Japanese Authorities Dress Down Foreign Banks On Money Laundering

by Mary Swire, for LawAndTax-News.com, Hong Kong

02 March 2004

Japan's Financial Services Agency has decided to issue a stern warning to foreign banks to abide by the country's laws and prevent money laundering after an incident involving British bank Standard Chartered last week in which the bank's Tokyo branch was prevented from opening new custody accounts.

The FSA will issue the warning to more than 80 banks, an agency official said. Japanese media have reported that the British-owned bank had undertaken transactions linked to money laundering by an underground finance group affiliated with Yamaguchi-gumi, one of the largest yakuza crime gangs.

All Japanese banks must notify the authorities of any transactions they suspect are linked to money laundering. Local experts say that organised crime groups may use foreign banks thinking that they are less likely to inform the Japanese authorities of suspect transactions.

In order to be permitted to offer new custody accounts, Standard Chartered must improve its legal compliance and internal controls, reporting to the FSA on March 22 with regard to action being taken to remedy the situation, and then again at three monthly intervals until the problem has been completely addressed.

The Japanese Ministry of Finance also announced last week that it will be preventing the Tokyo branch of the UK-based bank from participating in government bond auctions from February 27th, until the FSA lifts the penalties that it has imposed on the bank.

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