Financial Crime World

Indonesia’s Battleground against Financial Crimes: A Focus on Asset Recovery, Risk-Based Supervision, and Proportionate Sanctions

title: Indonesia’s Commitment to Combating Money Laundering and Terrorist Financing at the FATF Plenary

Paris, April 27, 2023 - Indonesian authorities demonstrated their commitment to combating money laundering and terrorist financing at the Financial Action Task Force (FATF) Plenary in Paris, showcasing a robust legal framework and effective cooperation efforts. However, concerns remain about areas like asset recovery, risk-based supervision, and proportionate sanctions.

Primary Threats for Indonesia

Indonesia’s primary money laundering risks stem from the following domestic issues:

  1. Corruption
  2. Narcotics
  3. Tax evasion
  4. Forest crimes

Indonesia also faces high-risk terrorism financing due to the presence of terrorist organizations and their supporters.

FATF Praise for Indonesia’s Efforts

The FATF Mutual Evaluation praised Indonesia for its solid understanding of the risks it faces and its development of risk-based policies and strategies. Notable achievements include:

  1. Robust domestic inter-agency coordination
  2. International cooperation, particularly in time-sensitive cases

Areas Requiring Further Attention

While Indonesia’s efforts show promise, there are areas requiring further attention:

  1. Asset Recovery: Ensuring that criminals are permanently deprived of the proceeds of their crimes, especially those involving forestry or environmental crimes and assets located abroad.
  2. Risk-Based Supervision: Strengthening supervision, particularly for sectors like money changers, money or value transfer services, and non-financial services. Imposing effectively dissuasive sanctions.
  3. Proportionate Sanctions: Ensuring that sanctions are proportionate and deterrent, applicable to all sectors.
  4. Transparency: Guaranteeing access to accurate information on the ultimate owners of companies for law enforcement.

The Role of Indonesian Financial Intelligence Unit

The Indonesian Financial Intelligence Unit (Suspo) provides valuable, timely, and targeted financial intelligence to law enforcement for investigations into money laundering, terrorist financing, and related offenses.

Progress on Terrorist Financing and Transparency Issues

Indonesia has shown success in detecting, investigating, and prosecuting terrorist financing. But there are still some transparency issues that need improvement:

  1. A clearer understanding of potential risks within the non-profit sector for terrorist financing
  2. Avoiding discouraging or disrupting legitimate charitable activities

Indonesia has addressed certain weaknesses in its legal framework for targeted financial sanctions related to weapons of mass destruction proliferation financing. However, some crucial gaps still remain.

Indonesia’s FATF Membership Journey

As part of its membership application to the FATF, Indonesia will continue its efforts to fulfill the organization’s membership requirements and address recommendations provided by the FATF.