Japan's vulnerability in AML/CFT

As far as money laundering in Japan concerned, property business is critically abused by organized crime syndicate, so called “Yakuza” or “Boryokudan”, nevertheless the government of Japan has not implemented strong and efficient measure yet, and the industry is seemingly reluctant to tackle with it. The problem is possibly related not only to Japan’s homeland security but also to international security. ‘The downturn in the Japanese economy [in 1990’s] has also led to the Yakuza spreading out from their traditional family/national base and looking for investments and business opportunities’ with numerous front companies (Lilley, 2006:23). In 2000’s, the Yakuza people allegedly makes profit through property dealing as well as stock investment in accordance with the temporal recovery of Japanese economy. Part of such illicit money shall be paid for drug trafficking with Democratic People’s Republic of Korea (DPRK, the official name of North Korea) or arms smuggling from Southeast Asia, for example the ex-militant in Philippine.

On one hand, the land and territory of Japan is very small, on the other hand, its population is geographically quite imbalance. Namely, people, money and goods are highly concentrated in a few huge cities such as Tokyo, Osaka, or Nagoya. Land and property are lucrative for business especially in big cities with high density, therefore Yakuza groups exploit real estate for making money. Adelstein reveals that

The Tokyo Metropolitan Police compiled a list in 2006 of roughly one thousand yakuza front companies in greater Tokyo; about a fifth of them are real estate firms… Some police officers in Tokyo use the word “Realtor” as a synonym for yakuza, so strong are the connections (2009:89).

Although the business people of property industry recognize the fact that the industry and customers are sacrificed by Boryokudan and complain about that, they would not take strong action against Yakuza. It implies the deep-rooted relation between the industry and Boryokudan.

Japanese National Police Agency (NPA) held the round-table conference of Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) in 2010 in which NPA heard opinion about Customer Due Diligence (CDD) from related industries such as financial sector and property dealer. In the series of discussion, the represent of real estate industry appeared to oppose to strict implementation of CDD in the name of customer satisfaction. Rather, they asserted, “Basically we hold attitude not to be involved in illicit dealing”. In fact, the number of Suspicious Transaction Report (STR) by property agent is very limited and negligible in Japan. According to NPA, among the total of 272,325 STRs, real estate industry submitted only 33 reports in 2009. In 2008, the number of STRs by the industry was 21 among the total of 235,260 STRs. Even if the industry lawfully monitors and adequately submits the reports, the number of reports is too small and in appreciable, considering the Yakuza’s business and its front companies. Consequently, it casts the doubt that CDD is effectively implemented in the property industry. However, neither strong action nor progress resulted in the round-table conference.

The property in Japan is assumed to be a key element or a linkage between Yakuza and Kim Jong-il regime of DPRK. According to NPA, the number of Yakuza and affiliated members is about 80,900 in total at the end of 2009. Of 80,900 Yakuza personnel, members are 38,600 and affiliates are 42,300. The GOJ unofficially estimates that nearly half of Yakuza members are North and South Korean-Japanese and their descendant. Meanwhile, the Kim regime saves money in cash of US dollar, Japanese yen, Euro, Swiss franc and so on, in addition possesses leisure homes, apartments and tenants of buildings in Beijing, Shanghai, Hong Kong, Macau, Switzerland and Moscow at least (Ino, 2009:123-124). The press reports that the dictator of DPRK ‘has $4 billion “emergency fund” hidden in secret accounts in European banks’.

According to some sources, it is estimated that over US$ 500 million at least has been flowed and transferred from Japan to North Korea in recent years. The money contains donation, legal and illegal business, and supposedly profit earned by dealing with Yakuza. DPRK’s illicit money is consumed for its WMD and nuclear programme, arms and missile dealing with rogue states such as Iran, Syria and Burma, and eventually, it is posing grave threat to international peace and security. Thus, strict implementation and enforcement of AML/CFT measures in Japan’s property industry is contributed not only to break the link of Yakuza and DPRK, but also to disrupt rogue states’ network. NPA and GOJ should urgently take strong and proactive measure for financial intelligence particularly in real estate industry.

References

• Adelstein, Joshua. 2009. Tokyo vice: an American reporter on the police beat in Japan. New York: Pantheon Books.
• Ino, Seiichi. 2009. Kim Jong-il no yuigon [Kim Jong-il’s will]. Tokyo: Asahi Shimbun Publications.
• Lilley, Peter. 2006. Dirty Dealing. London: Kogan Page.