Indonesian Financial Regulator Strengthens AML CFT Reporting Requirements Amid Global Threats

Indonesian financial market, which is known for its vibrancy and constant evolution, is not immune to the risks of Money Laundering (ML) and Terrorism Financing (TF). Financial institutions play a critical role in preventing these illicit activities from infiltrating the financial system. In line with this, the Indonesian Payment System (SPI) 2025 aims to ensure a balance between innovation and integrity by implementing Anti-Money Laundering (AML), Counter Financing of Terrorism (CFT), and Proliferation Financing (PFF) measures.

The Importance of AML CFT Measures

AML, CFT, and PFF measures are crucial in safeguarding the economy, enhancing the country’s international reputation, and assuring a fair business environment. Bank Indonesia, the country’s central bank, has established the AML CFT Framework to mitigate risks such as economic instability, reduced international credibility, increased investment risks, and national security threats.

Sectoral Risk Assessments (SRAs)

Sectoral Risk Assessments (SRAs) are a vital component of the AML CFT Framework. These assessments help identify threats, vulnerabilities, and consequences of ML, TF, and PFF. Bank Indonesia has carried out risk assessments across various sectors, including non-bank payment service providers and non-bank money changers.

Evaluation of Risks

In the assessment of non-bank payment service providers and non-bank money changers, Bank Indonesia evaluated the following risks:

1. Geographic risks - assessing risks based on the location and size of the business
2. Customer risks - evaluating risks associated with customers and their transactions
3. Products and services - determining the potential risks posed by specific products or services
4. Delivery channels - evaluating the risks posed by the various channels used to deliver services.

Enhancing Risk Management Capabilities

The purpose of these assessment adjustments is to enhance risk management capabilities and formulate strategy measures to mitigate risks adequately.

Compliance with Regulations

Bank Indonesia has issued several regulations to regulate AML CFT obligations for non-bank payment service providers and non-bank money changers.

1. Bank Indonesia Regulation (PBI) No. 19/10/PBI/2017: This regulation sets forth detailed AML CFT requirements for non-bank payment system service providers and non-bank money changers.
2. PBI No. 14/23/PBI/2012: This regulation concerns Fund Transfer.
3. PBI No. 18/20/PBI/2016: This regulation concerns Non-Bank Money Changers.

Payments system regulatory reforms under BSPI 2025 further solidify these requirements.

Guidelines for Effective Implementation

Bank Indonesia has also issued technical guidelines to aid in the effective implementation of risk-based approaches and customer due diligence (CDD) measures. Some of these guidelines include:

1. Guidelines for the Implementation of Risk-Based Approach (RBA): These guidelines serve as essential resources for financial institutions in implementing RBA for non-bank money transfer services providers and non-bank money changers.
2. Guidelines for the Implementation of Know Your Customer (CDD): These guidelines are available for non-bank payment system providers and non-bank money changers.

Typology Study

Bank Indonesia has prepared a Typology Study of ML, TF, and PFF for non-bank payment service providers and non-bank money changers. This study aims to raise awareness and serve as a risk mitigation guideline for financial institutions, law enforcement agencies, and other relevant authorities.

Cooperation with Relevant Authorities

Through the implementation of the above measures, the Indonesian financial sector is bolstered against the risks of ML, TF, and TFWMD. Bank Indonesia continues to strengthen its cooperation with relevant national and international authorities to ensure a robust and efficient AML CFT framework.