TOKYO - A major Japanese credit company said Wednesday it had lent money to yakuza gangsters in a widening scandal that is sweeping through the country's banking system.
The admission by JACCS, a unit of Japan's largest lender Mitsubishi UFJ Financial Group, is the latest in a growing line and comes as a government agency says it will buy shady loans to help companies keep their balance sheets clean.
A spokesman for JACCS said an inspection of its books had revealed several instances of its lending cash to figures with links to Japan's underworld.
"Those cases were found linked to anti-social individuals after the initial screenings," said the spokesman.
He refused to give an exact number, but admitted it was "more than one but still single digit".
The scandal has gripped Japan's banking sector since Mizuho Financial Group came under fire in September for the revelation that it had processed hundreds of loans worth about $2 million to mobsters.
A panel of lawyers hired by Mizuho to probe the transactions said last week that "many officials and board members were aware of, or were in a position to be aware of, the issue".
"However they failed to recognise it as a problem, believing that the compliance division... was taking care of it," said the panel's 100-page report.
The company said 54 former and current executives would be punished, including Mizuho Bank chairman Takashi Tsukamoto, who would step down from his post but stay on as head of the parent company.
In the wake of that report, Japan's financial watchdog said it would probe the country's top three banks - Mizuho, Mitsubishi UFJ and Sumitomo Mitsui Banking Corp. - in an effort to weed out the practice of offering loans to the underworld.
Like the Italian mafia or Chinese triads, the yakuza engage in activities ranging from gambling, drugs, and prostitution to loan sharking, protection rackets, white-collar crime and business conducted through front companies.
The gangs, which themselves are not illegal, have historically been tolerated by the authorities, although recently efforts have been made to choke off their sources of funding.
Observers say the extent of the mob's reach into legitimate areas of finance is sometimes the result of officials looking the other way, but often a loan may be extended in good faith to someone who appears to be above board. It is only later that the individual's connection to organised crime is uncovered.
A state agency, the Deposit Insurance Corporation of Japan, began a scheme two years ago to help financial companies scrub their books of links to gangsters.
The agency buys the loans at a discount from the bank or credit card company, which must swallow the loss, while the state tries to recover the cash, an official at the Deposit Insurance Corp said.
Since its introduction in 2011, the agency has bought debts worth nearly 300 million yen (S$3.74 million). It has paid 11.7 million yen for them, he said.