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Combating Terrorist Financing Methods: A Focus on Indonesia

Introduction

Indonesia has made significant strides in combating money laundering and terrorist financing, but experts say that there is still room for improvement. In this article, we will explore the current state of Indonesia’s efforts to combat these types of crimes.

Challenges Faced by Indonesia

High-Risk Sectors

According to a recent assessment by the Financial Action Task Force (FATF), Indonesia’s money laundering risks come primarily from domestic crimes such as corruption, narcotics, tax evasion, and forestry crimes. The country also faces high terrorism financing risks due to the presence of terrorist organizations and their supporters within its borders.

Gaps in Supervision

Indonesia’s financial supervisory authorities have proactively developed their Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework, but there are still gaps in risk-based supervision, particularly in areas such as:

• Money changers
• Money or value transfer services
• Non-financial businesses

Recommendations for Improvement

Risk-Based Supervision

Experts say that Indonesia needs to improve its risk-based supervision by:

• Conducting regular reviews of high-risk sectors
• Implementing effective and dissuasive sanctions in all sectors
• Ensuring accurate information on the ultimate owners of all companies is available to law enforcement agencies

Asset Recovery

Indonesia also needs to improve its investigation and prosecution of different types of money laundering activities, particularly those related to forestry or environmental crimes.

Progress Made by Indonesia

Financial Intelligence Unit

Indonesia’s Financial Intelligence Unit has been providing high-quality financial intelligence to law enforcement for use in investigations into money laundering, terrorist financing, and other offenses.

Terrorism Financing

Indonesia has successfully detected, investigated, and prosecuted cases in line with its risk profile. The country’s strategy includes a focus on returning foreign terrorist fighters and de-radicalization programs.

Areas for Further Improvement

Experts say that Indonesia needs to:

• Improve its understanding of the risk of abuse of its non-profit sector for terrorism financing
• Take proportionate measures without discouraging or disrupting legitimate charitable activities
• Address gaps in Indonesia’s legal framework for targeted financial sanctions on proliferation financing

Conclusion

While Indonesia has made significant progress in combating money laundering and terrorist financing, there are still areas where improvement is needed. By addressing these gaps, the country can further strengthen its AML/CFT regime and reduce the risks associated with these types of crimes.