Financial Crime World

Indonesia Takes Significant Steps to Prevent Financial Crime

Strengthening Its Financial System

Jakarta, May 5 - As part of ongoing efforts to strengthen its financial system, Indonesia is making significant strides in preventing money laundering and terrorist financing. According to a recent report by the Financial Action Task Force (FATF), the country has made notable progress in understanding and mitigating risks related to these crimes.

Progress and Areas for Improvement

However, the FATF evaluation also highlighted areas where Indonesia needs to improve, including:

  • Asset recovery: Enhancing its ability to recover assets linked to financial crimes
  • Risk-based supervision: Improving oversight of high-risk sectors and entities
  • Proportionate sanctions: Implementing effective and dissuasive penalties for financial crimes

Key Risks and Challenges

The majority of Indonesia’s money laundering risks stem from domestic crimes such as:

  • Corruption
  • Narcotics trafficking
  • Tax evasion
  • Forestry-related offenses

Additionally, the country faces significant terrorism financing risks due to the presence of terrorist organizations and their supporters within its borders.

Efforts to Address Risks

Indonesia has been commended for developing robust policies and strategies to address these risks, including:

  • Effective inter-agency coordination: Enhancing cooperation among government agencies
  • Comprehensive AML/CFT framework: Establishing a robust anti-money laundering and combating the financing of terrorism framework
  • Proactive supervision: Taking proactive steps in supervising high-risk sectors and entities

Recommendations for Improvement

To address the disparities in risk understanding, Indonesia needs to:

  • Enhance risk-based supervision: Improving oversight of money changers, money or value transfer services, and non-financial sector entities
  • Implement effective sanctions: Imposing proportionate penalties for financial crimes
  • Ensure accurate information: Providing law enforcement agencies with accurate information on the ultimate owners of all companies

Progress in Combating Terrorism Financing

Indonesia’s efforts to combat terrorism financing have been successful, with:

  • Effective detection and investigation: Detecting, investigating, and prosecuting cases according to its risk profile
  • Strategies for returning foreign terrorist fighters: Implementing strategies aimed at returning foreign terrorist fighters and promoting de-radicalization
  • Promoting de-radicalization: Encouraging the prevention of radicalization and extremism

However, there is still a need for Indonesia to:

  • Improve its understanding of risk: Enhancing its understanding of the risk of exploiting its non-profit sector for terrorism financing purposes
  • Address gaps in legal framework: Addressing some key areas in its legal framework for targeted financial sanctions on proliferation financing