Aug 27 2008
Yakuza target Japan’s financial markets
Japan’s powerful yakuza organised crime syndicates are mounting a widespread and “infectious” assault on the country’s financial markets that may have left hundreds of listed companies riddled with mob connections.
In a surprisingly stark admission of the crisis, the National Police Agency (NPA) says it is locked in a battle for the “economic soul” and international reputation of Japan.
Police investigations suggest the yakuza have become voracious traders and manipulators of listed Japanese stocks, and – via a network of about 1,000 apparently legitimate front companies – occupy hefty positions on the shareholder registers of many companies that may not even be aware of the connection.
The new activities of the nation’s largest crime syndicates, said one veteran expert on the yakuza, has effectively turned the mob into “the biggest private equity firm in Japan”.
In a white paper on the subject, the NPA warns that the yakuza’s switch from “old fashioned” crime rackets like drugs and prostitution to mainstream financial markets is “a disease that will shake the foundations of the economy.”
The Securities and Exchange Surveillance Commission has privately compiled a watch list of hundreds of companies suspected of direct or indirect links to mafia money. The list, seen by The Times, includes more than 200 publicly traded companies, many of which are household names in Japan.
The issue has become so acute that the Osaka Stock Exchange has been forced to introduce an entirely new screening system to establish which companies now have direct mob links or large quantities of yakuza money on their shareholder register. Scores of companies, says one exchange insider, face the threat of being delisted.
As well as flagging the risks of a yakuza invasion of financial markets, the police white paper also sounds alarm bells over the real estate and construction sectors. The greatest risk, says the official report, is that the yakuza now match the operational strategies of mainstream global corporations and outsource much of their financial chicanery to “co-operative groups”.
But even as police and regulators rush to address soaring yakuza interference in the securities industry, close observers of the Japanese mafia believe the problem may now be well beyond control. The sophistication of the crime gangs has grown exponentially in recent months: many have begun hiring newly out-of-work traders who have been laid-off by large financial houses feeling the squeeze of the credit crunch.
According to one in-depth investigation by the state broadcaster NHK, a few yakuza gangs even operate their own stock dealing floors where millions of dollars worth of shares are traded every day. A newly published book on the subject, Yakuza Money, claims that the presence of skilled ex-bankers, ex-stockbrokers and ex-accountants on the yakuza’s extended payroll has dramatically increased the mob’s income stream and made it virtually impossible to discern the difference between legal and illegal funds as they flow through the Japanese markets.
One of the key recent developments, said Joshua Adelstein, an author and consultant on the yakuza, is the emergence of mob-backed auditing firms. It is by getting these auditing firms to sign-off false company accounts, he said, that the yakuza were now able to manipulate both the apparent earnings and stock prices of numerous small listed companies. “The police are worried, but the police are understating the problem,” he said, “organised crime has made tremendous inroads into the Japanese financial sector. The bad guys now have everything in place to manipulate the stock market.”
Yakuza target Japan’s financial markets – From Times Online – August 27, 2008 – Leo Lewis, Asia Business Correspondent – This story was found at: http://business.timesonline.co.uk/tol/business/markets/article4619166.ece
