Indonesia’s Efforts to Prevent Money Laundering Praised, But Room for Improvement Identified

Indonesia has made significant strides in preventing money laundering and terrorist financing, according to a recent assessment by the Financial Action Task Force (FATF). While the country’s legal framework is robust, financial intelligence and international cooperation are being effectively utilized, there are areas that require further attention.

Money Laundering Risks

Indonesia faces significant money laundering risks due to domestic crimes such as corruption, narcotics trafficking, tax evasion, and forestry crimes. Additionally, the country is at high risk of terrorism financing, given the presence of terrorist organizations and their supporters within its borders.

FATF Assessment Highlights

The FATF assessment highlighted Indonesia’s good understanding of the risks it faces and its development of risk-based policies and strategies to mitigate them. Domestic inter-agency coordination and cooperation are robust, and international cooperation has been effective in addressing time-sensitive cases related to terrorism and terrorist financing.

Improvement Areas

To address money laundering and terrorist financing, Indonesia needs to:

• Improve Risk-Based Supervision: Enhance risk-based supervision, particularly with regards to money changers, money or value transfer services, and non-financial sector entities.
• Effective and Dissuasive Sanctions: Ensure that accurate information on the ultimate owners of all companies is available to law enforcement agencies. Implement effective and dissuasive sanctions across all sectors.
• Financial Intelligence: The Indonesian Financial Intelligence Unit provides high-quality, timely, and targeted financial intelligence to support investigations into money laundering, terrorist financing, and other offenses.

Challenges Ahead

While Indonesia has made significant progress in detecting, investigating, and prosecuting terrorist financing cases, there are areas that require improvement. Specifically:

• Non-Profit Sector: Enhance 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.
• Asset Recovery: Focus on improving asset recovery, particularly with regards to assets located abroad or derived from forestry or environmental crimes.
• Legal Framework: Identify key gaps in its legal framework for targeted financial sanctions related to proliferation financing, which needs to be addressed.

Conclusion

Overall, while Indonesia has made significant progress in preventing money laundering and terrorist financing, there are areas that require further attention to ensure the effectiveness of its AML/CT regime. Continued efforts to address these challenges will help maintain Indonesia’s reputation as a leader in combating financial crimes.