FSA Order AEON Bank to Strengthen Risk Management and AML Measures

The Financial Services Agency (FSA) has issued an order to AEON Bank to strengthen its measures against illegal activities.

This action is a response to the bank’s failure to detect and report at least 14,639 suspicious transactions during 2023 and 2024. Insufficient risk management systems and a lack of oversight for suspicious transactions are significant deficiencies that must be resolved.

The FSA now requires AEON Bank to submit an improvement plan by January 31, 2025, and to provide regular progress reports thereafter. This directive aims to minimize deficiencies in the bank’s AML protocols and ensure compliance with regulatory standards.

Aeon Bank is a subsidiary of the major Japanese retailer Aeon Co., which maintains a significant presence in the country’s banking sector.  The bank operates approximately 6,800 automated teller machines (ATMs) strategically located at its retail outlets, train stations, and airports nationwide.

As the media states, The bank’s latest disclosure report reveals a huge deposit base. Aeon Bank currently holds approximately 4.62 trillion yen in deposits across 8.62 million accounts. This highlights its role as an essential player in the Japanese banking sector.

The Financial Action Task Force (FATF) has placed Japan in the ‘enhanced follow-up’ category, which is the second of three levels indicating the need for closer monitoring of compliance with anti-money laundering standards.

It’s the first time that the FSA has overseen administrative actions against any bank. AEON became the first bank to receive administrative orders from the FSA’s intensive inspection that started in 2021.

According to FSA’s survey, AEON bank has the following deficiencies:

• Reporting suspicious transactions were delayed by approximately 152 days.
• The financial transactions didn’t inspect approximately 14,639 transactions.
• No progress has been made since the previous criticism.
• The regulation development & system implementation haven’t been completed within the given deadline.

The order highlights that customer transactions will not have any immediate impact. It also emphasizes the banks need to implement relevant measures so that similar issues do not become a practice.

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This order highlights the importance of risk management systems for financial institutions because financial crimes are rising. So, a proactive approach is required to fulfill regulatory requirements.