Financial Crime World

Indonesia Takes Steps to Combat Financial Crime, But Still Faces Challenges

Jakarta, April 27, 2023

Despite significant progress in preventing and deterring financial crime, Indonesia still faces several challenges that need to be addressed. According to a recent assessment by the global anti-money laundering watchdog, the Financial Action Task Force (FATF), Indonesia has a strong legal framework to tackle money laundering and terrorist financing, but needs to improve its asset recovery, risk-based supervision, and proportionate sanctions.

Key Challenges

  • Asset Recovery: Indonesia still struggles with recovering stolen assets, particularly those located abroad or obtained through forestry or environmental crime.
  • Risk-Based Supervision: The country’s financial supervisory authorities need to improve their supervision of sectors such as money changers, money or value transfer services, and non-financial institutions.
  • Proportionate Sanctions: Indonesia needs to impose effective and dissuasive sanctions across all sectors, without disrupting legitimate activities.

Sources of Financial Crime Risks

  • Domestic Crimes:
    • Corruption
    • Narcotics trafficking
    • Tax evasion
    • Forestry crimes
  • Terrorism Financing: Indonesia faces high risks due to the presence of terrorist organizations and their supporters in the country.

Progress Made

  • Risk-Based Policies and Strategies: Indonesia has developed risk-based policies and strategies to mitigate its financial crime risks.
  • Proactive Steps by Financial Supervisory Authorities: The country’s financial supervisory authorities have taken proactive steps to develop its anti-money laundering and combating the financing of terrorism (AML/CFT) framework.
  • Good Understanding of Risks: Banks and larger financial institutions in Indonesia have a good understanding of the risks they face.

Improvements Needed

  • Investigation and Prosecution: Indonesia needs to improve its investigation and prosecution of different types of money laundering activities, particularly those involving assets located abroad or obtained through forestry or environmental crime.
  • Non-Profit Sector: The country needs to improve its understanding of the risk of abuse of its non-profit sector for terrorism financing and take proportionate measures without disrupting legitimate charitable activities.

Conclusion

Indonesia has made progress in detecting, investigating, and prosecuting terrorist financing cases, but still faces challenges in fulfilling the FATF’s membership requirements. The country is committed to continuing its work to address these shortcomings and improve its AML/CFT framework.