Financial Crime World

Indonesia Makes Progress in Financial Inclusion and Crime Prevention, But Still Faces Challenges

Indonesia has made significant strides in combating money laundering and terrorist financing, with a robust legal framework in place and effective use of financial intelligence and international cooperation. However, the country still faces challenges in improving asset recovery, risk-based supervision, and proportionate sanctions.

Main Risks and Mitigation Efforts

According to a recent report by the Financial Action Task Force (FATF), Indonesia’s main risks come from domestic crimes such as corruption, narcotics, tax evasion, and forestry crimes, as well as terrorism financing. The country has developed robust policies and strategies to mitigate these risks, including inter-agency coordination and international cooperation.

Domestic Crimes

  • Corruption
  • Narcotics
  • Tax evasion
  • Forestry crimes

International Cooperation

  • Inter-agency coordination
  • FATF membership

Financial Supervision Authorities

Indonesia’s three main financial supervisory authorities have proactively developed their anti-money laundering (AML) and combating the financing of terrorism (CFT) frameworks. Banks, larger financial institutions, and virtual asset service providers have a good understanding of the risks they face, but this understanding is more varied in other sectors.

Risk-Based Supervision

  • Needs improvement, particularly in the non-financial sector
  • Proportionate sanctions in all sectors

Financial Intelligence Unit

Indonesia’s financial intelligence unit provides high-quality financial intelligence to law enforcement agencies for investigations into money laundering, terrorist financing, and other crimes. However, the country needs to improve its investigation and prosecution of different types of money laundering activities and ensure that it permanently deprives criminals of the proceeds of their crimes, particularly assets located abroad or those obtained through forestry or environmental crime.

Investigation and Prosecution

  • Needs improvement in investigating and prosecuting different types of money laundering activities
  • Ensure permanent deprivation of criminal proceeds, especially assets located abroad or obtained through forestry or environmental crime

Terrorist Financing

Indonesia has made progress in detecting, investigating, and prosecuting terrorist financing cases, including returning foreign terrorist fighters and de-radicalization efforts. However, the country needs to improve its understanding of the risk of abuse of its non-profit sector for terrorism financing and take proportionate measures without discouraging legitimate charitable activities.

Non-Profit Sector

  • Risk of abuse for terrorism financing
  • Proportionate measures needed to address this risk without discouraging legitimate charitable activities

Indonesia has taken steps to address shortcomings in its legal framework for targeted financial sanctions on proliferation financing, but some key gaps remain.

Proliferation Financing

  • Key gaps remain in the legal framework for targeted financial sanctions
  • Needs improvement to effectively prevent proliferation financing

Conclusion

While Indonesia has made progress in financial inclusion and crime prevention, it still faces challenges that need to be addressed. The country will continue to work to fulfill the FATF’s membership requirements and improve its AML/CFT regime.