Indonesia Makes Strides in International Cooperation Against Financial Crime, But More Effort Needed

Indonesia has made significant progress in combating money laundering and terrorist financing, as praised by international experts. However, there is still more work to be done to improve asset recovery, risk-based supervision, and proportionate sanctions.

Progress and Challenges

Indonesia has developed a robust legal framework to tackle financial crime and utilizes financial intelligence and cooperation with domestic and international partners. The country’s efforts have been praised for its good understanding of the risks it faces, including robust policies and strategies to mitigate them.

However, Indonesia still faces significant risks from domestic crimes such as corruption, narcotics trafficking, tax evasion, and forestry crimes, which are major sources of money laundering activity. The country also faces high terrorism financing risks due to the presence of terrorist organizations and their supporters within its borders.

Domestic Coordination and Cooperation

Indonesia has developed strong domestic inter-agency coordination and cooperation, as well as informal cooperation with international partners on time-sensitive cases involving terrorism and terrorist financing.

Financial Supervision Authorities

Indonesia’s financial supervisory authorities have taken proactive steps in developing their Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework. Banks, larger financial institutions, and virtual asset service providers demonstrate a good understanding of the risks they face.

However, other sectors such as money changers, money or value transfer services, and non-financial entities require greater attention. Experts urge Indonesia to improve risk-based supervision in these sectors and impose effective and dissuasive sanctions that are proportionate to the severity of the offense.

Financial Intelligence Unit

Indonesia’s Financial Intelligence Unit has been praised for providing high-quality financial intelligence to law enforcement agencies, which has contributed to successful investigations into money laundering and terrorist financing cases. However, experts suggest that Indonesia needs to improve its investigation and prosecution of different types of money laundering activities, as well as ensure that criminals are permanently deprived of the proceeds of their crimes.

Terrorist Financing

Indonesia’s efforts to combat terrorist financing have also been praised, with a focus on returning foreign terrorist fighters and de-radicalization. However, experts warn that more needs to be done to address the risk of abuse of Indonesia’s non-profit sector for terrorism financing and take proportionate measures without discouraging legitimate charitable activities.

Legal Framework

Indonesia has taken steps to address shortcomings in its legal framework for targeted financial sanctions on proliferation financing, but some key gaps remain. Overall, Indonesia is expected to continue its work to fulfill the membership requirements of the global anti-money laundering watchdog, FATF.

In conclusion, while Indonesia has made significant progress in combating financial crime, there is still more work to be done to address the remaining challenges and improve asset recovery, risk-based supervision, and proportionate sanctions.