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Indonesia Steps Up Anti-Money Laundering Efforts with New Regulation

In a move to strengthen its anti-money laundering (AML) framework, Indonesia has issued a new regulation aimed at combating financial crimes.

New Regulation Aligns with International Principles

The Indonesian Financial Services Authority (OJK) introduced OJK Regulation No. 8 of 2023, which replaces the previous POJK No. 12/POJK.01/2017 and focuses on implementing AML, Counter-Terrorist Financing (CFT), and Counter-Proliferation Financing of Weapons of Mass Destruction (CPF) programs in the financial services sector. The new regulation aligns with international principles issued by the Financial Action Task Force on Money Laundering (FATF), relevant laws and regulations in Indonesia, and developments in technology and innovation.

Risk-Based Approach to AML Compliance

The regulation requires financial institutions to adopt a risk-based approach to AML compliance. This involves assessing the risk posed by individual customers and clients, which is central to FATF AML policy. The approach requires appropriate customer due diligence measures to identify high-risk customers and screen them against international sanctions, adverse media, and politically exposed persons lists.

AML Enforcement and Regulation

Indonesia’s regulatory bodies, including Bank Indonesia and various professional bodies for sectors like law, accounting, and real estate, are actively involved in AML enforcement. The principle AML legislation in Indonesia focuses on requiring institutions to implement AML and CFT provisions that meet standards set by the OJK and the FATF.

Regulation of Cryptocurrencies and Digital Payments

The country has also taken steps to regulate cryptocurrencies and digital payments, recognizing the need to adapt existing AML regulations to address the evolving landscape of financial transactions. Cryptocurrency exchanges and digital payment service providers are subject to reporting obligations similar to traditional financial institutions, while entities offering these services must conduct customer due diligence to verify the identity of their customers.

Technological Solutions for AML Compliance

Indonesia encourages the use of technological solutions for AML compliance in the cryptocurrency and digital payment sectors. The country employs blockchain analytics tools and software to trace and monitor cryptocurrency transactions for potential illicit activities.

International Collaboration

The Indonesian government collaborates with international organizations like the FATF to align its AML regulations concerning cryptocurrencies and digital payments with global standards.

Penalties for Non-Compliance

The Indonesian government has demonstrated a commitment to enforcing AML regulations within the cryptocurrency and digital payment sectors. Penalties, fines, or revocation of licenses are available for violations.

Conclusion

Indonesia’s efforts to strengthen its AML framework demonstrate a significant step forward in combating financial crimes. The country’s proactive approach to regulating cryptocurrencies and digital payments aims to strike a balance between innovation and AML compliance, ultimately contributing to the integrity of its financial system.