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The fight against organised crime

Following the promulgation of the Act on Prevention of Unjust Acts by Organised Crime Group Members in 1992, organised crime groups in Japan began increasingly to attempt to conceal the true nature of their organisations as ordinary businesses and use more sophisticated methods to generate funds through complex transactions such as equity investments and real-estate transactions.

In 2007, as a response to this development the Japanese government published the Guideline for Enterprise Operators to Prevent Damage from Antisocial Forces, after which much progress has been made in Japan with respect to the elimination of organised crime.

Efforts in Tokyo

On March 18 2011, the Tokyo metropolitan government promulgated the Tokyo City Organised Crime Group Elimination Prefectural Ordinance, which came into effect on October 1. Similar ordinances are also in place in each of Japan's 47 prefectures. These ordinances regulate not only issues with respect to organised crime, but the responsibilities of the government itself, its residents and businesses. Subject to certain minor variations they are generally similar.

The Tokyo Prefectural Ordinance regulates businesses in three principal ways. The first is related to the execution of agreements. If a business suspects that an agreement it is entering into may be used to facilitate organised crime operations or otherwise contribute to organised crime operations such business must endeavour to confirm that such counter-party, its agent, intermediary or any other related party are not members of organised crime or otherwise have a close relationship with organised crime.

In addition, where a business enters into a written business agreement such business must endeavour to include a clause in the written agreement, or other ancillary document, that would allow them to terminate such agreement without demand should it be discovered that the counter-party, its agent or intermediary to the agreement is found to be an organised crime related-party.

The second relates to the transfer and lease of real estate. Any person seeking to transfer or lease real estate in Tokyo prefecture must endeavour to confirm that the counter-party to such transaction will not use the subject property as a base for organised crime activity.

Parties seeking to enter into written property transfer or lease agreements are to endeavour to include provisions stating that the transferee or lessee will not use or otherwise allow the property to be used as a base for organised crime activity, and in the event it is found that the property is used in that way, the transferor or the lessor will be entitled to terminate the lease agreement or repurchase the real estate without demand.

Although the Tokyo Prefectural Ordinance only provides that parties are to endeavour to take such preventative steps where a director of a company neglects to make such efforts and as a result the company enters into an arrangement with organised crime from which it cannot extricate itself, he or she may be found to have not met their duty of care.

The Tokyo Prefectural Ordinance also regulates businesses with respect to the prohibition of benefits. Businesses are prohibited from providing economic benefits to organised crime, or persons designated thereby, in exchange for engaging in violent acts or violent demands.

If a business breaches this regulation, the Public Safety Commission will issue a recommendation to the business to take those measures necessary to terminate its relationship with organised crime and prevent such relationship from recurring, should the business violate such recommendation the name of the business may be published. If the business continues to provide economic benefits to organised crime, an administrative order may be issued, the breach of which may result in criminal penalties.

Efforts by bankers

In 2008 and 2009, the Japanese Bankers Association (JBA) published a reference manual for use in banking transactions and ordinary accounts, checking accounts and safe-deposit box agreements. The JBA amended this manual on June 2 2011 in order to properly and effectively deal with organised crime conducting financial transactions through related parties to, for example, participate in reconstruction projects arising from the recent earthquake in eastern Japan.

In its new reference manual, the JBA expanded the definition of antisocial forces to include "persons for whom five years have not elapsed since the time when such persons are no longer members of organised crime groups", and also substantially expanded the factors that would denote a relationship with anti-social force.

The JBA's new reference manual also provides that a bank will not be liable for any damages caused to its customers arising out of the application of the organised crime elimination provisions. In fact, bank customers are responsible to compensate their financial institution for damages arising from the application of these provisions.

It is expected that future financial transactions and checking account transactions involving Japanese banks will be operated in accordance with the new reference manual.

Yumiko Wada

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