Japan's Financial Services Agency is asking regional banks to improve their compliance with anti-money laundering and counter-terrorism financing rules following its survey of the banks earlier this year, Reuters reported Oct. 2, citing "people familiar with the matter" and documents seen by the outlet.
The FSA's survey showed that a number of regional banks and credit associations lag behind when it comes to preventing money laundering and terrorism financing. The survey, which was launched by the regulator earlier this year, found that many of the banks have inadequate risk management and little buy-in from senior management.
Further, the survey showed that about 20% of regional banks have not completed risk evaluations of transactions made by counterparties for potential violations of anti-money laundering rules or terror financing, a requirement under Japanese law. Meanwhile, 50% of credit unions have not completed the assessments.
The agency has begun onsite inspections and plans to tighten surveillance of banks' compliance with anti-money laundering measures as a result of the survey. The agency will also hold compliance seminars to improve banks' monitoring of illegal transactions.
Banks that fail to comply with anti-money laundering rules may lose their correspondence with overseas banks for their foreign exchange business, among others, the sources said.
A spokesman for the regulator declined to comment. The Regional Banks Association of Japan and the National Association of Shinkin Banks also declined to comment, Reuters said.