Episode #259: Dealing With Crime In Business In Japan

Crime is going to be a feature of any society. There are going to be different elements of crime – activities that affect your personal safety, fraud coming from outside your firm and fraud coming from within your company. Organised crime the Yakuza are well established here. They even have their offices with their own shingle, announcing which gang they are. They are not as strong as they once were, but they are still a force. The chances of a foreign run business having trouble with the Yakuza is pretty low. For cultural and language reasons they find dealing with us too hard. There are plenty of local Japanese they can exploit and that is a much easier to do.

They run prostitution, drugs and extortion. There have been media reports at different times of a Japanese company President or employee being killed by Yakuza, because he wouldn’t pay them off or whatever. A new law introduced a few years ago that held the gang boss response for the crimes of his underlings, has had a strong negative impact on the Yakuza, but they are still operating and probably always will be.

You are more likely to run into Yakuza in a club or bar. You are out on the town, you go for drinks, and are having a great time. When you get the bill, it is the equivalent of the GNP of a medium sized African country. You protest and that is when the Yakuza chinpiraor punks, appear to persuade you to shut up and pay. And you better pay.

If you go to places like Roppongi or Kabukicho in Shinjuku in Tokyo, then you will be in Yakuza territory and they will be running clubs and bars. If you get into any trouble with Yakuza on the street, the safest place for you is at the police Koban or police box. Don’t try and sort it out yourself, get the cops involved. Anyway, you will have to work pretty hard to get yourself into trouble with the Yakuza in Japan, it is very, very unlikely to ever happen.

Fraud is a different question. There are plenty of cases here of Japanese being taken to the cleaners through fraud. They have their share of ponzi schemes here too. Often they are pretty bad ponzi schemes, in the sense they collect the money and then rapidly disappear. They don’t even bother to string it out over a number of years like Bernard Madoff did in the US. Here they grab your cash and then they are long gone.

You also hear anecdotal cases where family wealth has been stolen through business dealings with bad people. My Japanese wife’s family and friends all know of cases where a solid family has lost wealth through fraud from supposedly reliable business partners. Fraud does happen here. If the deal sounds too good to be true, it is probably not something you want to be part of. There is no such thing as a free lunch in business and it is all hard work, hard work, hard work.

It is very difficult at the start to distinguish which business partners are the good ones guys and which ones are the crooks. Keep you wits about you. Having said that, the chances of this happening are pretty slight. Again all of those cultural and language issues make it hard for them to target you. And there are so many gullible Japanese kamo or targets anyway, why waste their time on the likes of you. Counter intuitively, speaking Japanese can be a disadvantage in this regard. I was a kamoin a real estate deal here and did lose a considerable sum of dough as a result. They had all the aces as it turned out and all I had was ignorance, but it was a strong lesson to do your due diligence here really well.

The other part of fraud is inside your own company. There are no shortage of cases of people stealing from banks, from their companies, etc. It does happen. In big companies, some staff are fabricating expense reports, to get the cash for themselves. There was a case recently of a bank employee who was hiving off cash from some transactions he was involved in. Often it is driven by bad gambling debts and they become desperate to pay the money back, especially if they are dealing with the Yakuza. Stealing from you sounds a lot better than getting beaten up or killed by the gang.

In the past, some of the short term, high interest cash loan businesses would use Yakuza muscle to collect the money. The usurious interest rates made it virtually impossible to ever clear the loan. That got cleaned up after a lot of scandals surfaced, but there is a lot of pressure to pay the loan back, so stealing from your employer starts to look like the only way out. The other usual driver is the middle aged married guy, trying to fund his young girlfriend’s required lifestyle and he starts taking money from the company to make it all work. This can be going on for years, before it is finally discovered.

Part of that reason is that Japan is such an honest culture that we all get lulled into a false sense of security. We don’t have the checks and balances in place because we are so trusting. The people involved have worked out the weaknesses in the system and they exploit that gap for their own financial benefit. Japan is a very honest country, so the chances of this happening are quite low, but they are not zero. So we should make sure we have some mechanisms in place to just be on the safe side of the equation.