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Japan to urge companies to share information on big shareholders

  • October 27, 2021
  • , Nikkei Asia , 6:21 p.m.
  • English Press

TOKYO — Japanese companies will be urged to disclose information regarding their major shareholders, starting next January, Nikkei has learned, as regulators step up their efforts to combat money laundering.

 

Japan’s Financial Services Agency, the Ministry of Justice and financial institutions will push for around 3.5 million companies, both public and private, to submit relevant information to the ministry’s legal affairs bureau. The authorities will check to see whether suspicious businesses or individuals involved in money laundering are listed as major shareholders.

 

The move comes after Japan received a failing grade for its anti-money laundering measures from an international watchdog.

 

In August, the Financial Action Task Force (FATF) placed Japan in the “enhanced follow-up” category, pointing out that certain sectors lacked a high level of understanding of the risks related to money laundering and terrorism financing. The FATF also called on regulators to take stronger action.

 

The government will work with the private sector to strengthen oversight. Banks will ask companies to submit information about their major shareholders when opening accounts or making loans.

 

Starting Jan. 31, the Ministry of Justice will ask companies to submit in writing the names, addresses, and shareholding ratio of those who have a direct or indirect stake of more than 25%, based on voting rights.

 

Financial institutions will be able to keep track of major shareholders and determine whether a company is likely to become a vehicle for money laundering.

 

The information submitted will be examined by the legal affairs bureau, which will retain it for seven years. Companies will be able to request a certified copy from the bureau.

 

The Japanese Bankers Association will encourage member banks to use the new system. Under it, banks will be allowed to ask companies seeking to open an account for information on their major shareholders as part of their required documentation. At their discretion, banks will also be able to require borrowers to submit such information to receive new loans or loan renewals. Big Japanese banks are expected to make use of the new system, with smaller regional banks and shinkin banks following suit.

 

Having information on their corporate clients’ major shareholders will make it easier for banks to understand their clients’ history and attributes, helping to prevent money laundering and other fraudulent activities.

 

Under current law, Japanese banks are prohibited from lending to “anti-social forces,” which generally refers to organized crime groups. Banks use an independent database created by the Bankers Association to perform due diligence and screen transactions.

 

Through its cooperation with the Ministry of Justice, banks may be able to enhance their screening for all sorts of loans, including those that might go to organized crime groups.

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