Japan has furthered enforcement of its illegal online gambling policies with rising engagement in illegal betting sites. Over 3.3 million individuals from Japan are estimated to have used offshore betting services. In this article, we analyze the recent policies pertaining to the regulatory bodies, the problems they face, the impact of payment processing and consumer activity, and the partnership between government bodies and the banking institutions.

A government-sponsored study in early 2025 shows Japan has more than 3.37 million users of offshore online gambling sites with wagers worth 1.2 trillion yen yearly. While many of these sites are run by legitimate foreign companies, gambling on such sites from Japan is prohibited.

Japanese-style advertisement, acceptance of yen deposits, and country-specific promotions offered by these gambling sites create a legal grey zone for consumers and financial institutions.

Overview of Regulatory Measures Imposed on Banks

This year, Japan’s Cabinet adopted new policies which put banking institutions on the front line of enforcement action. Regulated financial institutions such as banks and payment processors have the legal interpretation as operators of gambling services, end-users of services and include alleged facilitators who transact with overseas gambling. Transactions suspected of illegal gambling perpetrated by patrons and payment processors bear the burden of forensic banking by terminating payments suspected of illegal wagering.

Banks are required to monitor the gambling payments through merchant codes and bank flag the identified gambling towards payment or receiving barred gambling services. This combination of changes is made according to anti-money laundering policies and the provisioned Foreign Exchange and Foreign Trade Act.

The cover also encompasses advertising and promotion. Websites, social media accounts, and blogs that either promote gambling or connect with services offering access to foreign gambling sites are now part of the banned network. This also encompasses content marketing for Japanese casinos located beyond the borders of Japan, especially those that masquerade as legitimate Japanese enterprises or use culturally appealing branding to entice users. Financial institutions are expected to avoid facilitating such payments, even when these services are purported to be media or entertainment.

The government accepts that these operations are often near impossible to detect, but financial services remain liable to reinforce their compliance frameworks. This requires such institutions to enhance information technology systems and update their compliance or payroll amenity, including training involved in gambling typologies, and coordinating with regulators on information exchange frameworks.

Challenges Faced by Financial Institutions

Payment systems and banks still lack the direct support from the government, which exposes them to operational issues. One of the key issues with capturing gambling transactions is the definition of gambling in the digital age, and in this case, the offshore sites pay for the services using sophisticated methods that conceal payment using anonymity. Offshore sites often conceal their financial footprints through anonymised merchant names, crypto, and even using third-party payment processors.

As an example, illegal gambling services which accept credit cards may be processed using generic e-commerce, travel, or digital media codes. Users can also send money to one intermediary, and this intermediary would send money to the gambling site. This process makes it very challenging to ascertain the fundamental objective of the transaction.

In particular, smaller financial services institutions and operators of fintech have raised concerns about the financial burden of compliance and the technical requirements. A number of regional banks have also reported suspending customer accounts, which were later found to have no association with gambling. This has caused disputes and loss of reputation.

Over-compliance is also an area of concern. Due to a lack of clear definitions or central registries of operators who are banned, some businesses have taken unwarranted cautious measures that resulted in flagging or declining legitimate payments that are processed across borders. Other than software development, this has also affected the creation of digital content, especially in cases where payments are made to or received from foreign nationals.

Impact on Payment Processing and Consumer Behavior

Payment processing activities have significantly changed as a result of the ban. Users who relied on e-wallets or credit cards to transact and fund their betting accounts can no longer access these payment options. Consequently, some of these users have resorted to the use of prepaid cards, cryptocurrency wallets, and VPNs to bypass these restrictions.

Frequent gamblers, for instance, are more likely to use these payment options, albeit for the time being. These payment options, especially decentralized finance, are still out of reach for the majority of Japanese consumers, which diminishes their overall usefulness.

As a whole, the population seems to recognize the risks more. Approximately 70% of users admitted to making at least one real-money wager in the past year. Roughly 40% of the participants, on the other hand, reported knowing about the activity being illegal in Japan. This discrepancy is larger for the users in the 20-29 year age group, who are the largest demographic visiting the sites.

Consumer concern is growing regarding bank transfers that are suddenly put on hold or canceled. Some people are bothered by the vague policies concerning the transaction limitations set by service providers. Banks defend themselves by stating they are working under guidance from outside regulators.

Collaboration Between Government and Financial Sector

To tackle these issues, the Japanese central government is working more closely with the finance industry. The Financial Services Agency (FSA) and National Police Agency (NPA) have specific inter-agency relations with commercial banks and credit card companies for the purpose of harmonizing regulatory practices.

Strengthening enforcement working groups are broadening their scopes and sharing information on identified gambling operators, known cases with suspicious transactions, and new methods of circumvention. This collaboration is also directed towards internet service providers to restrict access to high-risk gambling domains, although the issues of censorship and privacy remain under legal deliberation.

Additional problem gambling prevention measures are being implemented, including the promotion of gambling addiction hotlines. These initiatives aim to support the public to avoid gambling addiction.

For companies that willingly sever ties with overseas gambling operators, there is legal clarity, and these businesses are receiving some leniency. This appears to be a preliminary step towards some companies refraining from inviting foreign casinos to the Japanese internet, as can be seen from the decrease in Japanese websites promoting foreign casinos.