Are Japan’s Biggest Banks in Bed with the Yakuza?

The term "yakuza" may call to mind prostitution rings and low-brow thuggery, but Japan’s modern day crime syndicates are all about white collar abuses — investing in high finance and getting their hooks into the country’s biggest banks.

Now those banks are under scrutiny following revelations that they’ve lent cash to gangsters. In September, authorities discovered that Japan’s second-largest bank, Mizuho, had loaned more than $2 million to people affiliated with organized crime groups in Japan. (Most of the 230 loans issued were for buying cars.) The incident prompted a federal investigation of the country’s three biggest banks, Mitsubishi UFJ, Mizuho and Sumitomo Mitsui Financial Group Inc.

The scandal deepened Tuesday, when one of the companies, Mitsubishi UFG, came clean about loans it made to "more than one" but less than 10 yakuza affiliates. On November 1, another bank, Shinsei, admitted to making dozens of similar loans, as well as opening bank accounts for "anti-social forces," as the yakuza are sometimes known.

Yakuza groups have sought a foothold in the financial sector for years, with varying success. In decades past, the gangs have reaped billions through extortion, drug smuggling, prostition, gambling and other illegal activities. Lately, though, their forays into banking and finance have earned them the nickname "Goldman Sachs with guns."

In general, Japanese law is easy on businesses that have dealings with gangs. Only in 2011 did authorities really begin cracking down on yakuza interests, through a series of exclusion ordinances that made it illegal to do business with gang members, and through other efforts to cut off their funding. Yet many of the ordinances are vague, and fail to penalize violators. Japan’s Deposit Insurance Corporation of Japan has since attempted to cleanse financial companies of yakuza ties by buying up yakuza loans at a discount and attempting to recover the money from gang members. But as the Japan Times notes, extricating themselves from yakuza deals can be tricky for banks, who may can’t easily cancel loans made before 2011, when an "anti-gangster" banking clause came into effect.

Mizuho, the first company found to have lent money to gangsters, claims that the individuals to whom they loaned cash passed initial screenings, and were only discovered to be affiliated with the yakuza afterwards. Mizuho’s chairperson, Takashi Tsukamoto, admitted during a recent press conference that the company knew about the yakuza loans for more than two years but failed to act. Some 54 executives will be punished, including Mizuho’s president, Yasuhiro Sato, who will receive no salary for six months.

Despite greater enforcement, yakuza remains a prominent force in Japan, consisting of 21 groups and more than 70,000 members,according to the National Police Agency.