Defending the financial system against yakuza infiltration

Citibank is feeling some FSA heat right now because it wasn’t strict enough in monitoring and reporting “suspicious transactions including money laundering.”

Organized crime relations are becoming a bigger and bigger deal in the world of Japanese financial regulation. Late last year, the FSA and the Japanese Bankers’ Association adopted some administrative guidelines concerning how banks should protect against yakuza, sokaiya and other rabblerousers, and many of those guidelines are being phased in this year by institutions across the country.

One measure being implemented is amending account agreements in order to allow banks to pull service from customers with criminal ties. Here is a translation of the JBA’s suggested language (original version here). It is pretty laughable even by legal Japanese standards; I wonder who had a hand in drafting it.

Article [__] (Exclusion of Anti-Social Forces)

(1) I hereby represent that I am currently not, and hereby agree that in the future I shall not become, any of the following.

1. A criminal organization (暴力団)
2. A member of a criminal organization
3. A quasi-constituent of a criminal organization
4. An enterprise related to a criminal organization
5. A sokaiya (総会屋), politically-branded racketeering organization (社会運動等標ぼうゴロ) or organized crime-related “specialist” (特殊知能暴力集団 – a police term for individuals or groups who are not yakuza themselves, but help fund yakuza activities)
6. Any other person pursuant to any of the above

(2) I hereby agree that I shall not engage in any of the following acts, whether personally or through a third party.

1. Violent demands
2. Improper demands in excess of legal responsibilities
3. Acts of violence or menacing statements in relation to a transaction
4. Spreading of rumors, use of falsified statistics or use of obstruction to harm the reputation of your bank, or to obstruct the business of your bank
5. Any other act pursuant to any of the above

(3) In the event it is determined that I correspond to any of the listed items in paragraph 1 above, commit any listed act in the preceding paragraph, or have made a falsified report with regard to the representations and covenants in paragraph 1 above, and it is improper to continue transactions with me, upon the demand of your bank, I will lose the benefit of term with regard to all liabilities I have to your bank, and will promptly perform those liabilities.

(4) In the event that I have received the discounting of notes, that it is determined that I correspond to any of the listed items in paragraph 1 above, commit any listed act in the preceding paragraph, or have made a falsified report with regard to the representations and covenants in paragraph 1 above, and that it is improper to continue transactions with me, upon the demand of your bank, I will owe a liability to repay the face amount of all notes, and will promptly perform it. Until such time as this liability is performed, your bank may exercise all of its rights as the holder of such notes.

(5) Once performance of the liabilities under the preceding two paragraphs has been completed, this agreement will lose validity. (Bizarre phrasing!)

South Africa’s rand is the world’s best performing – and best looking – currency

This was some interesting news (via Bloomberg):

South Africa’s rand, the world’s best-performing major currency this year, may rally another 4 percent if it breaks through 8.23 per dollar and stays there, based on technical analysis by Barclays Plc-owned Absa Capital.

Candlestick charting shows the rand closed stronger than its opening levels everyday last week, suggesting it’s “fighting” to appreciate further, said Judy Padayachee, a technical analyst at Johannesburg-based Absa. Even so, it has yet to remain stronger than the so-called “resistance” level of 8.23 per dollar, according to Padayachee.

Good for them. But thanks to this news I was pleasantly surprised at how awesome the rand looks. Buffalo power!


The notes were redesigned after the end of apartheid in 1994. Here is what the old notes looked like:


You can find out more about South Africa’s currency (with similarly intense drawings of lions and rhinos) here.

My Credit

After reading the recent NYT Magazine Article What does your credit card company know about you? and listening to the Planet Money interview with the author, Adam and I were discussing our personal credit experiences a bit. We begun an exchange over email, but I’m going to move it to the blog. Here is the initial email I sent to him, after he asked what the interest rate on my credit cards is.

I have three credit cards, all from Chase Bank (now JP Morgan, originally Chase Manattan).

