Japan’s financial regulator has stepped up scrutiny of banks in taking measures against money laundering and terror funding. The Financial Services Agency (FSA) sees as patchy, Japanese banks’ measures for fighting criminal abuse of the financial system and is increasingly concerned that without an appropriate response, international trust in the system could be shaken, sources said. The FSA is surveying banks and will pull together results this summer, and then seek an industry-wide bolstering of standards before the Financial Action Task Force (FATF) evaluates Japan’s overall performance in 2019. The regulator’s move comes as FATF, which sets standards on combating money laundering and terror funding, looks to identify and disrupt the funding of terrorist groups such as Islamic State - a top priority for the Parisbased organization. In its evaluation of Japan - part of its periodic assessment of its 37 members - FATF will look at the effectiveness of its laws on money laundering and terrorist funding.