Financial Crime World

Indonesia’s Financial Sector Hit by Fraudulent Activities: Report Highlights Weaknesses in Anti-Money Laundering Efforts

The Financial Action Task Force (FATF) has released a report highlighting the challenges faced by Indonesia in combating fraudulent activities in its financial sector. The report identifies weaknesses in anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts, despite having a strong legal framework in place.

Weaknesses Identified

The report highlights several areas where Indonesia needs improvement:

  • Improving risk-based supervision: The country’s supervision of money changers, money or value transfer services, and non-financial sectors is inadequate.
  • Effective sanctions: Indonesia is urged to impose effective and dissuasive sanctions across all sectors.
  • Accurate information on company owners: The country needs to ensure that accurate information on the ultimate owners of companies is available to law enforcement agencies.

Strengths and Progress

Despite these weaknesses, the report highlights several strengths:

  • Understanding of risks: Indonesia has a good understanding of the risks it faces, including corruption, narcotics, tax evasion, and forestry crimes.
  • Risk-based policies and strategies: The country has developed risk-based policies and strategies to mitigate these risks.
  • Domestic coordination and cooperation: Indonesia’s domestic inter-agency coordination and cooperation are robust, as well as its informal cooperation on time-sensitive terrorism and CFT cases with international partners.

Recommendations

The report provides several recommendations for Indonesia to improve its AML/CFT efforts:

  • Investigation and prosecution of money laundering activities: The country needs to improve its investigation and prosecution of different types of money laundering activities.
  • Return of criminal assets: Indonesia is urged to permanently deprive criminals of the proceeds of their crimes, particularly assets located abroad or those linked to forestry or environmental crime.
  • Understanding of non-profit sector risk: 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 discouraging or disrupting legitimate charitable activities.

Conclusion

Indonesia will continue to work towards fulfilling FATF membership requirements, and it is expected to make significant progress in addressing the weaknesses highlighted in the report. The country’s financial intelligence unit was praised for providing high-quality, timely, and targeted financial intelligence to law enforcement agencies. With continued efforts, Indonesia can strengthen its AML/CFT framework and reduce the risks of fraudulent activities in its financial sector.