Japanese regulators follow the money to beat the yakuza as the organised crime gangs move into finance and construction

The yakuza, Japan’s organised-crime syndicates that have reaped billions from activities ranging from extortion to human trafficking, are finding their ranks decimated by authorities employing methods similar to those used to jail Al Capone: going after their money.

Japan’s Financial Services Agency delivered the latest blow, last month ordering Mizuho Financial Group to improve compliance and then demanding that top executives report by 29 October what they knew and when about a consumer-credit affiliate found making loans to crime groups.

The regulator’s slap adds to pressure from yakuza-exclusion ordinances enacted nationwide in 2011 making it illegal to do business with gang members, as well as a US executive order that year requiring financial institutions to freeze yakuza assets. The US Treasury so far has frozen about $55,000 (£34,000) of yakuza holdings including two Japan-issued American Express cards, according to documents obtained by Bloomberg News.

“Pressure on the yakuza has definitely intensified,” said Hideaki Aihara, general manager of the National Centre for the Elimination of Yakuza and a former superintendent at the Tokyo Metropolitan Police Department. “There’s no doubt they’re having trouble doing business.”

While the gangs themselves aren’t illegal in Japan, violating the exclusion ordinances – which also require customers seeking financial and other services to attest to non- association with a criminal enterprise – could come with a fine of 500,000 yen (£3,170) or a year in jail. Police have investigated 164 possible violators since the laws went into effect, arresting nine people to face potential prosecution.

Police also arrested more than 24,000 yakuza members last year, including 23 bosses of the largest organization, the Yamaguchi-gumi, for crimes such as extortion, drug violations, gambling, theft and fraud, according to the agency’s website.

The yakuza have diversified their business interests in recent years into finance, construction and waste disposal, according to a police report.

“Banks are scrutinising their borrowers to check whether they have any relations with the yakuza, to avoid any penalties from the FSA,” Mr Aihara said, referring to the banking regulator. “It’s tremendously meaningful.”

Alarmed by yakuza involvement in securities trading, the Japan Securities Dealers Association began requiring members to take steps to exclude the gangs from the industry in 2010.

The move into finance and other legitimate businesses helped prompt greater vigilance by the US, said Adam Szubin, director of the US Treasury’s Office of Foreign Assets Control. The agency is leading the effort to freeze assets. “It’s a pin prick in terms of the impact that we’re expecting to deliver,” Mr Szubin said in a phone interview from Washington in August.

Targeting gang members alone will not result in large seizures as “there aren’t just large sitting accounts out there with the name” on them, so the US Treasury is working to blacklist companies and individuals that hold, move or launder funds for the syndicates, he said. “No bank is eager to have its name splashed across the front page of a newspaper as being the banker of choice for the yakuza,” Mr Szubin said.

The Yamaguchi-gumi is estimated to generate “billions of dollars annually” from drug and human trafficking, extortion, prostitution, fraud and money laundering, the US Treasury said when it blacklisted the group in 2012. The yakuza are also “heavily involved in white-collar crime, often using front companies to hide illicit proceeds within legitimate industries, including construction, real estate and finance,” according to a Treasury statement.

As soon as the yakuza were added to the US Treasury blacklist, most gang members who had accounts at US-affiliated financial institutions closed them, said Jake Adelstein, a writer who specialises in the yakuza and lives in Tokyo under police protection. “I didn’t expect anything to be found,” said Adelstein, who expressed surprise at the results of the US Treasury actions. “They’re off to a great start.”

Tightening of laws and stepped-up US prosecutions caused recruitment trouble for La Cosa Nostra, the biggest crime syndicate in the US from the Prohibition era to the 1990s, causing some crime families to disappear and others to see their numbers drop to as little as 10 per cent of their 1970s size, according to a report in 2000 from the US Justice Department.

Japanese authorities also have occasionally used tax-evasion prosecutions to target yakuza members since the 1970s, according to the book Yakuza: Japan’s Criminal Underworld – the charge that led to the jailing of the Chicago crime boss Al Capone in 1931.

The US executive order requiring financial institutions to freeze the assets of organised-crime groups and members is only enforceable for assets in the US or which are owned or controlled by American individuals, companies and their overseas branches.

The blacklist includes Japan’s three largest gangs – Yamaguchi-gumi, Sumiyoshi-kai and Inagawa-kai – accounting for 72 per cent of yakuza membership, and their top leaders, according to the US Treasury. Masako Shiono, a spokeswoman for Mizuho Financial, said the company is aware of the US effort to freeze yakuza assets and “is supporting it appropriately”.

The US Treasury’s moves followed criticism that Japan wasn’t doing enough to fight cross-border organised crime. A US State Department report in 2011, four months before President Barack Obama issued the executive order, called co-operation by Japanese police “minimal”. This year’s report said Japan’s compliance with international standards to prevent money laundering is “notably deficient” and said the National Police Agency provides “limited co-operation” to foreign governments.

Yet gangsters are adept at moving funds through underground channels, said Randal Wolverton, a forensic accountant in Kansas City, Missouri. “The bad guys are ahead of the game when it comes to the underground,” Mr Wolverton, who spent 27 years at the US Federal Bureau of Investigation, says. “You’re dealing with very sophisticated criminals.”

©The Washington Post