Financial Crime World

Title: Indonesia’s Anti-Financial Crime Progress: FATF Praises Improvements, Identifies Key Areas for Enhancement

Indonesia’s Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) Efforts Recognized by FATF

Indonesia’s progress in the area of Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) has been acknowledged by the Financial Action Task Force (FATF) following a recent mutual evaluation. In 2015, Indonesia was removed from the watchlist while enjoying observer status since 2018. The country aims to meet the conditions for full membership.

Analysis of Indonesia’s AML/CTF Framework by FATF

During the assessment, the FATF evaluated the effectiveness of Indonesia’s AML/CTF framework concerning its membership application. Indonesia demonstrates a robust legal, regulatory, and institutional framework, registering high technical compliance in most areas. Although some recommendations exhibit full and others partial compliance, substantial or moderate progress towards the goals of an effective AML/CTF system was identified in several key outcomes.

The Role of the Financial Intelligence Unit (FIU)

The Financial Intelligence Unit (FIU) was singled out for its impressive financial intelligence provision to law enforcement agencies in cases involving money laundering, terrorist financing, and other offenses.

Priority Areas for Improvement Identified by FATF

  1. Asset Recovery: Indonesia must strengthen its Asset Recovery Centre and law enforcement agencies to confiscate assets linked to financial crimes. This includes utilizing international cooperation frameworks to recover laundered proceeds of crimes committed in Indonesia that have been hidden overseas and effectively investigating cross-border money laundering.
  2. Risk-based supervision: The Indonesian supervision programme for money changers, money or value transfer services, and the non-financial sector requires a shift towards a risk-based approach. Supervisory authorities should employ written warnings and dissuasive sanctions as part of their responses to regulatory violations.
  3. Oversight of the Non-Profit Organizations (NPO) sector: The FATF underscored the need for enhanced outreach and oversight towards NPOs that present the highest risk for terrorist financing abuse. Currently, the 2022 NPO Sectoral Risk Assessment identifies 32 such organizations.

Encouragement to Continue Progress

Despite these areas necessitating improvement, the FATF acknowledged Indonesia’s success in developing a strong AML/CTF framework and encouraged the country to continue its progress. The comprehensive report detailing Indonesia’s AML/CTF measures is open for review.