• The Financial District

JAPAN FUND HIT BY FRAUD

The September arrest of two foreign men on suspicion of defrauding a government-backed small loan system for people in financial distress due to the coronavirus pandemic has apparently triggered a flood of canceled aid applications and returned funds, according to Mainichi Shimbun

The funds were emergency small loans of up to 200,000 yen (about $1,900) or comprehensive support loans of up to 600,000 yen (about $5,700) provided by social welfare councils across Japan to households that have seen serious income declines. The amounts were raised as a special measure to blunt the economic impact of the pandemic. The government-backed loans are interest-free, and repayment schedules are within two years and within a decade, respectively.


The two accused men, both from Nepal, were arrested in early September on suspicion of fraud for filing false applications for and receiving loans from the Tokyo Council of Social Welfare. Over a period of about 20 days after the arrests were announced by the Metropolitan Police Department (MPD) on Sept. 9, 60 other people of foreign nationality canceled loans they were applying for with the Tokyo council, worth a total of 36 million yen (about $341,600), and seven more returned a total of 4 million yen (about $38,000) to the program that they had already received.


"These people were probably afraid their own fraudulent applications would be exposed," one senior investigator told the Mainichi Shimbun. "There are signs that this kind of scam spread by word of mouth, so this case is likely just the tip of the iceberg." The officer noted that a former yakuza member was also arrested in September on suspicion of defrauding the loan program, adding, "We will boost our supervision regardless of nationality."


According to the MPD's second organized crime control section, the two arrested men allegedly claimed on their loan applications that their monthly income had dropped to zero even though they had income of a little under 200,000 yen as restaurant workers. They received a total of 400,000 yen in loan support. One of the suspects was quoted as telling investigators that he had "no intention of repaying the money." The incident was uncovered when the men were arrested for immigration law violations.


The alleged scam may be tied to the simplification of the loan application process implemented during the coronavirus crisis. According to the Japan National Council of Social Welfare and other sources, previously an applicant had to show social welfare council staff a detailed pay slip or bank book to receive funds. However, during the pandemic, applicants have been able to write and submit their own income reports.


The public loan system is under the jurisdiction of the welfare ministry, and one official told the Mainichi, "It is possible that some fraud will go undetected, but there are some employers that don't issue detailed pay slips. If we make application vetting more severe, it will become impossible to provide speedy relief to people who really need it."


From March 25 to Sept. 26 this year, social welfare councils granted some 1.13 million loans worth about 3.88 billion yen (about $36.8 million), or about 150 times the number of loans issued in all of fiscal 2018, which totaled just under 700 million yen (or just under $6.6 million).





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