At least 12 regional banks in Japan have introduced a system to monitor ship-to-ship transfers of cash and gold earned through illicit means as part of their efforts to combat money laundering, bank officials said Wednesday.
The introduction of the system of IHS Markit, an information-providing firm headquartered in London, comes as an intergovernmental body tasked with combating money laundering and terrorist funding has indicated Japanese regional banks' anti-money laundering measures were insufficient.
According to its 2021 report on Japan, the Financial Action Task Force said some financial institutions in the country other than megabanks have a limited understanding of money laundering and terrorism financing risks that have become a global issue.
The 12 banks which introduced the system include Hiroshima Bank, Hyakujushi Bank and Fukuoka Financial Group Inc., with many based in areas where shipbuilding and shipping business prosper.
The monitoring system allows them to confirm locations and speeds of ships, as well as changes in waterlines of vessels which indicate loading and offloading of cargos, via satellites and antennas installed in various locations.
The system alerts its users when the speed of a vessel dips below its setting.
U.S. and European financial institutions as well as major Japanese institutions started introducing the monitoring system after the 2001 terrorist attacks in the United States as part of their anti-money laundering and counter terrorist financing measures.
Among the 12 regional banks, Iyo Bank in Ehime Prefecture in western Japan, where the country's leading shipbuilder Imabari Shipbuilding Co. is located, introduced the system in 2019 as the lender has many shipping firms as clients.
The bank monitors maritime activities of large vessels on computer screens.
"We have been closely monitoring vessels cruising around countries that are subject to U.N. sanctions," an official of the bank said.
Among such countries, North Korea, sanctioned for its nuclear and ballistic missile programs, was accused by Japan and other countries of smuggling petroleum products through illicit shipments in a report submitted in 2020 to a U.N. Security Council sanctions committee on North Korea.
Yamaguchi Financial Group Inc., meanwhile, has been monitoring some 200 vessels operated by clients of affiliated banks with focus on activities in the Sea of Japan, according to a person with knowledge of the matter.
"Regional banks' measures to combat money laundering have steadily made progress," said an official of Japan's Financial Services Agency.
