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Low BO Registration Raises Concerns on Effectiveness of Indonesia’s Anti-Money Laundering System
JAKARTA - The relatively low number of Business Operator (BO) registrations in Indonesia has raised concerns about the effectiveness of the country’s anti-money laundering system.
Enforcement Gaps and Consequences
According to a recent report, although available in law to some extent, Indonesia is not applying sanctions for failures to comply with requirements regarding disclosure of basic and BO information. This lack of enforcement has led to a significant gap in the country’s ability to effectively combat money laundering and terrorist financing (ML/TF).
Primary Risks
The report highlights that Indonesia’s ML risk primarily stems from domestic proceeds, particularly those generated by predicate offences such as:
- Narcotics
- Corruption
- Banking crimes
- Taxation
- Forestry crimes
These proceeds are often laundered through the banking, capital markets, and real estate sectors.
Investigations and Intelligence
The report notes that while Indonesia has a strong legal and institutional framework to investigate ML, the number of investigations is relatively small considering the risk and context. In particular:
- ML investigations for environmental crime are low
- Despite recent developments, the Ministry of Environment and Forestry does not have the mandate to investigate ML
The report also emphasizes the importance of financial intelligence in supporting ML/TF investigations and related predicate offences investigations. The Indonesian Financial Intelligence Unit (PPATK) has made significant efforts to produce and disseminate a wide range of financial intelligence products.
Challenges and Recommendations
However, the report notes that:
- The limited number of Suspicious Transaction Reports (STRs) from Designated Non-Financial Businesses and Professions (DNFBPs) and those related to environmental crimes do not seem fully consistent with Indonesia’s risk profile
- A significant number of reporting entities are not yet registered with the goAML system, which may limit the financial intelligence available to PPATK
The report concludes that while Indonesia has made commendable efforts in facilitating domestic coordination between competent authorities, there is still much work to be done to effectively combat ML/TF.