Financial Crime World

Indonesian Authorities Crack Down on Financial Crimes

Indonesia, the world’s fourth most populous country, has witnessed a surge in financial crimes in recent years. The illicit activities range from money laundering and tax fraud to corruption and cybercrime, posing a significant threat to economic development and social stability. Indonesian authorities have ramped up their efforts to enforce laws and collaborate with international partners to combat these crimes.

Financial Crimes: A Global Concern

According to the United Nations Office on Drugs and Crime (UNODC), financial crimes impact economic development and social stability worldwide. In Indonesia, financial crimes — which encompass both domestic and cross-border transactions — require international cooperation (UNODC, 2021).

Money Laundering: Disguising Proceeds of Illegal Activities

One common form of financial crime in Indonesia is money laundering, which involves disguising the proceeds of illegal activities as legitimate income. In its 2020 risk assessment, the Financial Action Task Force (FATF) identified strategic anti-money laundering and counter-terrorism financing deficiencies in Indonesia. However, Indonesian authorities have made progress in strengthening their legal framework and law enforcement capabilities to address money laundering (FATF, 2020).

  • Identified Weaknesses: The lack of effective policies and legislation to prevent the misuse of legal entities for money laundering and terrorism financing; limited capacity and resources for investigating and prosecuting money laundering and terrorism financing cases; and insufficient international cooperation and information exchange.
  • Progress Made: The Indonesian authorities have taken steps to address these deficiencies by adopting new laws and policies and enhancing their investigative and prosecutorial capabilities.

Tax Fraud: Underreporting or Misrepresenting Income

Tax fraud, which involves underreporting or misrepresenting income to evade taxes, is another significant financial crime. In 2022, the Indonesian tax office uncovered more than IDR 1.6 trillion (approximately USD 110 million) in unpaid taxes from e-commerce companies, demonstrating the extent of tax evasion (Indonesia Investments, 2022).

Corruption: The Pervasive Problem

Corruption remains a pervasive problem in Indonesia, with bribes and kickbacks often used to facilitate business transactions and government services. In 2021, Transparency International ranked Indonesia 95th out of 180 countries in its Corruption Perceptions Index (Transparency International, 2021).

To address the issue, the Indonesian government has taken the following steps:

  • Establishing an Anti-Corruption Commission: The establishment of the Corruption Eradication Commission (KPK) in 2002 aimed to tackle corruption at all levels.
  • Implementing Stricter Penalties: In 2019, the Indonesian parliament passed a law imposing jail terms of up to 20 years and fines of up to IDR 5 billion (approximately USD 348,000) for corrupt officials.

Cybercrime: Growing Concern Amid Expanding Digital Economy

Cybercrime, including fraud and identity theft, is another growing concern in Indonesia, which has a large and rapidly expanding digital economy. In 2021, the Indonesian National Police reported over 44,000 cybercrimes, a 35% increase from the previous year (Republic of Indonesia, 2021).

To address the challenge, the Indonesian authorities have established a cybercrime center to improve investigative capabilities and enhance international cooperation, as cybercriminals often operate transnationally.

International Cooperation: Combating Financial Crimes Together

Through organizations such as the UNODC and the FATF, Indonesian authorities seek international cooperation to combat financial crimes. In 2022, Indonesia and Singapore signed a mutual legal assistance agreement to enhance cooperation in criminal matters, including financial crimes (Indonesia Investments, 2022).

Conclusion

Financial crimes pose a significant threat to Indonesian society and the economy. Despite progress in strengthening legal frameworks and law enforcement capabilities, Indonesian authorities continue to face challenges in addressing these illicit activities. Through international cooperation and collaboration, they are making strides to crack down on financial crimes and create a safer and more prosperous country.