Indonesia’s Financial Intelligence Unit Functions Praised, But Room for Improvement Remains

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The global anti-money laundering and counter-terror financing watchdog, the Financial Action Task Force (FATF), has recently assessed Indonesia’s financial intelligence unit and praised its efforts in combating money laundering and terrorist financing. The country’s legal framework is deemed robust, with a good understanding of risks faced and strategies to mitigate them.

Key Findings

• Indonesia’s legal framework is considered robust, with a good understanding of risks faced and strategies to mitigate them.
• The country’s financial intelligence unit has been praised for providing high-quality, timely, and targeted financial intelligence to law enforcement agencies.
• However, there are areas where improvement is needed, including asset recovery, risk-based supervision, and proportionate and dissuasive sanctions.

Areas for Improvement

• Asset recovery: Indonesia needs to improve its investigation and prosecution of different types of money laundering activities and ensure that it permanently deprives criminals of the proceeds of their crimes.
• Risk-based supervision: The country needs to focus on identifying and addressing high-risk areas, such as corruption, narcotics, tax crimes, and forestry crimes.
• Proportionate and dissuasive sanctions: Indonesia needs to develop a more effective system for imposing penalties on individuals and entities that engage in money laundering or terrorist financing.

Money Laundering Risks

• Corruption
• Narcotics
• Tax crimes
• Forestry crimes

Terrorism Financing Threats

• Presence of terrorist organizations and their supporters in the country

Financial Supervision Authorities

• Indonesia’s three main financial supervisory authorities have developed anti-money laundering and counter-terror financing (AML/CFT) frameworks.
• Banks, larger financial institutions, and virtual asset service providers have a good understanding of the risks they face.

Challenges

• Variability in understanding of AML/CFT risks among different sectors, such as money changers, money or value transfer services, and non-financial sector.
• Need to improve investigation and prosecution of different types of money laundering activities.

Next Steps

• Indonesia will continue to work towards fulfilling the FATF’s membership requirements and addressing the areas identified for improvement.
• The country will focus on improving asset recovery, risk-based supervision, and proportionate and dissuasive sanctions.