Reforms of on-site monitoring following the Mizuho bank case

(1)Horizontal reviews of internal controls for anti-money laundering (hereinafter referred to as the “AML”) as well as anti-social forces (“ASF”)

Based on the new Financial Monitoring Policy, the FSA will conduct horizontal reviews of internal controls across financial sectors to fight against ASF and ML.

The horizontal reviews will appraise effectiveness of the internal controls including involvement of senior management, databases for ASF, monitoring of transactions as well as procedures for terminating relations with ASF.

Following the horizontal reviews, the FSA plans to conduct further in-depth review of financial institutions including on-site inspection, whose internal controls are identified as vulnerable. The FSA, by providing feed-backs of the results of the horizontal reviews, also encourages each financial sector to upgrade their internal controls.

(2)Continuous monitoring of business strategies of financial institutions

In line with continuous monitoring of business strategies of major financial institutions, the FSA will identify potential risks in a timely fashion.

Especially on new business or major products/services, the FSA will assess the risks and request actions to mitigate such risks as needed.

(3)Enhanced information and intelligence collection mechanism

The FSA will enhance further cooperation with relevant regulatory bodies such as the National Police Agency as well as foreign supervisors. The FSA will establish an intelligence team which will collect information/intelligence related to unlawful and unfair businesses and transactions in financial markets.

(4)By strengthening its capacity for risk assessment by above measures, the FSA intends to enhance further risk based approach as well as conduct more in-depth and more effective on-site monitoring.

(1)Establishment of Special Task Force for AML and ASF

Based on the new Financial Monitoring Policy, special task forces are being created to address issues and sectors which require higher expertise. A special task force for AML and ASF, which is composed of experts, will be created to enhance cooperation with other regulatory bodies and to upgrade expertise on AML and ASF, including that on global best practices.

(2)More strategic on-site inspection

When a significant problem is identified through on-site monitoring, the FSA plans to conduct on-site inspection in more timely and strategic fashion, for example, by extending an inspection period and allocating additional resources flexibly.