RESOURCES
1. Indonesia
Current Compliance Landscape
Money laundering in Indonesia is a significant problem due to weak regulatory controls, insufficient law enforcement and the presence of corruption. Compounding the problem is the fact that Indonesia is vulnerable to smuggling and illegal activities due to its geographic location with its land mass being surrounded by water which makes it hard to patrol. This naturally makes financial institutions and money changers a target for money laundering, however Indonesia has been working towards greater compliance in line with the recommendations set out by FATF.
Indonesia is toughening its stance on compliance when it comes to regulatory reporting, going so far as to revoke the licenses of money changers when they submit documents late or in an improper format. This is partly to protect the image of tourism in the country, and partly to combat money laundering and terrorist financing.
In June 2015 , the FATF removed Indonesia from their list of countries to monitor for AML/CFT compliance progress. This came about after Indonesia introduced a regulation authorizing the government to block terrorist-linked bank accounts. Despite its removal from the list, Indonesia however still remains the second most complex place for business compliance in the world.
This change would bring more business to Indonesian money changers progressively as BI enforces their prohibition with the relevant agencies. Despite the higher business volume, Indonesian money changers should remain vigilant: flag high volume transactions, maintain proper records and submit them promptly to ensure that they stay on the right side of the law.
Aside from guarding against ML and TF, money changers in Indonesia also have to deal with great volatility in the IDR. In Indonesia, BI has an unusual mandate relative to other central banks. The usual primary mandates of central banks around the world would be one (or more) of the following: to keep inflation stable, unemployment low and the whole financial system stable. BI’s single mandate is to keep the Indonesian Rupiah (IDR) stable to manage inflation which is allowed to spike ‘temporarily’.
This single mandate is responsible for the history of IDR volatility, especially in the 1997/1998 Asian Financial Crisis. The value of the IDR had the greatest decline of 70% which was double that of the Malaysian Ringgit (MYR) and Thai Baht (THB).
According to the Wall Street Journal , 80% of office rents are paid in USD. BI rolled out a new ruling on 01 July 2015 which prohibited the use of foreign currencies in Indonesia. Import-export and international financing deals where parties from different countries are involved are however exempted from this deal. This new rule is an attempt to strengthen the legal tender status of IDR as the reform momentum slows.
Indonesia appointed the highly respected General Tito Karnavian as the chief of national counter-terrorism agency, BNPT, on 15 March 2016 reflecting their resolve to enforce compliance laws diligently. In June 2016 , an Indonesian lawmaker was sentenced to six years of jail for money laundering.
Indonesian Law Highlights
Indonesia has a myriad of laws which can be confusing and requires too much time to digest properly for the lay person. For the convenience of Indonesian money changers, we have extracted the following highlights.
Article 11 states that:
“Any person who supplies or collects funds to be used, or which that person should have known will be used, entirely or in part to perpetrate the crime of terrorism within the meaning of Articles 6, 7, 8, 9 and 10, faces between three and 15 years’ imprisonment .”
Money changers are especially vulnerable as they deal with large numbers of transaction daily. Hence they should screen their clients diligently for every transaction which hits the prescribed limits to stay out of prison.
(English Version) Article 1.6 states that:
Suspicious Financial Transactions shall be transactions deviating from the profile and characteristics as well as from the usual transaction patterns of the customer concerned, including financial transactions conducted by customers that can be reasonably suspected to be conducted with the purpose of avoiding the reporting of the transactions concerned as required of Providers of Financial Services in accordance with this Law.
The law specifically defines suspicious transaction because they want it to be reported. In addition, article 13.1 states that:
Providers of Financial Services shall be obligated to submit reports to the PPATK referred to in Chapter V, in respect of the following matters:
a. Suspicious financial transactions; b. Financial transactions conducted in cash to a cumulative total of Rp.500,000,000.00 (five hundred million rupiah) or more or an equivalent amount (in foreign currency), conducted either in one transaction or in several transactions within 1 (one) business day.
PPATK is the local office that handles suspicious transaction. BI would later revise record keeping limit to US$25,000 or (Rp $329,874,925) in 2015. Money changers should follow the lower limits in their daily operations.
Most importantly, Indonesian money changers should take note of the following penalty provisions for anti-money laundering. Article 6.1 states that:
Any person receiving or controlling the:
a. Placement;
b. Transfer;
c. Payment;
d. Donation;
e. Contribution;
f. