This blog was originally created by RDC and published on rdc.com.
If, like me up until fairly recently, you are not aware of the Japanese Anti-Social Forces List, you may find this article of particular interest, especially if your organisation has any sort of nexus to Japan. In this blog, I will endeavour to explain what this ‘list’ is, who is on it and why, as well as its usefulness to financial institutions carrying out know your customer (KYC) and anti-money laundering (AML) checks.
Prior to researching this topic, I had never heard of the Japanese betting card game Oicho-Kabu, hence I had no idea of its significance. Very simply put, it is not dissimilar to Baccarat in that the aim of the game is to beat the dealer, ideally with a 3-card total score of 9. The game doesn’t have picture cards and, for reasons that I won’t delve into here, the worst possible hand that you can draw is 8-9-3, which is pronounced ‘ya-ku-sa’ in Japanese.
The Anti-Social Forces List
This has a bearing on this article since it provides the source of the collective expression for organised gangsters in Japan, which is the Yakuza. Those involved may prefer to refer to their participation in a ‘ninkyō dantai’ which translates into English as a ‘chivalrous organisation’. Membership of a Yakuza family or ‘syndicate’ is not illegal however, somewhat interestingly, members are required to register with the Japanese police, who refer to them as ‘bōryokudan’ or ‘violent groups’.
The names of the active members are maintained on a list, widely referred to as Anti-Social Forces, however this list is not published and is only made available to a select few institutions. The normal use of this list could include a bank looking to onboard a new customer, whereby they approach the police and ask if the names of their proposed clients appear on the list. On the basis that they don’t, then the bank would normally proceed to open up the new account.
A familiar workaround
Now, I can’t claim to fully understand the Japanese culture however that would seem somewhat too trusting for my liking, especially from an anti-financial crime perspective. As with politically exposed persons (PEPs) and sanctioned individuals, they are aware that they are under scrutiny from a financial point of view so they may be more inclined to ask family or friends to do their dirty work.
The same thing applies here, where evidence exists of Yakuza members reusing company names or asking ‘associates’, who aren’t Yakuza members and hence not on the list, to do their banking for them. So, whilst it might be a ‘nice to have’, it doesn’t immediately sound like something that you can place too much reliance upon.
Identifying material risk
What should be of greater importance is whether or not the individuals concerned are the subject of adverse media (and/or if they are PEPs and/or sanctioned, of course) as that would give a bank a much better basis upon which to make a decision about establishing, or maintaining, a relationship. Furthermore, as membership is not criminalised, just playing Devil’s Advocate for a moment, anyone whose name appears on the list technically hasn’t done anything wrong.
Clearly the ‘list’ is a useful resource and one that should be regarded as relevant however, as with PEPs and sanctioned individuals, it is important to understand the potential risks involved and be able to mitigate them, where possible, so that materiality can be determined. It is vital that a risk-based approach is applied and ideally one which incorporates as many relevant risk factors as possible. It is also noteworthy that the list is unlikely to be completely up to date at all times and a huge amount of faith is placed upon the Yakuza members that they will in fact get their name added to the list. Conversely, do they ask to have it removed if they retire?
A more effective approach
Organised crime in any shape or form is deplorable and something that should rightly be suppressed. One way to really hurt criminals is to stop them infiltrating the financial system. There is evidence, albeit still anecdotal at this stage, that COVID-19 is significantly hampering the efforts of money launderers due to lockdown requirements. No doubt this will change when the restrictions are lifted however it proves the point that cash entering the banking system is the first stage of the process. Reduce that, or better still cut it out altogether, and half the battle is won.
An approach, which has worked effectively for c20 years, is to utilise a curated database of newsworthy items that includes, amongst many other things, instances of organised crime. Furthermore, a chronological approach to the status of the crime, be it alleged or actual, enables the user to determine the severity of what has occurred and how far progressed it is in legal terms.
For instance, you might be interested in a person who has been arrested for selling illicit drugs, but then again as they haven’t been charged, it might not resonate with you. Yet. Similarly, you may have a zero tolerance approach to gun crime, hence want to know if an individual has been accused of illegal gun possession even though, in the eyes of the law at least, they are still innocent until proven guilty.
In summary, the Japanese Anti-Social Forces list is a curious resource for financial institutions operating in the region, but one that you would be ill-advised to rely solely upon for carrying out a robust risk assessment of potential customers. For those of us operating in other regions, it is a useful reminder of some of the key factors that contribute to effective risk-based screening. Do you have the means of identifying close associates of PEPs and sanctioned individuals who may pose a threat to your organisation? And how might the stage of an offence identified through adverse media – or the level of seniority of a PEP – help you carry out a more effective risk-based approach to screening?