Japan mob loans scandal deepens as another major bank admits business links with yakuza

TOKYO (AFP) - A loans-to-mobsters scandal that is 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 dozens of 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 in the wake of a scandal that has made headlines for weeks, and reportedly sparked a police investigation into Japan Inc.'s ties with organised crime.

The Financial Services Agency (FSA) said 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.

On Friday, Japan's finance minster Taro Aso called Shinsei's admission "sensible", days after he slammed the Mizuho transactions as a "huge problem" and said the bank's initial - and incorrect - claims that executives knew nothing about the shady loans was "the worst thing a bank can do".

Authorities have long battled to keep gangsters from infiltrating Japan's corporate sector amid fears about 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.

Shinsei's Tokyo-listed shares were down 0.43 percent to 228 yen by the break Friday.