Financial Crime World

Indonesia Takes Significant Step Forward in Combating Financial Crimes with New Anti-Money Laundering Regulation

Strengthening AML Framework

The Indonesian Financial Services Authority (OJK) has issued a new regulation aimed at strengthening its anti-money laundering (AML) framework, focusing on the implementation of AML, Counter-Terrorist Financing (CFT), and Counter-Proliferation Financing of Weapons of Mass Destruction (CPF) programs in the financial services sector. This regulation replaces OJK Regulation No. 12/POJK.01/2017 and addresses emerging risks of money laundering, terrorist financing, and proliferation financing.

Aligning with International Standards

The new regulation aligns with international principles such as those issued by the Financial Action Task Force on Money Laundering (FATF), relevant laws and regulations in Indonesia, and developments in technology and innovation. This underscores OJK’s commitment to supporting Indonesia’s aspiration to become a full member of the FATF.

Regulatory Bodies Involved

Other regulatory bodies are actively involved in AML enforcement in Indonesia, including:

  • Bank Indonesia, the country’s central bank
  • Various professional bodies for sectors like law, accounting, and real estate
  • OJK, which is responsible for implementing and enforcing AML regulations

Risk-Based Approach to AML Compliance

Financial institutions in Indonesia are expected to adopt a risk-based approach to AML compliance, involving:

  • Assessing the risk posed by individual customers and clients
  • Identifying high-risk customers and screening them against international sanctions, adverse media, and politically exposed persons lists
  • Conducting customer due diligence measures

Consequences of Non-Compliance

Financial institutions failing to comply with these regulations could face severe penalties, including:

  • Fines
  • Revocation of licenses

Addressing Technological Advancements

Indonesia’s efforts to address technological advancements like cryptocurrencies and digital payments within its AML framework are noteworthy. The country has taken steps to regulate these technologies, including:

  • Recognizing cryptocurrencies as commodities
  • Requiring cryptocurrency exchanges to register with the Commodity Futures Trading Regulatory Agency (Bappebti)
  • Subjecting cryptocurrency exchanges and digital payment service providers to reporting obligations similar to traditional financial institutions

Customer Due Diligence

Entities that offer cryptocurrency and digital payment services must conduct customer due diligence to verify the identity of their customers.

Encouraging Technological Solutions

Indonesia encourages the use of technological solutions for AML compliance in the cryptocurrency and digital payment sectors, including:

  • Blockchain analytics tools
  • Software to trace and monitor cryptocurrency transactions

Collaboration with International Organizations

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

Conclusion

Indonesia’s new AML regulation demonstrates a significant step forward in combating financial crimes, and its efforts to address technological advancements like cryptocurrencies and digital payments within its AML framework are notable. By regulating these technologies, imposing reporting obligations, conducting customer due diligence, and promoting a risk-based approach, Indonesia seeks to strike a balance between innovation and AML compliance, ultimately contributing to the integrity of its financial system.