The following article appeared in the Nihon Keizai Shinbun several days ago. The English translation has been provided by the Shingetsu Institute. It is an interesting case that shows how cultural and linguistic differences sometimes impede Japan’s cooperation with international campaigns against terrorism and other matters.

Katakana Troubles Japan in Fighting against Terror
By Yasuo Ota

The terrorists’ simultaneous bombings struck London while the G-8 Summit (the Gleneagles Summit) was just being held. The participating nations of the summit reconfirmed the need to reinforce international cooperation to prevent acts of terrorism. Japan is going to focus on economic countermeasures against terrorists’ finance. However, the Japanese financial system has an unexpected shortcoming which makes it difficult to wipe out terror money.

Eliminating terror money has been an important theme of international coordination since the US was attacked by terrorists in 2001. The Financial Action Task Force on Money Laundering (FATF: the head office is located in Paris), which plays a main role, has given us guidelines such as banning anonymous accounts.

So far Japan has obligated companies to report dealings which might have something to do with terror money, as well as to report those remitting large amounts of money overseas in 2002. In 2003, the government required banks to identify clients who make an internal remittance of more than 2 million yen.

The government took the terrorist act in London seriously, and it is considering lowering the amount of money requiring a notification and how to make sure of the identity of persons who remit money using ATMs, etc. However, some people doubt the effectiveness of these measures.

The authorities, including the Financial Service Agency, have provided the names of terrorist groups of concern, and the members of those groups. However, security is still better in Europe. In addition to the data from the authorities, European banks have made their own database of dangerous groups or persons, and machines check automatically whether remittance is used by them.

On the other hand, banks in Japan are different from banks in Europe. Few banks in Japan have a system against terrorists’ finance since the number of remittances to foreign countries is so small in this country. Bank staff might have suspicion if a receiver’s country is in Iraq or Afghanistan, but he/she may not be aware of a danger when the accounts are owned by companies in Switzerland or Hong Kong, which terrorist groups may have a connection with.

Internal dealings are tougher to cope with. The system of the Japanese Bankers Association, which covers internal remittances and bank transfers, works based on data written in katakana letters. The problem is that different katakana can be used in expressing the same name. For example, “MOHAMMAD” can be written in katakana “muhanmado,” “mohamedo,” “mohamado,” and so on. It is difficult for a machine to distiguish all of them automatically.

The authorities expect that tellers will keep a list of suspicious groups or people and make sure of security. However, the list created by the Financial Services Agency has as many as 90 pages, and more than 450 names of groups or people like al-Qaida and Abu Sayyaf on the list. If they always consult the list, they would be unable to do their regular services smoothly.

The Japan branch of Brazil Bank was punished at the end of the last year after it turned out that the bank had dealt with business of an unauthorized remittance dealer. Although it seems Brazilian laborers in Japan merely sent their salary home, it may well have been terror money. Moreover, it is said that an allied group of al-Qaida has already used a Japanese account for money laundering.

Britain and America will beef up their security measures against terror more than ever. Unless Japan keeps up with them, the Japanese banking system will be used by terrorist groups in the future. Japan mustn’t give it up because of its katakana problem. It is a priority matter that the alphabet can be used in the system. Otherwise, we cannot restore confidence in Japanese finance that was lost in the 1990s.