Financial Crime World

Indonesia’s Financial Crimes Investigation Agencies Under Scrutiny: A Mixed Bag of Progress and Shortcomings

Recent assessments by international experts have praised Indonesia’s legal framework for tackling money laundering and terrorist financing, as well as its efforts to utilize financial intelligence and engage in domestic and international cooperation. However, the report also highlights areas where improvement is needed.

Risks and Challenges

Indonesia faces significant risks of money laundering due to domestic crimes such as:

  • Corruption
  • Narcotics trafficking
  • Tax evasion
  • Forestry crimes

The country’s terrorism financing risks are also considered high, given the presence of terrorist organizations and their supporters within its borders.

Progress and Achievements

The Financial Action Task Force (FATF) has praised Indonesia for:

  • Having a good understanding of the risks it faces
  • Developing risk-based policies and strategies to mitigate them
  • Significant strides in domestic inter-agency coordination and cooperation
  • International cooperation on high-priority cases involving terrorism and terrorist financing

Areas for Improvement

Indonesia needs to improve its financial supervisory authorities’ risk-based supervision of:

  • Money changers
  • Money transfer services
  • Non-financial sectors

Additionally, the country needs to:

  • Impose effective and dissuasive sanctions across all sectors

Financial Intelligence Unit

The Indonesian Financial Intelligence Unit has been commended for providing high-quality, timely, and targeted financial intelligence to law enforcement agencies. However, more effort is needed to:

  • Investigate and prosecute different types of money laundering activities
  • Ensure that criminals are permanently deprived of their ill-gotten gains, particularly those located abroad or derived from environmental crimes

Combating Terrorist Financing

Indonesia’s efforts to combat terrorist financing have been successful, with a focus on:

  • Returning foreign terrorist fighters
  • De-radicalization

However, the country needs to improve its understanding of the risk of abuse by non-profit organizations for terrorism financing purposes, while taking proportionate measures that do not discourage or disrupt legitimate charitable activities.

The assessment also identified gaps in Indonesia’s legal framework for targeted financial sanctions on proliferation financing, which will require further attention.

Conclusion

Despite these shortcomings, Indonesia is expected to continue working towards fulfilling FATF membership requirements. The country’s efforts to combat financial crimes and terrorism financing are commendable, but there is still room for improvement.