Financial Crime World

Indonesia’s Anti-Money Laundering Efforts Praised, But Room for Improvement Remains

Jakarta, Indonesia

Indonesia has made significant strides in tackling money laundering and terrorist financing, with a robust legal framework and effective financial intelligence and international cooperation. However, experts say that further improvements are needed to strengthen the country’s anti-money laundering (AML) regulations.

Significant Risks Remain

According to a recent assessment by the Financial Action Task Force (FATF), Indonesia faces significant risks from domestic crimes such as:

  • Corruption
  • Narcotics trafficking
  • Tax evasion
  • Forestry crimes

These crimes contribute to Indonesia’s high money laundering risk. The country is also vulnerable to terrorism financing due to the presence of terrorist organizations and their supporters.

AML/CFT Framework

Indonesia’s financial supervisory authorities have developed a comprehensive AML/CFT framework, with:

  • Banks showing a good understanding of the risks they face
  • Larger financial institutions demonstrating effective risk management practices
  • Virtual asset service providers exhibiting awareness of anti-money laundering requirements

However, there are concerns that other sectors, such as:

  • Money changers
  • Money or value transfer services
  • Non-financial sector entities require improved risk-based supervision.

Financial Intelligence Unit

The Indonesian Financial Intelligence Unit has been praised for providing high-quality, timely, and targeted financial intelligence to law enforcement agencies. This is crucial in investigating and prosecuting money laundering and terrorist financing cases.

However, experts say that Indonesia needs to improve its investigation and prosecution of different types of money laundering activities, particularly those involving:

  • Foreign assets
  • Assets from forestry or environmental crimes

Terrorist Financing

Indonesia has also been successful in detecting, investigating, and prosecuting terrorist financing cases, with a focus on:

  • Returning foreign terrorist fighters
  • De-radicalization

However, there are concerns that the country’s non-profit sector may be vulnerable to abuse for terrorism financing purposes. Proportionate measures need to be taken without disrupting legitimate charitable activities.

Indonesia is still working to address gaps in its legal framework for targeted financial sanctions on proliferation financing. Despite these challenges, the FATF has praised Indonesia’s commitment to improving its AML/CFT regime and has invited the country to continue its work towards fulfilling the requirements for FATF membership.