Japanese Anti Yakuza Laws Not working all that well

The discovery of 230 transactions with organized crime syndicates totaling about Y200 million ($2 million) at Mizuho Bank Co. – one of Japan’s largest banks — shows how easily finance-savvy yakuza can secure funds in the world’s third-biggest economy, despite repeated crackdowns.
Over the past two decades, lawmakers and regulators have passed a series of laws and ordinances aimed at curtailing organized crime. Starting with laws in 1991 making typical yakuza activity and money laundering illegal, Japan has been stepping up penalties and stiffening up “know your client” rules. Banks were obliged to check customers’ IDs and report information on money laundering, while regulators were given more authority to monitor suspected money-laundering behavior.
But those rules look tame by international standards. Under 2011 yakuza-exclusion ordinances, companies are merely required to “try” to confirm they are not engaged in transactions with a gang member. Failure to make adequate efforts to ID a client could lead to a prison term of up to one year or a fine of up to Y1 million.
The weak penalties, coupled with wiggle room in implementation, have invited international criticism. In fact, the number of queries to police about run-ins with mobsters has risen by 33% over the four years through 2012, according to the National Police Agency. The criticism has forced Japan to launch its first comprehensive assessment of the state of money laundering here.
Financial Services Agency officials argue that awareness among banks of the gravity of laundering money for the yakuza has risen exponentially. They point to Japan’s housing loan corporations, which received Y685 billion in public funds in 1996 after they were unable to recover loans, including many that were knowingly made to yakuza organizations. Mizuho’s problem was more a failure by bankers to report to their superiors when they found out they were lending to the mob, FSA officials said.
Until the Mizuho case, no major bank had been found guilty of dealing with “anti-social forces” – Japanese official-speak to describe gangsters — since 2007, and the situation is improving, they said.
You be the judge. Here are some of the most recent and/or high-profile cases Japanese financial regulators have found over the past six years, according to the FSA or the Kanto Local Finance Bureau:
2010: Korea Exchange Bank’s Japan branches suspend new business operations for three months after an Osaka branch manager accepts a deposit into a customer’s account from someone with ties to yakuza. The money — Y400 million — was to help the customer buy a golf course. The bank apologized for the trouble caused and submitted a business improvement plan.
2010: Regional lender Miura Fujisawa Shinkin Bank, based in Tokyo bed town Yokosuka, says it knowingly made loans totaling more than Y450 million to a criminal syndicate and related individuals and organizations for over 17 years, and created savings accounts for the organization. The bank apologized and then-Chairman Yoshihisa Ogawa resigned.
2009: Citibank’s Japan branches suspend promotional sales activities in its retail banking division for one month after regulators say it had not set up an adequate system to detect and monitor suspicious transactions and failed to set up procedures to control any dealings with possible “anti-social forces.” This was Citibank Japan’s second of three suspensions for what regulators said were lax controls. Citibank issued an apology and a business improvement plan.

2007: Mitsubishi UFJ Financial Group Inc.’s core banking unit, Bank of Tokyo-Mitsubishi UFJ, suspends lending to new corporate customers for seven days for knowingly making loans in the 1970s to organized crime member Kunihiko Konishi. Top management of the bank’s precursor Sanwa Bank went so far as to permanently station staff in the mob member’s office, regulators said. The bank apologized and said it was taking the matter seriously.

http://blogs.wsj.com/japanrealtime/2013/09/27/in-japan-real-gangstas-go-to-the-bank/?mod=WSJBlog