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Japan's biggest banks face gangster investigation


Text by NEWS WIRES , Tokyo

Latest update : 2013-10-29

Japan's financial watchdog said Tuesday it would investigate the country's top three banks following the revelation that one of them, Mizuho, had failed to act when it discovered it had loans to gangsters on its books.

Japan's financial watchdog said Tuesday it would probe the country's top three banks in the wake of a loans-to-mobsters scandal that has raised questions about corporate links with organised crime.

The Financial Services Agency (FSA) will look at Mizuho's business dealings as well as rivals Mitsubishi UFJ and Sumitomo Mitsui Banking Corp., an agency spokesman said, without disclosing further details.

Mizuho has been under fire since it emerged last month that it processed hundreds of loans worth about $2 million for the country's notorious yakuza crime syndicates, which are involved in activities ranging from prostitution and drugs to extortion and white-collar crime.

Jiji Press news agency said Tuesday the widening regulatory investigation would probe a range of issues, including the banks' risk management systems, while Japanese finance minister Taro Aso said the watchdog must do a better job of weeding out corporate misdeeds.

The scandal has made headlines for weeks, and reportedly sparked a police investigation into Japan Inc.'s ties with organised crime.

Authorities have long battled to keep gangsters from infiltrating Japan's corporate sector amid fears about mob involvement in stock trading and the real estate sector, among other legitimate activities.

In 2007, regulators penalised a unit of Mitsubishi UFJ, the country's biggest lender, for doing business with organised crime figures.

News of the FSA's latest probe comes a day after a panel of lawyers hired by Mizuho said bank executives knew it was doing business with gangsters, but failed to stop the practice.

"Many officials and board members were aware of, or were in a position to be aware of, the issue," said the panel's 100-page report.

"However they failed to recognise it as a problem, believing that the compliance division... was taking care of it."

Aso on Monday slammed the Mizuho transactions as a "huge problem", and said the bank's initial -- and incorrect -- claims that executives knew nothing about the shady loans was "the worst thing a bank can do".

On Tuesday, Aso took aim at the FSA, saying that "we have to improve what we are supposed to be doing". His comments were in response to questions about the watchdog's handling of the high-profile case.

Mizuho has submitted its own report to regulators, and said Monday that 54 former and current executives would be punished, including Mizuho Bank chairman Takashi Tsukamoto. He will step down from his post but stay on as head of the parent company.

Mizuho Financial Group chief executive Yasuhiro Sato -- who has acknowledged he was in "a position to be aware of" the loans but refused to quit -- will work without pay for six months. Other managers would also take wage cuts.

"I apologise sincerely... The problem was that we weren't aware or sensitive enough to loans that were being done by an affiliate company," Sato told a press briefing in Tokyo this week.

He also said the bank will invite a former Supreme Court judge to become an external board member to beef up compliance.

The panel's report Monday called on Mizuho to overhaul its compliance department, noting that the transactions were made via a complicated scheme involving the affiliate firm.

Like the Italian mafia or Chinese triads, the yakuza engage in activities ranging from gambling, drugs, and prostitution to loan sharking, protection rackets, white-collar crime and business conducted through front companies.

The gangs, which themselves are not illegal, have historically been tolerated by the authorities, although there are periodic clampdowns on some of their less savoury activities.




Date created : 2013-10-29

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