Financial Crime World

Financial Crime Risks Emerge as Fintech Thrives in Indonesia

As Indonesia aims to become the world’s fourth-largest economy by 2050, the country is leveraging new financial technologies (fintech) to facilitate access to financial services across every segment of society. However, this growth raises concerns about financial crime risks.

The Rise of Fintech in Indonesia

Indonesia has seen a surge in fintech startups, including OVO, Doku, Kredivo, Gopay, and Amartha, which offer a range of services such as payments, lending, crowdfunding, and financial planning. These companies have become omnipresent in the country, providing citizens with greater access to financial services.

Financial Crime Risks Associated with Fintech

However, the growth of fintech also raises concerns about financial crime risks. In 2017, Indonesian authorities confirmed that a well-known militant transferred money back to his country using PayPal and Bitcoin to fund terrorist cells in Java.

The Risk of Virtual Currencies

The use of virtual currencies (VCs) such as Bitcoin, Monero, Dash, and Zcash poses a particular risk. These cryptocurrencies offer high levels of anonymity, making it difficult for authorities to track transactions and identify the individuals involved.

  • According to the European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs, VCs represent a new frontier for lone actors and small terrorist cells.
  • Young people who are fluent in internet and digital technologies are particularly vulnerable to using VCs for illicit activities.

Government Efforts to Address Financial Crime Risks

The Indonesian government has taken steps to address these risks, including working with private companies and regulators such as Indonesia’s Financial Authority. However, as the fintech environment in the country is destined to grow, financial crime risks are likely to increase in number and complexity.

Conclusion

Indonesia’s ambition to occupy a more prominent role on the global economic scene makes it essential for the government to closely monitor the fintech ecosystem and address any potential risks that may arise. By doing so, Indonesia can ensure that the benefits of fintech are realized while minimizing the risks associated with financial crime.

About the Author

Federica Russo is a Researcher and Simulation Supervisor at the consulting firm Wikistrat.