Limit          APR             Cash APR
$10,500      9.24%          19.24%
$11,000      7.24%          19.24%
$4,200        13.24%        19.24%
(APR is Annual Percentage Rate, basically just interest rate. Cash APR is the rate they charge when you take a cash advance by using your credit card as an ATM card.)
All 2 cards are from Chase, I had only applied for one originally, which started with an introductory $500 limit back in like 1999 or so, which has been gradually raised over the years and with them, sending me two extra cards, unsolicited, at some point. The original card was MasterCard, the others include a second Mastercard and a Visa. Of course, I also have an ATM debit card, but I only use that to withdraw cash since I got the credit card, which presumably is how I built enough of a record with Chase for them to give me so much unsolicited credit at apparently reasonably rates. BTW, I’m not entirely sure which card is the original one at this point, but I think it may be the one with the highest APR, with the lowest interest rate card being the most recent, granted to me as an apparently responsible customer.
Obviously I should make sure to only use that one in the middle from now on. In fact, that is the one I’ve been using, which currently has a couple of hundred bucks I haven’t payed off yet, but I will as soon as I get paid next into my Chase account. BTW, I hadn’t even noticed my credit limit had been raised again sometime in the past year. Last time I looked my total credit limit was around $20,000 but now it’s up to $25,700.

Komakai cash flow planning for the cross-border professional

I’ve been intrigued lately by some good pieces on gaijin personal finance. First there’s the blog Frugalista Japan, which is all about saving money and has some interesting tips to share. Then came this great piece on budgeting for the inaka lifestyle by Deas at “Rocking in Hakata.” And, of course, our own Adamu wrote recently about borrowing his way out of debt.

This stuff is great. For those of you who don’t know, I work in structured finance at a bank in Tokyo, which is an inherently unstable job these days (lots of going-away parties lately). To make matters worse, although my salary is pretty decent, going through three years of grad school gave me several figures of student loan debt to pay off, and I have to wire money to the US on a regular basis to cover these bills. So money management has been in the forefront of my mind for a while.

I started out keeping track of my accounts manually, but this carried three significant drawbacks. One was that it took a hell of a lot of time. One was the ongoing annoyance of fluctuating exchange rates and wire transfer fees, which really add up if you are doing things on a paycheck-to-paycheck basis. The other was that I would sometimes miscalculate something, or overlook a pending payment, and end up overdrafting one of my accounts, which can be REALLY expensive.

If you are rich, you can get an account with HSBC Premier and avoid many of these headaches. I am not rich, though, and even if I were, I would not want to stick 100 grand of cash into an uninsured account. Not in this economy.

Fortunately, the right accounting solution was in front of my eyes the whole time. Structured finance — whether in the form of asset-backed securities or syndicated loans (i.e. loans extended by a big group of banks rather than a single bank) — often revolves around the concept of “waterfalls.” This is the notion that some constant flow of money (business revenues, mortgage payments, etc.) trickles into an account somewhere and then gets divided among a bunch of recipients in a predetermined order on a regular basis, much like a multi-level waterfall pours water in different directions. For instance: “Bank A gets paid interest on its share of the loan, then any remainder gets split evenly between Banks A, B, C, and D, then the company which took out the loan gets to keep the rest.”

This concept works pretty well when you are getting a regular paycheck and need to pay bills in two countries. I set up a spreadsheet using Google Docs, and now I have an idea of exactly what to do with my money each month. I’ll start with the Japan side.

                        4/19/09   5/19/09
Last Balance            xxxxxxx   xxxxxxx
Paycheck          19th  xxxxxxx   xxxxxxx
Other Income                       57,550
JAL Card          27th   11,800         0
View Suica         4th  207,431    60,000
E-Bank Deposit          158,000   183,000
Rent              Last   90,000    90,000
Extraordinary             8,000
Discretionary            90,000    93,000
Wire to US                        199,040
End JPY Bal             xxxxxxx   xxxxxxx

Each column represents the cash flows from one incoming paycheck (I get paid on the 19th) and any extra income, such as my commuting allowance or the upcoming teigaku kyuufukin bonanza. I pool my yen in the bank account where the paycheck comes in, and my two credit cards automatically pull payments from that account. (My utilities get billed to these cards as well; the April payment is high because I put a few sizable nomikai on my card for the points.)

Then I stick spending money in a separate account with eBank, which I use because of its awesome cash card (it works as a Visa card and can pull money for free from Yucho and 7/11 ATMs) and easy online banking interface. The “E-Bank Deposit” line gets automatically calculated based on how much I plan to spend in rent, extraordinary expenses and discretionary expenses.

