, they have a national ID system called “My Number;”, though adoption of the My Number card which can be used for identity verification has been relatively low, and it is therefore not a reliable single source of verification. 

• Photo ID Cards There are IDs with a photo and without a photo in Japan, and in case a user wants to use an ID without a photo, the user may be required to use more than one ID for identity verification.

• Strict data protection laws: Japan has strict data protection laws, such as the Act on the Protection of Personal Information (APPI) which requires financial institutions to protect personal data and inform customers about how their data will be used.

• Two-factor authentication: For many financial services in Japan, they use a  two-factor authentication system that requires customers to use a physical token or mobile app to generate a one-time code to confirm their identity.

• Fintech companies: Many fintech companies must comply with the same regulations as traditional financial institutions for eKYC in Japan. This includes obtaining a license from the FSA and following strict security and data protection requirements.

• Customer notification: Following the APPI, businesses must inform customers about how their personal information will be used and protected. Likewise, they should obtain their consent before collecting or using their personal data.

• Risk assessment: Following the amendment of the Act on Prevention of Transfer of Criminal Proceeds, businesses trying to serve Japanese customers must verify customer identities and conduct regular risk assessments to identify potential money laundering and terrorist financing threats. 

• KYB (Know Your Business) process: As with many other countries, Japan has a specific process called “Know Your Business” (KYB) which is to verify the identity of the company and its directors. This includes collecting information about the company’s ownership, management, and financials, and conducting background checks on the directors.

• Compliance and reporting: Businesses must have a system in place to ensure compliance with the FSA regulations and must report any suspicious activity to the FSA. They must also have regular audits and reviews of their compliance program.

Final Thoughts 

Overall, Japan has a robust and strict framework for eKYC that is different from other countries. Businesses operating in Japan must comply with strict regulations and use advanced technology to ensure the security and privacy of customers’ personal information.

While entering the Japanese eKYC space can be tedious, through TRUSTDOCK, you can create a gateway to happiness for both your company business and clients alike.