Banks vow mob-loans cleanup

by Elaine Kurtenbach


Japanese banks are pledging more stringent efforts to halt loans to organized crime after an investigation at Mizuho, the country’s second-biggest bank, led to disclosures of mob links throughout the banking industry.

Lawmakers grilled bank executives and government officials, including Finance Minister Taro Aso, in a hearing Wednesday that focused on how and why financial institutions, including consumer credit companies, banks and insurers, have failed to fully comply with a ban on doing business with gangs and their associates.

“It’s not enough just to make rules if you don’t actually carry them out,” said Yuzuru Takeuchi, a lawmaker with the New Komeito Party, the coalition partner of the ruling Liberal Democrats.

Aso was repeatedly asked why the Financial Services Agency and other regulators had failed to crack down more effectively on dealings with individuals linked to yakuza, as Japanese criminal gangs are known.

Yakuza have long been involved in many areas of the economy, despite efforts to freeze them out of the financial system.

“Much remains to be done to resolve this problem,” Aso said at the hearing. “We must follow up on this thoroughly or it will just re-emerge later.”

Industry leaders, including the heads of the banking, consumer credit and securities associations, acknowledged that lenders and other financial institutions are struggling to comply with longstanding laws against doing business with organized crime.

Kazuhiro Omori, head of the Japan Consumer Credit Association, said his group was revising its rules on such issues and preparing to close any accounts violating them.

“It is very difficult. There are many cases to be reviewed,” he said.

Japanese securities companies have long had access to police data on people linked to criminal groups, but sharing that information with banks has lagged, police and other officials said.

Still, lawmakers chided Mizuho Financial Group’s president, Yasuhiro Sato, for delegating “know your customer” responsibilities to the bank’s credit affiliates. They also accused regulators of lax enforcement and of failing to provide enough support to financial institutions to help them prevent illegal business transactions.

Sato was summoned Wednesday for questioning by lawmakers after his bank said it failed to act after discovering more than ¥200 million in mob-related loans at its consumer credit affiliates.