The “discretionary” line is my pocket money, which I use for groceries, restaurants, booze, gadgets, hot dates or whatever else comes up during the week. I keep this budgeted at 3,000 yen per day/21,000 per week for simplicity’s sake: it varies in monthly amount because the months have slightly different lengths. Then there is a line for “extraordinary” payments: gifts, travel and other potentially big-ticket items which I know are coming up.

Finally, I have to send money to the US to pay student loans. The rather random-looking “wire to US” number comes from the bottom half of my spreadsheet, which looks like this.

                        4/19/09   5/19/09
USDJPY rate               99.56     97.52

Last Balance            xxxxxxx   xxxxxxx
Wire from JP                     2,000.00
Interest                   2.48      0.44
Wire Fee                            18.00
Chase SLS         Last   389.62    389.62
KHESLC            10th   456.00    456.00
Chase CC          15th   400.00  1,400.00
Other Spend              405.64
End USD Bal             xxxxxxx   xxxxxxx

It’s easiest to read this from the bottom. I have two student loan accounts, which draw from my US checking account automatically every month, as well as a US credit card which is still carrying the bill from my last trip to the States. I simply set up the spreadsheet to calculate the ending balance for each month based on the starting balance and the scheduled payments in between. Then, whenever the ending balance comes up negative, I drop in a big wire transfer to top it up.

The spreadsheet automatically updates the USD/JPY exchange rate based on Google Finance data (one of the advantages of using Google Docs for this purpose), and the formula for the outgoing transfer amount accounts for the transfer charge and the rate spread. So whenever I go to make a transfer, I overwrite the auto-updated exchange rate formula in the spreadsheet with whatever exchange rate was actually used (generally the same one if I am quick enough), and all the numbers line up perfectly.

The beauty of this system is that it makes it really hard to run out of cash or miss a payment on any of your accounts; you can simply tweak a couple of numbers (like wire transfer amounts or credit card payments) to keep everything in the black in any given pay period. Setting the spreadsheet to make negative numbers bold and red helps a lot. This also makes it easier to game exchange rate fluctuations, as you can move your transfers around based on your own estimates of when the rates will be good.

Just to be even more komakai, I also set up a running balance sheet for myself so that I can track how my net worth is doing. Although I started out doing this on a monthly basis, I switched to quarterly accounting recently after reading Nassim Taleb’s book Fooled by Randomness. Taleb makes many good points in this book, but one that stuck out in my mind is that keeping a very tight eye on financial indicators which are mainly relevant in the long term (stock prices, property values, etc.) is likely to cause more stress than the benefit of the additional information can justify. Personal net worth is one such indicator: it’s nice to know when you will pay off your debt, or how much dough you are set to hoard by retirement age, but you don’t need to know it on a monthly basis, as those months where you buy a plane ticket, give to charity or have a wild night in Roppongi are likely to turn you off to the whole idea of accounting for yourself.

Paypal coming to Japan

UPDATE: Just to be clear, this article is about an expansion of Paypal’s services in Japan  into bank remittances. Paypal already offers some services in Japan linked to credit cards. Thanks to commenter Adrian for pointing that out.

The Nikkei has an article noting that thanks to law revisions set to pass in the current Diet session, restrictions on the remittance business will be substantially relaxed in a move that will finally allow Paypal to offer its services in Japan. The article contains an example of how sending money will change starting some time in 2010:

Current money transfer services offered by banks are not ideal for sending small amounts of money overseas. For example, a major Japanese bank charges 5,500 yen for wiring money to a U.S. bank account regardless of the amount.

PayPal and other online money-transfer services offer a cheaper, more convenient alternative to traditional bank wires. High fees have stopped a grandmother in Nagoya from sending a 5,000 yen birthday gift to a grandchild in the U.S., since she would have to spend more on fees than the amount she is sending.

If an online money transfer service such as PayPal can be used, the grandmother probably would have sent the money without hesitation because fees for sending 5,000 yen to the U.S. using that service come to no more than 200 yen.

This sounds tempting, but the numbers presented are misleading, especially in this English-language summary of the original Japanese article.

According to the print edition of Nikkei, Paypal will charge fees of 1.9-2.7% of the amount, plus an additional 30 yen fee, in contrast to banks which take a flat fee (usually around 4,000 yen, but Lloyds charges just 2,000) plus a foreign exchange fee of around 1%. So while the service looks cheap for small amounts like the example above, in reality the fees are cheaper than banks only up to around 150,000 yen, according to a company spokesperson quoted in the article (vs. Lloyds that number falls to 100,000 yen). For debt slaves like me who routinely send 200,000 yen overseas each month, this would make no difference at all.

