Financial Crime World

Indonesia Grapples with Digital Financial Threats as E-commerce Boom Accelerates Corruption Challenges

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The digital era has brought about a complex array of corruption challenges for traditional enforcement systems, with Indonesia being no exception. As e-commerce continues to boom since the start of the pandemic, the country is witnessing a spike in credit card fraud, online scams, phishing, and technology-enabled money laundering.

Digital Financial Threats on the Rise

According to research by the United Nations Office on Drugs and Crime (UNODC), law enforcement agencies in Southeast Asia have yet to fully adapt to the digitalized threat landscape, with many failing to leverage data analytics to detect and prevent corruption and fraud. The Indonesian Financial Transaction Reports and Analysis Centre (PPATK) has highlighted the risks of electronic money laundering and terrorism financing arising from new payment methods.

Webinar Discusses Digital Financial Threat Landscape

To address these challenges, UNODC recently organized a webinar on the digital financial threat landscape and law enforcement, attended virtually by over 100 participants representing national regulators, law enforcement, financial services, and other government agencies. The webinar explored various issues, including:

  • The rise of financial technologies bringing new corruption and fraud risks
  • The need for investigators to be equipped with skills to obtain electronic evidence and undertake forensic analysis

Key Takeaways from the Webinar

  • Fintech and crypto traders have characteristics that render them vulnerable to organized crime, such as high-speed transactions and real-time privacy features.
  • Fraud in Indonesia is steadily increasing, with fraud-related suspicious action reports rising from 9,801 in 2019 to approximately 23,000 in 2021.
  • Three areas were identified by PPATK as worthy of prioritization in mitigating the risks of electronic money laundering practices:
    • Financial services
    • Retail transactions
    • Export-import sector

Harnessing Technology for Law Enforcement

Where utilized correctly, new technologies hold great promise for law enforcement agencies. Mark Caroll, Director of Criminal Justice at Optima, reflected on five broad technological advancements that have innovated criminal justice processes, including:

  • Data-rich pictures of criminal activity

Governments must be proactive in harnessing the emerging power of financial technologies, addressing fraud risks without restraining innovative technology development.

Building Capabilities and Knowledge

Mr. Fithriadi emphasized the importance of building capabilities and knowledge on fintech, collaborating with the private sector, mitigating risks using smart regulations, and encouraging the private sector to develop and use regulatory technology.

Integrating Best Practices for Electronic Evidence Requests

The interaction between governments and technology providers has a significant impact on how crime prevention takes place. Ms. Hansol Park, Crime Prevention and Criminal Justice Officer at UNODC’s Terrorism Prevention Branch, recommended the Practical Guide developed under the UNODC Sherlock platform for integrating best practices when requesting electronic evidence across borders.

Conclusion

The webinar was part of activities funded by the Ministry of Justice of Government of the Republic of Korea. As Indonesia implements its Digital Transformation Policy, law enforcement agencies must be prepared to mitigate the risks posed by crime associated with this rise in digital innovation.