Financial Crime World

Indonesia Urged to Improve Asset Recovery, Risk-Based Supervision and Sanctions in Fight Against Money Laundering and Terrorism Financing

The Financial Action Task Force (FATF) has called upon Indonesia to strengthen its efforts in combating money laundering and terrorist financing. The country’s strong legal framework and good use of financial intelligence and international cooperation were highlighted by the FATF in its recent mutual evaluation.

Major Risks to Indonesia’s Financial System

  • Corruption
  • Narcotics
  • Tax crimes
  • Forestry crimes
  • Terrorism financing

Indonesia faces a high risk of terrorist financing due to the presence of terrorist organizations and their supporters. The country has a good understanding of these risks and has developed robust policies and strategies to mitigate them.

Progress Made in AML/CFT Frameworks

  • Indonesia’s three main financial supervisory authorities have proactively developed their anti-money laundering and combating the financing of terrorism (AML/CFT) frameworks.
  • Banks, larger financial institutions, and virtual asset service providers show a good understanding of the risks they face. However, this understanding is more varied in other sectors, such as:
    • Money changers
    • Money or value transfer services
    • Non-financial sector

Recommendations for Improvement

  • Improve risk-based supervision to ensure accurate information on the ultimate owners of companies is available to law enforcement.
  • Impose effective sanctions in all sectors without discouraging or disrupting legitimate activities.
  • Improve investigation and prosecution of different types of money laundering activities.

Successes in Combating Terrorism Financing

  • Indonesia has successfully detected, investigated, and prosecuted terrorist financing cases, with a focus on returning foreign terrorist fighters and de-radicalisation.

However, the FATF recommended that the country:

  • Improve its understanding of the risk of abuse of its non-profit sector for terrorism financing.
  • Take proportionate measures without discouraging or disrupting legitimate charitable activities.
  • Targeted financial sanctions on proliferation financing: Indonesia has been working to address these gaps in its legal framework.

Overall, the FATF assessed Indonesia in the context of its request for membership and commended the country’s commitment to continue its work to fulfill the FATF’s membership requirements.