Financial Sanctions Implementation in Indonesia Needs Improvement: Experts

Indonesia has made significant progress in combating money laundering and terrorist financing, but there are still areas that require attention to strengthen its financial sanctions implementation. According to a recent report by the Financial Action Task Force (FATF), Indonesia’s legal framework is strong, with good use of financial intelligence and domestic and international cooperation.

Key Risks and Challenges

• Money laundering risks in Indonesia primarily come from domestic crimes such as corruption, narcotics, tax evasion, and forestry crimes.
• The country faces a high risk of terrorism financing due to the presence of terrorist organizations and their supporters.
• Despite these challenges, Indonesia has developed robust policies and strategies to mitigate the risks, including domestic inter-agency coordination and cooperation.

Progress and Areas for Improvement

• Indonesia’s three main financial supervisory authorities have proactively developed its anti-money laundering (AML) and combating the financing of terrorism (CFT) framework.
• Banks, larger financial institutions, and virtual asset service providers have a good understanding of the risks they face, but this is not the case for other sectors.
• Areas for improvement include:
  • Risk-based supervision, particularly in the money changers, money or value transfer services, and non-financial sector.
  • Imposing effective and dissuasive sanctions in all sectors.
  • Ensuring accurate information on the ultimate owners of all companies is available to law enforcement agencies.

Financial Intelligence Unit and Investigation

• The Indonesian Financial Intelligence Unit provides high-quality financial intelligence to law enforcement agencies for use in their investigations into money laundering, terrorist financing, and other offenses.
• Indonesia needs to improve its investigation and prosecution of different types of money laundering activities, particularly those involving assets located abroad or from forestry or environmental crime.

Terrorist Financing and Non-Profit Sector

• Indonesia has made progress in detecting, investigating, and prosecuting terrorist financing cases, with a focus on returning foreign terrorist fighters and de-radicalization.
• However, the country should improve its understanding of the risk of abuse of its non-profit sector for terrorism financing and take proportionate measures without disrupting legitimate charitable activities.

Legal Framework and Targeted Financial Sanctions

• Indonesia has taken steps to address shortcomings in its legal framework for targeted financial sanctions on proliferation financing, but some key gaps remain.
• The country will continue to work towards fulfilling the FATF’s membership requirements.

Overall, while Indonesia has made significant progress in combating money laundering and terrorist financing, there are still areas that require attention to strengthen its financial sanctions implementation.