Japanese watchdog scrutinizes money-laundering defenses
Regulator seeks to address vulnerabilities among smaller banks
TOKYO -- Japan's Financial Services Agency is surveying the measures banks take to prevent money laundering, aiming to better tackle a growing problem among regional institutions unaccustomed to dealing with foreign transactions.
The survey covers the country's 106 regional banks and more than 400 other institutions such as shinkin banks -- credit associations serving small and midsize businesses -- and credit unions. The watchdog is examining what steps banks take to prevent money laundering and whether these policies have been adopted by individual branches, as well as management's understanding of related risks. The agency plans to report the results as early as this year.
Particularly effective anti-laundering controls will be shared with other financial institutions. Banks will be urged to take steps to nip illicit transactions in the bud, such as focusing more on data gathering and analysis.
Legislation that took effect last October imposed more-stringent identity verification standards on certain transactions. But the FSA worries that differences in implementation among institutions have left an opening for criminals.
Accounts at regional or shinkin banks make up 95% of Japanese bank accounts involved in illegal money transfers in the greater Osaka area. This is likely because smaller institutions are less used to transactions involving overseas accounts or have few staffers that can understand foreign languages. The FSA hopes to use the survey to pinpoint such issues.
The number of reports of possible money laundering or other suspicious transactions received by police from financial institutions rose 0.4% to 401,091 in 2016, the most since the system was implemented in 1992, according to the National Police Agency. While some institutions, particularly megabanks, can now spot illegal activity in advance, the number of illicit transactions is believed to be growing.
The international Financial Action Task Force issued a statement in 2014 expressing concern about Japan's "continued failure to remedy the numerous and serious deficiencies" in its handling of money laundering and other finance-related crimes.