Indonesia’s Efforts Against Terrorism Financing and Counter-Terrorism Receive International Praise, but Improvement Needed
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A recent evaluation by the Financial Action Task Force (FATF) has commended Indonesia’s efforts in combating money laundering and terrorist financing. The report highlights a strong legal framework, effective use of financial intelligence, and international cooperation as key strengths. However, it also identifies areas where improvement is needed to further strengthen the country’s counter-terrorism measures.
Risks and Challenges
Indonesia faces significant risks from domestic crimes such as:
- Corruption
- Narcotics
- Tax evasion
- Forestry crimes
These crimes have the potential to generate large amounts of illicit funds, posing a high risk of terrorism financing. The presence of terrorist organizations and their supporters within the country also poses a significant threat.
Policies and Strategies
Indonesia has developed robust policies and strategies to mitigate these risks, including:
- Risk-based approaches
- Domestic inter-agency coordination
The country has also made progress in international cooperation, particularly in informal agreements on time-sensitive terrorism and terrorist financing cases.
Financial Supervisory Authorities
The report commends Indonesia’s financial supervisory authorities for their proactive development of anti-money laundering and counter-terrorism financing (AML/CFT) frameworks. However, it notes that:
- Risk-based supervision is needed to focus on higher-risk sectors such as money changers, money or value transfer services, and the non-financial sector
- More effective and dissuasive sanctions are required in all sectors
Financial Intelligence Unit
The Indonesian Financial Intelligence Unit has been praised for providing high-quality financial intelligence to law enforcement agencies. However, the report notes that:
- Improvements are needed in the investigation and prosecution of different types of money laundering activities, particularly those involving assets located abroad or related to forestry or environmental crimes
Efforts Against Terrorist Financing
Indonesia’s efforts against terrorist financing have also been recognized, with a focus on:
- Returning foreign terrorist fighters
- De-radicalization strategies
However, the country needs to improve its understanding of the risk of abuse of its non-profit sector for terrorism financing and take proportionate measures without disrupting legitimate charitable activities.
Remaining Gaps
The report highlights some remaining gaps in Indonesia’s legal framework, including:
- Targeted financial sanctions on proliferation financing
- Urges the country to address these shortcomings
Conclusion
While Indonesia has made significant progress in combating money laundering and terrorist financing, there is still much work to be done to strengthen its counter-terrorism measures. The country will continue to work towards fulfilling FATF membership requirements.