Indonesia Takes Steps to Combat Financial Terrorism, But More Needs to be Done
Indonesia has made significant progress in combating financial terrorism and money laundering, but the country still faces challenges in recovering assets, implementing risk-based supervision, and imposing effective sanctions.
Understanding the Risks
According to a recent assessment by the Paris-based Financial Action Task Force (FATF), Indonesia has a good understanding of the risks it faces, including domestic crimes such as:
- Corruption
- Narcotics
- Tax evasion
- Forestry crimes
- Terrorism financing
Proactive Measures
Indonesia’s three main financial supervisory authorities have proactively developed their anti-money laundering and combating the financing of terrorism (AML/CFT) framework. However, there is a need for more effective risk-based supervision, particularly in the sectors of:
- Money changers
- Money or value transfer services
- Non-financial institutions
Investigating and Prosecuting Money Laundering Activities
Indonesia needs to improve its investigation and prosecution of different types of money laundering activities, including recovering assets located abroad or obtained through:
- Forestry crimes
- Environmental crimes
The country’s financial intelligence unit provides high-quality, timely, and targeted information to law enforcement agencies, but more needs to be done to permanently deprive criminals of their ill-gotten gains.
Combating Terrorism Financing
Indonesia has been successful in detecting, investigating, and prosecuting cases in line with its risk profile. However, there is a need for greater understanding of the risk of abuse of the non-profit sector for terrorist financing and proportionate measures should be taken to prevent disruption to legitimate charitable activities.
Progress on Targeted Financial Sanctions
Indonesia has made progress in addressing shortcomings in its legal framework for targeted financial sanctions on proliferation financing, but some key gaps remain. The country will continue to work towards fulfilling FATF’s membership requirements.
Conclusion
While Indonesia has made significant progress in combating financial terrorism and money laundering, there is still much work to be done to address the remaining challenges and improve its AML/CFT framework.