Are financial institutions' measures against money laundering adequate? Concerted government and private-sector efforts must be made promptly to bolster arrangements to deal with the practice.
The Financial Services Agency has been stepping up measures against money laundering, which is the practice of disguising profits from illegal activities as legitimate assets. The FSA is doing so because such profits can often be used as funds that support organized crime and terrorism.
The Financial Action Task Force (FATF), an organization consisting of financial and law enforcement authorities of Japan, Europe and the United States, is scheduled to conduct screenings next year of Japanese financial institutions' arrangements for dealing with money laundering.
Many problematic points were pointed out in the previous inspection conducted a decade ago. If countermeasures are judged inadequate in the planned screening, there is a possibility that the credibility of financial transactions in Japan will decline. Japanese financial institutions should take all possible measures to ensure sufficient arrangements for tackling money laundering.
Undoubtedly, it is essential for the measures not to impair such financial functions as settlements. How to strike a balance between thwarting illegitimate acts and ensuring convenience for customers will be put to the test. Information sharing with other countries concerned must be promoted.
A shinkin bank in Saitama Prefecture was found to have remitted a total of about 1.9 billion yen in about 20 transactions to recipients including unidentified accounts overseas. The possibility is said to exist that the recipients of transferred money included at least one firm related to North Korea.
Some regional financial institutions, unlike major commercial banks, have insufficient arrangements for guarding against money laundering. Regional financial institutions need to be aware that they are liable to be targeted by criminals, among others.
Bolster supervision
Money launderers' techniques have become sophisticated. Financial institutions are called on to pay meticulous attention to whether there is a hint of anything shady when they are asked to remit a large amount of money and whether there are problems with respect to the purpose of the remittance or the characteristics of the customers.
Punishments for money laundering have become stricter as the international community has cast a sterner eye on the practice.
It was revealed in September as a result of an in-house investigation that a Danish major bank had remitted about 200 billion euros (about 26 trillion yen) in suspected money laundering schemes.
The bank's top management was forced to resign to take responsibility for the scandal. On top of this, there is a possibility that the bank will receive fines on the level of several hundred billion yen from U.S. and European supervisory authorities.
Japanese financial institutions cannot ignore the incident as something unrelated to them. Unless they take adequate steps, they will risk their own survival. Top management should be aware of such a risk.
Of more concern than banking organizations are cryptocurrency exchange operators.
Cryptocurrencies, with their highly anonymous nature, are liable to be used as funds for terrorism and other purposes. But according to a survey by the FSA, many cryptocurrency exchange operators do not understand regulations against money laundering and there have been cases in which they did not sufficiently confirm the identities of those involved in transactions.
The agency must ramp up its supervision. As for the operators who fail to correct deficiencies in their preventive measures, it should study withdrawing their registration as cryptocurrency exchange operators.
(From The Yomiuri Shimbun, Oct. 18, 2018)
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