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Financial Institution Compliance Policies in Indonesia: A Report on Best Practices and Challenges

In a bid to combat financial crimes, such as money laundering and terrorist financing, Indonesia has implemented a range of regulations and policies for financial institutions. This report examines some of the key compliance requirements that financial institutions operating in Indonesia must adhere to.

Assessing Risk and Applying a Risk-Based Approach

Indonesian financial institutions are required to assess the risk posed by their customers and apply a risk-based approach to customer due diligence. This involves:

Identifying high-risk customers
Conducting enhanced due diligence on them

National Cooperation and Coordination

The Indonesian government has established various agencies and units to combat financial crimes, including:

The Financial Services Authority (OJK)
The National Counter Terrorism Agency (BNPT)

These agencies work together to coordinate efforts and share intelligence to prevent financial crimes.

Money Laundering Offence

Indonesian law criminalizes money laundering, and financial institutions are required to report any suspicious transactions to the authorities. The OJK has also established a system for reporting suspicious transactions.

Confiscation and Provisional Measures

In addition to criminal penalties, Indonesian law provides for:

Confiscation of assets
Provisional measures such as freezing of accounts

Financial institutions must be aware of these provisions and take steps to prevent their customers from using their services for illegal activities.

Terrorist Financing Offence

Indonesian law also criminalizes terrorist financing, and financial institutions are required to report any suspicious transactions related to terrorism. The OJK has established guidelines for reporting such transactions.

The Indonesian government has imposed targeted sanctions on individuals and entities suspected of being involved in:

Terrorism
Terrorist financing

Financial institutions must be aware of these sanctions and take steps to prevent their customers from using their services to evade them.

These are just some of the key compliance requirements that financial institutions operating in Indonesia must adhere to. In our next report, we will examine other challenges and best practices in this area.