Financial Crime World

Indonesia’s Fight Against Money Laundering and Terrorist Financing: A Mixed Bag

JAKARTA, INDONESIA - Indonesia has made significant progress in its fight against money laundering (ML) and terrorist financing (TF), but there are still areas that require improvement. According to a recent report by the Asia-Pacific Group on Money Laundering (APG), while Indonesia has a strong legal and institutional framework, its effectiveness is hindered by a low number of Business Operator (BO) registrations and a lack of sanctions for non-compliance with disclosure requirements.

Challenges Faced by Indonesia

  • ML risk primarily stems from domestic proceeds, particularly in the predicate offences of narcotics, corruption, banking crimes, and taxation.
  • High TF risk due to the presence of terrorist organizations and their supporters.
  • Limited number of Suspicious Transaction Reports (STRs) from Designated Non-Financial Businesses and Professions (DNFBPs) and those related to environmental crimes do not seem fully consistent with Indonesia’s risk profile.

Progress Made by Indonesia

  • Strong legal and institutional framework
  • National Coordination Committee has established a framework for national policies and objectives, which are supported by annual action plans.
  • Regular use of financial intelligence to support ML/TF investigations, including the tracing of assets for confiscation.
  • Indonesian Financial Intelligence Unit (PPATK) produces and disseminates a wide range of financial intelligence products, including strategic analysis products.

Areas Requiring Improvement

  • Limited number of BO registrations
  • Lack of sanctions for non-compliance with disclosure requirements
  • Need for more robust approaches to assessing ML risks, particularly in relation to environmental crimes.
  • Significant number of reporting entities are not yet registered with the goAML system, which may limit the financial intelligence available to PPATK.

Conclusion

While Indonesia has made significant progress in its fight against ML and TF, there are still areas that require improvement. The country must continue to strengthen its legal and institutional framework, as well as improve the effectiveness of its financial intelligence and ML investigations.