Countries/Jurisdictions of Primary Concern - Indonesia
Indonesia has a growing formal financial sector with approximately 120 commercial banks. While not a major regional financial center, the country remains vulnerable to money laundering and terrorist financing due to gaps in financial system legislation and regulation, a cash-based economy, weak rule of law, and ineffective law enforcement institutions. Additionally, indigenous terrorist groups, which obtain financial support from both domestic and foreign sources, are present in the country. These include Jemaah Islamiyah (JI), and a loose network of JI spin-off groups, including Jemaah Anshorut Tauhid and others, such as the Eastern Indonesia Mujahedin.
Most money laundering in Indonesia is connected to drug trafficking and other criminal activity such as corruption, tax crimes, illegal logging, wildlife trafficking, theft, bank fraud, credit card fraud, maritime piracy, sale of counterfeit goods, illegal gambling, and prostitution.
Indonesia has a long history of smuggling of illicit goods and bulk cash, made easier by thousands of miles of unpatrolled coastlines, sporadic and lax law enforcement, and poor customs infrastructure. Proceeds from illicit activities are easily moved offshore and repatriated as needed for commercial and personal use. While Indonesia has made progress in combating official corruption via its Corruption Eradication Commission, endemic corruption remains a significant concern and poses a challenge for AML/CFT regime implementation.
Indonesia first appeared on the FATF Public Statement in February 2012. The FATF removed Indonesia from this statement in February 2015, based on Indonesia’s passage of key legislation criminalizing the finance of terrorism, and its implementation of terrorist asset freezing pursuant to UNSCRs 1267 and 1373.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: Combination approach
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks; finance companies; insurance companies and brokers; pension fund financial institutions; securities companies; investment managers; providers of money remittance; and foreign currency traders
Number of STRs received and time frame: 52,228: October 1, 2014 - September 30, 2015
Number of CTRs received and time frame: 1,899,334: October 1, 2014 - September 30, 2015
STR covered entities: Banks and finance companies; insurance companies and brokers; pension fund financial institutions; securities companies, investment managers, custodians, and trustees; postal services as providers of fund transfer services; money remitters and foreign currency changers (money traders); providers of payment cards, e-money, and e-wallet services; cooperatives doing business as savings and loans institutions; pawnshops; commodities futures traders; property companies and real estate agents; car dealers; dealers of precious stones, jewelry, precious metals, art, and antiques; and auction houses
money laundering criminal Prosecutions/convictions:
Prosecutions: 138: October 1, 2014 - September 30, 2015
Convictions: 65: October 1, 2014 - September 30, 2015
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Indonesia is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.apgml.org/documents/search-results.aspx?keywords=Indonesia
Enforcement and implementation issues and comments:
In comparison to 2014, in 2015 there was a sizeable increase in the number of suspicious transaction reports (STRs) filed, as well as prosecutions and convictions. In the last year, Indonesia has prosecuted 13 terrorist finance cases and achieved nine convictions.
Indonesia’s financial intelligence unit (FIU), known as the PPATK, works closely with the Indonesian central bank to oversee and implement Indonesia’s AML regime. Indonesia is in the process of finalizing its National Risk Assessment identifying key money laundering and terrorism finance risks in the country. Indonesia should focus on vulnerabilities in the non-profit sector, particularly monitoring of charitable giving. PPATK has also noted its intent to focus on informal money transfer systems and networks, such as hawala networks and remittances, and to continue its work on other AML/CFT risks it has identified, such as those related to land registry, capital markets, insurance, car dealerships, and beneficial ownership.
In 2015, Indonesia adopted an inter-ministerial joint regulation to further implement asset freezing as required under UNSCRs 1267 and 1373. While Indonesia continues to issue orders to freeze the assets of all UNSCR 1267/1989 sanctioned individuals and entities, it is working to implement an electronic delivery and signature system so that all needed parties can sign off on new UNSCR 1267 list changes within the three working days cited in the joint regulation, and ensure its freezing process is “without delay.” In February 2015 the Government of Indonesia authorized the freezing of terrorist-linked bank accounts. PPATK, Bank Indonesia (the central bank), and OJK (the financial services agency) should better define roles and responsibilities in order to better address compliance and asset freezing.
Indonesia should strengthen its cross-border currency reporting requirements by enacting laws to counter money laundering schemes whereby individuals divide large amounts of currency or monetary instruments, with each person or package carrying an amount under the declaration threshold to circumvent reporting requirements. Corruption, particularly within the police ranks, impedes effective investigations and prosecutions. Indonesia should continue to develop investigative resources and intelligence to better combat international organizations engaging in money laundering and terrorism finance while it struggles to identify and seize proceeds of crime domestically or outside its borders.