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Japan loans scandal deepens as bank admits yakuza loans

A loans-to-mobsters scandal gripping Japan's banking sector has widened after major lender Shinsei Bank admitted doing business with organised crime figures. The country's finance minister on Friday lauded Shinsei after it admitted a day earlier that one of its subsidiaries made more than a dozen loans to the notorious gangsters, known as yakuza. The criminal syndicates are involved in activities ranging from prostitution and drugs to extortion and white-collar crime. "Our internal controls were not strict enough," Shinsei President Shigeki Toma told reporters in Tokyo on Thursday. Shinsei also admitted to opening accounts for what it called "anti-social forces", a common euphemism for gangsters. The revelation comes days after Japan's financial watchdog said it would probe the country's top three banks following a scandal that has made headlines for weeks, and reportedly sparked a police investigation into corporate Japan ties with organised crime. Authorities have long battled to keep gangsters from infiltrating Japan's corporate sector amid fears of mob involvement in stock trading and the real estate sector, among other legitimate activities. In 2007, regulators penalised a unit of Mitsubishi UFJ, the country's biggest lender, for doing business with organised crime. The Financial Services Agency (FSA) said this week it would look at Mizuho Financial Group's business dealings as well as rivals Mitsubishi UFJ and Sumitomo Mitsui Banking Corp., without disclosing further details. Mizuho has been under fire since it emerged in September that it processed hundreds of loans worth about $2 million for mob members. News of the FSA's latest probe came a day after a panel of lawyers hired by Mizuho said bank executives knew it was doing business with gangsters, but failed to stop the practice. The lender said Monday that 54 former and current executives would be punished, including Mizuho Bank chairman Takashi Tsukamoto. He would step down from his post but stay on as head of the parent company. Mizuho Financial Group chief executive Yasuhiro Sato -- who has acknowledged he was in "a position to be aware of" the loans but refused to quit -- will work without pay for six months. On Friday, Japan's finance minister Taro Aso called Shinsei's admission "sensible", days after he slammed the Mizuho transactions as a "huge problem". He criticised Mizuho's initial -- and incorrect -- claims that executives knew nothing about the shady loans, saying it was "the worst thing a bank can do". Japan's finance chief also took aim at regulators, saying that "we have to improve what we are supposed to be doing". His comments were in response to questions about the watchdog's handling of the high-profile case. The government would consider additional punishment for Mizuho as regulators probe its shady loans, Aso said Friday. The yakuza gangs, which themselves are not illegal, have historically been tolerated by the authorities, although there are periodic clampdowns on some of their less savoury activities. Shinsei's Tokyo-listed shares closed down 0.87 percent to 227 yen.