Financial Crime World

Indonesia’s Financial Crime Trends 2023: A Mixed Bag

Indonesia has made significant progress in tackling money laundering and terrorist financing, with a strong legal framework in place and good use of financial intelligence and domestic and international cooperation. However, the country still faces challenges in improving asset recovery, risk-based supervision, and proportionate sanctions.

Key Risks

According to the Financial Action Task Force (FATF), Indonesia’s main money laundering risks come from domestic crimes such as:

  • Corruption
  • Narcotics
  • Tax evasion
  • Forestry crimes

The country also faces high terrorism financing risks due to the presence of terrorist organizations and their supporters.

Strengths

Indonesia has a good understanding of its risks and has developed risk-based policies and strategies to mitigate them. Domestic inter-agency coordination and cooperation are robust, and informal international cooperation on time-sensitive cases is effective.

The FATF evaluation highlighted Indonesia’s:

  • Good understanding of its risks
  • Development of risk-based policies and strategies
  • Robust domestic inter-agency coordination and cooperation
  • Effective informal international cooperation

Challenges

Indonesia still needs to improve in the following areas:

  • Asset recovery: The country faces challenges in recovering assets from money laundering and terrorist financing activities.
  • Risk-based supervision: Indonesia needs to focus on money changers, money or value transfer services, and non-financial sectors to improve risk-based supervision.
  • Proportionate sanctions: The country should ensure that sanctions are proportionate and do not disrupt legitimate charitable activities.

Recommendations

To address these challenges, Indonesia is recommended to:

  • Improve its understanding of the risk of abuse of its non-profit sector for terrorism financing
  • Take proportionate measures without disrupting legitimate charitable activities
  • Address shortcomings in its legal framework for targeted financial sanctions on proliferation financing
  • Focus on money changers, money or value transfer services, and non-financial sectors to improve risk-based supervision
  • Improve its investigation and prosecution of different types of money laundering activities, particularly those involving assets located abroad or from forestry or environmental crime
  • Ensure that accurate information on company ownership is available to law enforcement agencies

Conclusion

While Indonesia has made progress in combating financial crime, it needs to continue improving asset recovery, risk-based supervision, and proportionate sanctions to effectively tackle money laundering and terrorist financing. With continued efforts and focus on addressing these challenges, Indonesia can further strengthen its ability to combat financial crime.