And of course Paypal’s service has other benefits besides overseas remittances – it’s mainly a convenient way to pay for online auction purchases (without giving out credit card info), so maybe it will catch on here as well. Other benefits touted by the article included 24-hour service and “lower fees” though they did not present examples as to how the fees for domestic transfers would be cheaper.

Plus other businesses such as NTT Docomo are planning their own services, so maybe at some point someone will find a profitable way to make overseas remittance cheaper.

Planet Joe

In a post on the Somalian piracy issue, the folks at NPR’s Planet Money point out how odd it is that some ships fly the flag of landlocked Mongolia (it comes down to tax/regulatory incentives), photo courtesy our own Joe Jones!


He’s got a bunch of other great photos on his Flickr site.

Though it may be an online-only podcast, Planet Money is fast becoming my favorite NPR program after This American Life and On The Media. They slow everything down and give context to the news, avoid shorthand and jargon, and generally make the day’s developments imminently accessible and understandable. Too often the news seems out of context and complicated, and no doubt turns away a lot of people before they can really even try and get a handle on things. Their approach is refreshing and sorely needed in other areas of the news!

The show originated as a spinoff of the amazing work they did for TAL, which is a must-listen to get a decent idea of what’s happening with the financial crisis:

The Giant Pool of Money (step-by-step, player-by-player breakdown of the subprime crisis)

Bad Bank (A follow-up made in February that similarly explains the developments of the financial crisis and what should be done with the banks)

Scenes from a Recession (This is a more traditional This American Life episode that takes a man-on-the-street approach to see how the recession is affecting people)

I’ve said it before, but I really can’t recommend these enough for anyone who’s not a “finance expert” but still wants to know what the hell is going on. In essence this stuff is really simple but made intentionally complicated by industry insiders.

The ANA-Shinsei theme music continuum

If you spend enough time in Japan with consumption habits like mine, you will eventually discover that All Nippon Airways and Shinsei Bank have very similar corporate theme songs. This is because both songs were composed and performed by Taro Hakase, a Japanese violinist who sports a generous afro, a skilled bow and a sizable repertoire of corporate contracts.

Here’s the ANA music, “Another Sky,” as presented in their employee tribute video which plays while an ANA flight deplanes. They also play it as hold music on their reservations line and as boarding music on international flights.

And the slightly sadder Shinsei theme song, “Color Your Life,” as performed live by Mr. Hakase. Unlike ANA, Shinsei doesn’t have an opportunity to force-feed this one to every customer, although you can easily get a whiff of it as the hold music on their customer service line. “Color Your Life” is also the company’s retail banking slogan, to tie in with its offering of cash cards in every color.

This is why being on hold with Shinsei gets me in the mood to take a flight somewhere.

Invest in North Korea?!

Yes, says the man in the bowtie:

Feb. 24 (Bloomberg) — A U.K. businessman is seeking to raise $50 million to invest in North Korea, reviving a 2005 plan after the U.S. government removed the communist regime from its list of countries that support terrorism.

ChosunFund Pte. Ltd. will join with North Korean partners for mining and energy projects, Colin McAskill, founder of the Singapore-incorporated fund, said in an interview.

“The country holds huge natural resources but is capital starved and lacks the technology and management skills with which to develop them,” McAskill said.

McAskill, 69, said he has been consulting on potential North Korean projects since 1987. While the country attracts one-off investment deals such as a recent contract licensing Orascom Telecom Holding SAE to provide wireless telephone services, it has struggled to raise money from global financial markets since defaulting on overseas debt in the 1970s.

London-based emerging markets money manager Fabien Pictet & Partners Ltd. was considering a fund that would invest in South Korean companies that do business with the North. The idea is “on hold for the time being,” Jonathan Neill, managing director, said in an e-mail.

I understand that the terror designation was a technical barrier for to much economic aid in addition to banning most financial institutions from doing business with NK. And I know saying investing in North Korea is a bad idea is like shooting fish in a barrel.

