Mizuho Bank Ltd. was ordered to strengthen legal compliance and administrative controls, the Financial Services Agency said in a statement in Tokyo yesterday. The unit of Japan’s third-biggest bank by market value made loans to the anti-social groups, the FSA said, without identifying them. The phrase is often used in Japan to describe criminal organizations.
Japanese authorities have stepped up efforts to combat yakuza gangs, whose activities range from extortion to fraud and money laundering, according to the National Police Agency. In the first penalty of its kind against a Japanese bank since 2007, the FSA told Mizuho to make a “clean break” from the groups after conducting 230 transactions, mostly car loans.
“There could be reputation risks, but Mizuho may not receive any direct impact on its business as this is just an internal controls matter,” said Yoshinobu Yamada, a Tokyo-based analyst at Deutsche Bank AG. “Lending to anti-social groups will become one of the main focuses of Japanese regulators in future.”
Mizuho made transactions valued at about 200 million yen ($2 million), an FSA official said at a news briefing in Tokyo, asking not to be named in accordance with the agency’s policy.
The bank has to formulate measures to prevent a recurrence and submit a business improvement plan by Oct. 28, the regulator said. It will report on its progress at the end of November and December and then every three months.
Mizuho “takes this order very seriously and deeply regrets these occurrences,” the bank said in a statement. The Tokyo-based company hasn’t decided any internal penalties yet, spokeswoman Masako Shiono said by phone.
Yesterday’s action is the latest blow to Mizuho after the FSA punished the bank for a computer glitch that delayed transactions following the nation’s March 2011 earthquake.
In 2007, the agency ordered Mitsubishi UFJ Financial Group Inc.’s banking unit to suspend some operations for a week after finding that a branch in Hyogo prefecture, western Japan, did business with an anti-social group for more than 30 years.
Japanese police are doubling efforts to crack down on the yakuza, the National Police Agency said in a white paper published in 2011. The gangs are increasingly turning to businesses such as construction, finance, waste disposal and securities markets to supplement their more traditional income sources, according to police.
The U.S. is also clamping down on the gangs, imposing sanctions on the two biggest groups as part of an effort by President Barack Obama to combat transnational criminal organizations.
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