Low BO Registration Rate Raises Concerns Over Effectiveness of Indonesia’s Anti-Money Laundering System
JAKARTA, INDONESIA - The relatively low number of Business Operator (BO) registrations in Indonesia has raised concerns over the effectiveness of the country’s anti-money laundering (AML) system.
Challenges to AML Effectiveness
Despite being available by law, Indonesia is not imposing sanctions on those who fail to comply with requirements regarding disclosure of basic and BO information. This lack of enforcement raises questions about the credibility of the country’s AML system.
Strengths of Indonesia’s AML/CFT Framework
Indonesia’s AML/CFT framework has a strong foundation for international cooperation, with bilateral and multilateral agreements in place for providing and seeking mutual legal assistance (MLA) and extradition. The Ministry of Law and Human Rights (MLHR) administers an integrated electronic case management system for MLA and extradition requests, with timely and proactive informal cooperation being a key feature.
High-Risk Areas
However, risks remain high in Indonesia, particularly in the areas of:
- Corruption
- Narcotics
- Fraud/economic crime
- Environmental crimes (such as forestry and illegal logging)
Financial Intelligence
In a recent assessment, financial intelligence was found to be regularly used by competent authorities to support AML/TF investigations, including the tracing of assets for confiscation. The Indonesian Financial Intelligence Unit (PPATK) produces and disseminates a wide range of financial intelligence products, which are widely used by law enforcement agencies.
Concerns Over Suspicious Transaction Reports
Despite these efforts, concerns remain over the limited number of Suspicious Transaction Reports (STRs) from Designated Non-Financial Businesses and Professions (DNFBPs) and those related to environmental crimes. Additionally, many reporting entities have not yet registered with the goAML system, which may limit the financial intelligence available to PPATK.
National Policies and Objectives
The Indonesian government has established national policies and objectives through national strategies, supported by annual action plans. Coordination and monitoring of this framework is undertaken by the National Coordinating Committee, which is generally strong.
Conclusion
While Indonesia’s AML/CFT system has a solid foundation for international cooperation, there are concerns over its effectiveness due to low BO registration rates and limited financial intelligence available to competent authorities. Addressing these issues will be crucial in preventing money laundering and terrorist financing in the country.