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Terra Nakazawa, a reader in Yamanashi Prefecture, recently wrote to Lifelines about a request she received from her bank:

I just got a notice from my local bank, where I have an account that I use for my salary and from which I pay bills. I am being requested to appear in person and show my residence card to “confirm your identity” as part of “regular measures to protect against money laundering and terrorism funding.” Is this a requirement only for foreign people, and if so, why?

Nakazawa, who is American, works full time for a local company and has lived in Japan for nearly 10 years. Discussion with her Japanese colleagues and in-laws revealed that nobody had received a similar request from their bank to confirm their identity, which led her to wonder if this requirement was solely for non-Japanese customers.

“I opened the bank account more than nine years ago and I haven’t sent money abroad in the past eight, so I’m mystified as to why I appear to be a risk for illegal international financial transactions,” she tells The Japan Times.

The online forums frequented by foreign nationals contain similar stories about other banks that have been sending out similar notices.

“Money launderers are not transferring pathetic little amounts of money like ¥10,000,” writes one user. “It’s just a case of having to be seen to do something, so targeting the ‘easy’ demographic. How about the government going after the actual money launderers in real estate and cybercurrency?”

There doesn’t seem to be a particular pattern to the bank requests in terms of visa status, length of time in Japan or location. For those who received a notification, however, the contents and purpose were essentially the same: “You need to visit the bank in person to show your residence card, as part of measures against money laundering and terrorism funding.” The notice was often written in several languages, including Japanese, English, Chinese and Vietnamese. The notices are politely worded, but they also warn that failure to comply may result in suspension of the account.

A visit to the branch

Lifelines met with Nakazawa and accompanied her to the main branch of the Yamanashi Chuo Bank. The staff member at the counter did her best to answer questions, although her knowledge was limited to her own bank’s practices. She explained that the bank was following an initiative introduced in February 2018 by the Financial Services Agency (FSA), the government agency responsible for overseeing banking, securities and exchange, and safeguarding the nation’s financial system. The initiative, “Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism,” is available to read online in English.

When it was pointed out the wording of the bank’s summons did not exactly instill confidence in a loyal customer like Nakazawa, who is not even engaging in international financial transactions, the staff member was apologetic. She explained that the bank would start asking Japanese customers to come and confirm their identities “in the near future.” As for the particular timing for Nakazawa’s notification, she may have been flagged in the system due to a prior visit to change her address after having recently moved house.

Since Nakazawa needs to maintain the account for her job, she acquiesced to the request to show her residence card and her details were entered into the bank’s computer. The system then flagged her as being American and she was asked to fill out an additional form in compliance with the Foreign Account Tax Compliance Act, which is part of efforts to combat tax evasion by Americans who hold offshore accounts. This required her to furnish her Social Security number and tax identification number, which she did not have on her.

Filling the form out at home and bringing it back on another day was not an option, however, so all previously entered information had to be voided, rendering more than an hour of everyone’s time and effort null and void. Nakazawa subsequently returned on another occasion to complete the entire process again from scratch.

A notice in the mail: Some non-Japanese residents are receiving notifications from their banks to come into their branch and show them some identification. | COURTESY OF TERRA NAKAZAWA
A notice in the mail: Some non-Japanese residents are receiving notifications from their banks to come into their branch and show them some identification. | COURTESY OF TERRA NAKAZAWA

Know your customer

In order to find out more about the situation, Lifelines called the Japanese Bankers Association, which works to ensure the smooth running of the country’s banking system, and spoke to Wataru Ichida of the public relations department. He pointed out that the aforementioned 2018 initiative by the FSA is in line with global measures to tighten up security. If anything, he notes, Japan was somewhat late to the party in this effort.

Foreign nationals living in Japan have probably noticed a trend toward extra administrative procedures and security measures with financial institutions back in their own countries, so Japan is not unusual in this respect.

“It is part of something known as ‘KYC,’ or ‘Know Your Customer,’” Ichida explains. Under KYC, financial service providers are making more effort to verify the identities of their customers, which fits within the broader scope of anti-money laundering policy.

There have been reports of an increase in international money laundering in the Japanese media recently. According to a National Public Safety Commission report in 2018 titled “National Risk Assessment of Money Laundering and Terrorist Financing,” however, “the number of cleared money laundering cases committed by foreigners in Japan in 2017 was 7.5%,” indicating a drop from 9% the year before. Those arrested came from China, Vietnam and Nigeria, with many having connections to organized crime. The remainder of the culprits were, presumably, Japanese nationals, many of whom are also connected to organized crime or specialized fraud groups.

In line with the aforementioned FSA initiative from 2018, Japanese financial institutions are required to reconfirm a customer’s name, address, date of birth and other details, according to Ichida.

“This reconfirmation is for the purpose of combating money laundering and the financing of terrorism, and is based on the nature and circumstances of the customer’s transactions with the bank,” he says. “So all customers, both Japanese and non-Japanese, are covered. However, the order in which the documents are sent is determined by each financial institution based on the bank’s business area and customer characteristics. We do not know the details of how banks determine the order in which they request cooperation from customers.”

Even though — in principle — the measures cover everyone, this may be another situation where, simply put, if you’re not Japanese, you’re a foreigner. Since foreign nationals are more likely to leave or re-enter the country, or send money abroad, financial institutions have perhaps decided to concentrate on this sector of the population first as a monolithic group, without taking into consideration variables such as length of stay in Japan, visa status or the frequency or monetary amount of any international remittances you do.

Constantly carded

Showing your residence card at the bank in Japan is not particularly unusual, in and of itself. These days, it is required when a non-Japanese person opens an account at most financial institutions or when informing the bank of a change in circumstances, such as a new address or visa status. This information can be found in a 2019 FSA guide for banks called the “Use of Savings Accounts and Remittances by Foreign Nationals.” Incidentally, in terms of money laundering, the guidelines simply ask banks to inform foreign nationals that it is illegal.

A call to the general affairs section of the Japanese Immigration Bureau revealed that a foreign national is not legally required to show a residence card to their bank, but neither is it illegal for the bank to request to see it. Since the residence card tends to be the default ID for every foreign resident of Japan, it serves as a useful baseline. Whether the bank will accept other forms of ID, such as a driver’s license, from a foreign national is up to the institution.

So what can you do if your bank sends out a request to come in and present yourself to prove you’re not a money launderer? Ultimately, it is up to you. If you choose to ignore the request you may or may not have your account suspended. If you go along with the request, it seems prudent to allow plenty of time, as shown by Nakazawa’s case, and to bring in U.S. taxation information if you’re an American. Finally, you can always vote with your feet and change banks, but you will likely end up having to show your residence card to open a new account wherever you go.

For more information, visit the Japanese Bankers Association at zenginkyo.or.jp/en.

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