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Probe finds Mizuho lax about cleaning up mob loans

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ELAINE KURTENBACH | October 28, 2013 01:09 AM EST | AP

TOKYO (AP) — Japanese bank Mizuho Financial Group was lax in cleaning up loans that the lender discovered were linked to organized crime did not deliberately cover them up, an outside panel of lawyers said Monday.

The panel said the Tokyo-based bank, Japan's second-largest, failed to do what was expected of it in reducing such loans and preventing mob-related transactions.

It characterized the more than 200 million yen ($2 million) in lending as "captive loans" acquired when Mizuho bought consumer finance company Orient Corp.

The panel's report said top management neglected to ensure compliance with laws against dealings with organized crime after it discovered the loans in early 2011. Soon after, Mizuho's management became preoccupied with ATM malfunctions triggered by an influx of donations for victims of the 2011 tsunami disaster.

The report outlined plans it said Mizuho will present to the Financial Services Agency, which has demanded that the bank "improve" its lending business.

They include ending the loans, stepping up anti-mob screening of incoming business, tighter corporate governance and improving awareness among management and other employees about the need to prevent dealings with those linked to organized crime.

The bank on Friday denied news reports saying its chairman would step down and president lose months of pay as penalties meted out to some 30 Mizuho executives for failing to comply with laws against lending to "anti-social forces," a byword in Japan for criminal gangs.

The troubles at Mizuho underscore the difficulties financial companies confront in avoiding dealings with those deemed to be affiliated with organized crime and are reinforcing calls for more data sharing by police and financial institutions.

Japanese gangs, known as "yakuza," have long been involved in many areas of the economy, despite efforts to freeze them out of the financial system.