Financial Crime World

Indonesia’s Financial Crime Prevention Efforts: A Growing Economy Faces Off Against Illicit Activities

Jakarta - With a GDP exceeding $1 trillion, Indonesia stands as Southeast Asia’s largest economy and a prominent member of the G20. However, its financial prowess also makes it vulnerable to financial crimes.

Indonesia’s Fight Against Financial Crimes

In 2002, PPATK (Pusat Pelaporan dan Analisis Transaksi Keuangan), the country’s financial intelligence unit, was established to combat financial crimes. Since then, Indonesia has implemented a series of anti-money laundering laws to strengthen its defense against illicit financial activities.

International Recognition and Partnerships

In 2012, the Financial Action Task Force (FATF) placed Indonesia on its blacklist of countries with a high risk of money laundering. However, Indonesia’s commitment to enhancing its anti-money laundering framework led to its removal from the blacklist in 2015. Notably, in 2018, FATF recognized Indonesia as an observer member, reflecting the nation’s dedication to international anti-money laundering efforts.

  • Indonesia is also an active member state of the Asia/Pacific Group on Money Laundering (APG), which focuses on localizing FATF compliance measures in the Asia/Pacific region.
  • Additionally, Indonesia holds associate membership with FATF, solidifying its role in shaping global anti-money laundering standards.

AML Requirements in Indonesia

To combat money laundering effectively, Indonesia adopts a risk-based approach to anti-money laundering compliance. Businesses and financial institutions in Indonesia are mandated to implement anti-money laundering compliance programs that encompass:

  • Customer Due Diligence (CDD): Thorough screening of customers against international sanctions lists, adverse media, and politically exposed persons (PEPs) lists.
  • Anti-Money Laundering Program: Implementing Know Your Customer (KYC) procedures to gather essential information about clients, helping to identify and prevent illicit activities.

Indonesian Regulatory Bodies

The primary authority overseeing anti-money laundering compliance in Indonesia is PPATK, founded in 2002 by the Indonesian government. PPATK collaborates extensively with AUSTRAC (Australian Transaction Reports and Analysis Centre) on various projects. Additionally:

  • The Bank of Indonesia plays a pivotal role in ensuring robust anti-money laundering compliance within the country.
  • The Financial Services Authority and OJK (Otoritas Jasa Keuangan) also play important roles.

Indonesia’s AML Risk Profile

Several international indicators assess Indonesia’s vulnerability to money laundering:

  • United States Dept of State Money Laundering Assessments
  • FATF 40 + 9 Recommendations
  • Corruption Index: These assessments classify Indonesia as a higher-risk jurisdiction.
  • Weakness in Government Legislation to Combat Money Laundering and World Governance Indicators: These indicators place Indonesia in the medium-risk category.

FATF Recommendations and Compliance

Indonesia has made significant strides in aligning its anti-money laundering framework with FATF recommendations. As a result, FATF is no longer actively monitoring Indonesia. The last mutual evaluation occurred in 2018, yielding the following results:

  • Compliant for 6 out of the FATF 40 Recommendations.
  • Largely Compliant with 29 Recommendations.
  • Effectiveness and Technical Compliance ratings indicated: Highly Effective for 0 areas; Substantially Effective for five areas.

Penalties for Money Laundering in Indonesia

Indonesia is resolute in its stance against financial crimes due to their potential threat to economic development. The country’s GDP per capita still lags behind the world average, underscoring the significance of combating financial crimes. Penalties for money laundering offenses vary based on the nature of the crime and specific circumstances but may include:

  • Fines ranging from 10 billion up to 100 billion Indonesian Rupiah.
  • Prison sentences of up to 20 years.

Conclusion

Indonesia’s journey in enhancing its anti-money laundering framework reflects its commitment to safeguarding its growing economy from the perils of money laundering. By adhering to anti-money laundering requirements, collaborating with international bodies, and imposing stringent penalties, Indonesia strives to create a secure and transparent financial environment.