But the US political decision to remove NK from the list doesn’t strike me as any real vote of confidence in the country, since North Korea appears to remain the dictionary definition of a state-run criminal enterprise, even if it hasn’t strictly engaged in “terrorism” the 80s. Nor is this is any real sign that the situation in North Korea is at all stable.  The ailing health of Kim Jong Il also plays a decisively destabilizing role. We could easily see a succession battle worthy of imperial Rome when he finally dies.

Still, you have to give the man credit for sticking with the idea for more than 20 years. There is always the chance that NK will stabilize somehow, so getting in on the ground floor would then be seen as a smart move. There could also be a rationale for investing in SK companies who take on NK projects with the backing of the South Korean government, or with some other guarantee to offset losses.

Best J-E financial glossary ever, available for free by the FSA thanks to the magic of XBRL

Thanks to some technological advances in the area of financial reporting, I am happy to pass along this very handy Japanese<>English financial glossary (3MB, Excel format). This treasure trove contains an extensive bilingual list of the terms used in Japanese financial statements, spanning all sectors and including terminology for investment business and mutual funds.
The file is a list of terms to used in XBRL. Ever heard of it? If you don’t work in investment or the finance department of a corporation, don’t feel bad if you haven’t. It’s a markup language, similar to XML or HTML, customized for the production of financial statements. (watch this awesome Japanese-language Flash animation to learn more).
The point is to standardize all aspects of producing the statements. Completely standardized and easily processed statements have all sorts  of advantages, from highly efficient analysis to potentially spotting massive frauds. And the advantages extend beyond mere numbers because the the format standardizes terminology across languages.  I have no clue how they came up with the translations (the FSA site mentions something about the terms being “extracted from past materials”), but from what I have reviewed they are all pretty solid. reports (perhaps with some slight overhyping of XBRL’s advantages by the SEC and others) that the system is set to be introduced to 500 of the largest US companies starting in April:

Adding XBRL tags to financial disclosures makes them searchable and much easier to compare. What used to be available only to financial professionals now will be easily accessible to anyone with an Internet connection. Investors, and regulators, in theory, will be able to analyze data faster and more easily, and possibly finding anomalies in corporate financial statements and investments.

The new rule, while not necessarily helping SEC and investors uncover problems that led to the collapse of the financial industry or discover investment fraud such as that allegedly perpetuated by Bernard Madoff, will improve financial analysis. To do so, XBRL would have to be applied to filings on all types of securities, including asset-backed securities and collateralized debt obligations.

The move will bring the United States into alignment with worldwide practices, said Diane Mueller, a member of the XBRL international steering committee and vice president of XBRL development at software vendor JustSystems.

Currently, financial disclosure records that public companies and mutual funds file are large, unwieldy documents often thousands of pages long. Only large financial institutions have been able to devote the time and staff necessary to parse through the documents and glean the most pertinent information and figures for analysis.

The adoption of XBRL, however, is likely to significantly change the way companies are analyzed. The addition of data tags will allow software to instantly comb through reports and identify the most critical information and figures. XBRL “makes for much easier and timely comparisons between companies,” Moyer said. “Today it’s extraordinarily difficult for investors to compare between balance sheets of two banks. They have different reporting styles, etc. [XBRL] starts to conform balance sheets and give you more comparability.”

Another advantage of XBRL for the commission is regulators will know instantly if a company’s filing is missing any key information because the software will automatically identify what data is missing when corporations electronically file documents and then notify the company and SEC. Previously, regulators had to manually check files to find missing information, Mueller said.

Speaking of worldwide practice, Japan’s Financial Services Agency, the financial regulator, was a step ahead, becoming one of the first major financial centers to mandate XBRL filing starting in April last year. Thanks in part to the Japanese authorities’ desire to be a leader in this area, they have provided an official FSA “XBRL taxonomy,” current as of March 2008, which is the file linked above.  
While this isn’t exactly news, it’s the first time I actually bothered to look. I had heard that the transition to XBRL could completely eliminate the need to translate financial statements manually, but wasn’t quite sure what it meant until now. Dig in, and mourn the coming loss of one source of translation work!

A conspiracy mindset setting in?

Looking for a transcript of Treasury Secretary Geithner’s congressional testimony, here is what Google recommended to me as a common search:

“Geithner Jew” — is he even Jewish? Apparently not.

I guess these searches could be coming from curious Jews wondering if one of their own was promoted to high office.