Financial Crime World

Title: Anti-Money Laundering Crackdown in Indonesia: Regime, Key Institutions, and Challenges

Indonesia, a signatory to the United Nations Convention Against Corruption since 2003, has made significant strides in fighting money laundering (ML) and terrorist financing (TF) through robust legal frameworks and institutions. Here’s an overview of the key parts of Indonesia’s anti-ML/TF regime:

  • Indonesian Legal Framework: Indonesia has strengthened its legal framework against money laundering and terrorist financing through various laws, including:
    1. Law No. 31 of 1999 on Eradication of the Criminal Act of Corruption (amended)
    2. Law No. 8 of 2010 on Prevention and Eradication of Money Laundering Crimes
    3. Law No. 5 of 2014 on State Civil Apparatus
    4. Law No. 14 of 2008 on Public Information Disclosure
    5. Law No. 28 of 1999 on State Administration that is Clean and Free from Corruption, Collusion, and Nepotism
    6. Regulation No. 54 of 2010 on Public Procurement of Goods and Services
    7. Law No. 1 of 2006 concerning Mutual Legal Assistance in Criminal Matters

II. Title: Anti-Money Laundering Regulatory and Supervisory Regimes

Indonesian Financial Intelligence Unit (FIU):

In accordance with Law No. 8 of 2010, the Indonesian Financial Intelligence Unit (FIU), officially known as the Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK), plays a crucial role in financial intelligence gathering and analysis. The FIU is:

  • Responsible for:
    1. Compliance monitoring and reporting procedures a. Reporting Suspicious Financial Transactions (SFTs) and Cash Transaction Reports (CTRs) b. Applying the principle of recognizing service users and reporting suspicious transactions
    2. Procedures for carrying cash and other payment instruments into or outside Indonesian customs areas
    3. Structure and authority of the FIU
    4. Procedures for temporary suspension of financial transactions
    5. Investigations, prosecutions, and court hearings
    6. Protection for whistleblowers and witnesses
    7. Cooperation in the prevention and eradication of money laundering and TF

III. Title: Sectors and Persons Subject to the ML/TF Regime

ML and TF can be perpetrated across various sectors and involving different types of persons. Below are the sectors and persons subject to Indonesia’s ML/TF regime:

  1. Financial institutions and non-financial businesses and professions: These entities play a significant role in the economy, and ML/TF can occur through their services.

  2. Designated non-financial businesses and professions (DNFBPs): Certain non-financial businesses and professions that present a high risk for ML/TF, such as real estate, dealers of precious metals, and lawyers, are designated non-financial businesses and professions.

  3. Politically Exposed Persons (PEPs): Individuals holding public functions, such as government officials or their family members, are considered PEPs and are at higher risk for engaging in ML/TF.

IV. Title: Case Example: Nazaruddin’s Money Laundering Scandal

A notable case of money laundering in Indonesia involves a member of the Indonesian parliament, Nazaruddin, who was convicted of money laundering crimes totaling Rp94.3 billion, which he had received through bribes during the construction of the Hambalang Athlete House. He hid the proceeds of the crime in various ways, including purchasing shares, assets, spending on vehicles, and insurance policies.

V. Title: Investigator’s Role

Investigating money laundering involves several tasks for investigators:

  1. Tracing suspects and their family histories: Gathering essential information about a suspect and their relatives.
  2. Blocking related bank accounts or non-bank financial institutions: Preventing the movement of funds tied to the suspect.
  3. Requesting financial intelligence from the FIU: Receiving information related to potential money laundering activities.
  4. Conducting calculations of suspects’ profits from the original crimes: Determining the magnitude of the financial gains from illegal activities.
  5. Studying suspects’ and their companies’ profiles: Examining the financial history and business operations of the suspect.
  6. Imposing compulsory measures on suspects: Taking actions against suspects to obtain evidence or assets.

VI. Title: Challenges Faced by Investigators

While Indonesia has made progress in combating money laundering, investigators face several challenges, such as:

  1. Lack of competence, integrity, and understanding of financial products: Limited knowledge in identifying high-risk transactions and understanding the nuances of financial instruments.
  2. Limited understanding of ML/TF methods in various financial services sectors: Inadequate awareness of possible money laundering techniques specific to each sector.
  3. Insufficient case studies and regulatory reviews: A limited number of case reviews to learn from past cases and establish best practices.
  4. Inadequate planning for preventing customs and excise crimes: Lack of focus on customs and excise operations, increasing the risk of money laundering through these channels.
  5. Lack of cooperation and coordination among agencies: Inadequate communication and information sharing between relevant agencies, hindering effective investigation and enforcement efforts.
  6. Failure to act independently, objectively, and professionally: The influence of external factors and personal biases on investigators can negatively impact their work.