Why Are Buyers Asked Where Their Money Comes From? Preparing ID and Transfer Records
Written by：SUMIMOTO Inc.Editorial Policy
On 18 October, Kyodo News reported that the Ministry of Land, Infrastructure, Transport and Tourism has drafted a revision of the “suspicious transaction” checklist used by real estate agents. Cases involving overseas companies with unclear points and crypto-asset payments are expected to be added.
This article explains why agents ask for ID and the source of funds when you buy, and which documents and records are worth preparing so you are not caught off guard. Practice varies by deal, so treat figures and procedures as rough guides.
Why do agents ask buyers for ID and the source of funds?
Under Japan’s Act on Prevention of Transfer of Criminal Proceeds, real estate agents are generally treated as “specified business operators” who must verify the identity of their counterparty and keep transaction records. Property is high in value and easy to use for moving assets, so layered checks are built into the process.
According to the reports, the current checklist is a yes/no format with examples such as large cash purchases, resale shortly after buying and signs that the true contracting party is being hidden. Being asked these questions is a routine step and does not mean you are suspected because you are a foreign national.
Numbers worth knowing (from reports and the system)
- Examples in the current checklist
- 21items
- Main categories of the list
- 5groups
- Typical record-retention period
- 7years
Number reported as listed in the ministry’s current checklist
Use of cash, concealed parties, unusual deals and so on
Set by the Act; confirm actual practice with your agent or an expert
What kinds of deals tend to look suspicious?
The table below recasts the checklist from a buyer’s point of view. Matching a single item does not by itself cause a problem; a reasonable explanation backed by documents is often enough.
What gets checked and how buyers can prepare
| Point checked | Examples | What you can prepare |
|---|---|---|
| How money is used | Large cash purchase, payment in a third party’s name | A transfer plan from your own account and balance records |
| Who the real party is | Unclear true buyer or an opaque company | ID documents; for a company, a registry extract and beneficial-owner records |
| Unusual features | Luxury property unrelated to the business, resale planned right after purchase | A short note on the purpose (living or investment) and holding plan |
| Overseas funds and crypto | Payments involving overseas companies or crypto-assets | Sending-account details and sale contracts or transaction history showing the origin |
What should foreign buyers and overseas remitters prepare?
When you send money from abroad, keep the sending account holder, amount and date in a form you can trace later. If the funds come from income or an asset sale, have supporting papers (payslips, sale contracts, statements) ready with a Japanese or English translation; this usually keeps the checks moving smoothly.
Provisions to know (please verify)
- Act on Prevention of Transfer of Criminal Proceeds, Art. 4
- Understood to require specified business operators to verify identity and related matters at the time of a transaction.
- Same Act, Art. 6
- Understood to concern creating and retaining a record of the verification for a set period.
- Same Act, Art. 8
- Understood to concern the duty to report when a transaction is judged suspicious.
How can you avoid problems in preparation?
Common gaps and fixes
✕Paid the deposit from a relative’s account and spent time explaining the source.
→Pay from an account in your own name in principle, and discuss any exception with the agent beforehand.
✕An overseas balance certificate in a foreign language could not be used.
→Attach a translation and use documents that are not too old.
✕Gave a vague answer about the purpose of purchase and the check dragged on.
→Summarise in a short note whether it is for living or investment and the expected holding period.
Pre-purchase checklist
- Prepared ID documents (residence card, passport and so on)
- Confirmed the paying account is in my own name
- Gathered papers showing the origin of funds (payslips, sale contracts and so on)
- Prepared translations of documents issued abroad
- Can explain my purpose and holding plan
- Recorded the dates, amounts and accounts of transfers
FAQ
- Q. Are checks stricter for foreign nationals?
- A. Checks generally depend on the content of the deal and the flow of funds rather than nationality alone. Overseas remittances or overseas companies can, however, lead to requests for extra documents.
- Q. What happens if an item on the checklist applies?
- A. Matching one item does not necessarily stop the deal, but the agent may report to the authorities when in doubt. Buyers are normally not told whether a report was made.
- Q. Is paying in cash a problem?
- A. Paying in cash is not illegal in itself. Large amounts, however, tend to prompt questions about the source, so having documents ready gives peace of mind.
In the SUMIMOTO Hub app, a 24-hour AI advisor explains the basic purchase flow and required documents in multiple languages. For specific requirements and practice, please also consult qualified professionals such as licensed agents, judicial scriveners or tax accountants.
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References & Sources
This article provides general information as of its publication date and is not individual legal, tax or investment advice. It was written with the help of generative AI.Editorial Policy
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