Financial Crime World

Indonesian Financial Institutions Brace for Digital Threats: UNODC Webinar Addresses Cybercrime and Money Laundering Challenges

Online, 19-20 April 2022

The Digital Threat Landscape in Indonesia

The digital era has brought new complexities to anti-corruption enforcement, with a surge in digital crimes such as credit card fraud, online scams, phishing, and technology-enabled money laundering. A UNODC study suggests that law enforcement agencies in Southeast Asia have yet to fully adapt to this digitalized threat landscape, with many still reluctant to use data analytics to detect and prevent fraud and corruption.

Addressing Digital Financial Threats in Indonesia

As part of Indonesia’s Digital Transformation Policy, the Indonesian Financial Transaction Reports and Analysis Centre (PPATK) recognizes the risks of electronic money laundering and terrorism financing arising from new payment methods. The country is implementing digital transformation policies that require readiness from law enforcement to mitigate risks associated with this rise in technological innovation.

UNODC, driven by stakeholder interest, organized a Webinar on the Digital Financial Threat Landscape and Law Enforcement on 19 – 20 April 2022. The event brought together national regulators, law enforcement, financial services, and other government agencies to explore the challenges and opportunities posed by digital technologies. Over one hundred participants attended the virtual event.

New Technologies and Corruption Risks

Fithriadi Muslim, Acting Deputy of Prevention at PPATK, discussed the vulnerabilities of financial technologies, including fintech and crypto traders, to organized crime. He highlighted the growing issue of fraud in Indonesia, with PPATK data showing an increase from 9,801 fraud-related suspicious action reports in 2019 to 13,338 in 2020, and approximately 23,000 in 2021. Fraud, including cyber fraud, now surpasses all other crime types triggering suspicious action reports in the country.

Investigation Challenges in Money Laundering Cases

Dr. Fadil Zumhana, Deputy Attorney General for General Crimes at the Attorney General’s Office, delved into the investigation challenges brought on by money laundering cases. He emphasized the importance of equipping investigators with the necessary skills to obtain electronic evidence and perform forensic analyses to enable swift criminal justice responses.

Priorities for Mitigating Electronic Money Laundering Practices

According to Fithriadi, there are three areas at risk of electronic money laundering practices:

  1. The financial services sector: Digital transformation requires increased information security from both financial service providers and customers. Inadequately secured products are vulnerable to phishing scams and identity theft. Sectors like retail transactions remain prime targets for fraudsters.
  2. The export-import sector: Trade-Based Money-Laundering (TBML) is prevalent in this sector, where criminals move funds cross-border using inflated import/export transactions. TBML contributes to Indonesia’s shadow economy.
  3. Other sectors: Criminals can exploit digital technologies in various sectors to launder money and finance terrorism.

The Promise of Technology for Law Enforcement

Mark Caroll, Director of Criminal Justice at Optima, shared how new technologies offer significant potential for law enforcement agencies. He highlighted the following technological advancements that have revolutionized criminal justice processes:

  1. Data mapping: Agencies can visualize data to understand relationships and trends.
  2. Smartphone tracking and location data: Information can help trace suspects and evidence.
  3. Wi-fi capabilities: Agencies can track devices to locate and identify suspects.
  4. Biometrics: Facial recognition, fingerprints, and other biometric data can help identify criminals.

Governments Responding to Technological Advances

Fithriadi underscored the importance of governments staying current with financial technology innovations, rather than prohibiting their development. He emphasized the need to build capabilities, collaborate with the private sector, develop smart regulations, and encourage the private sector to develop and use regulatory technology to prevent money laundering and terrorism financing.

Best Practices for Requesting Electronic Evidence Across Borders

The interaction between governments and technology providers plays a significant role in crime prevention. Hansol Park, Crime Prevention and Criminal Justice Officer at UNODC, advised governments on best practices when requesting electronic evidence across borders:

  1. Consult the Practical Guide from the UNODC Sherlock platform.
  2. Smaller tech companies and micro-platforms could consult the publicly-available Data Disclosure Framework for guidance on data processing concepts for criminal justice purposes.

This webinar was funded by the Ministry of Justice of the Government of the Republic of Korea. For those interested, UNODC event footage and written summaries are available on their website.

Additionally, UNODC offers Webinars on Covid-19 response, Law Enforcement Integrity, and Anti-Corruption in Southeast Asia. Check the provided links for more information.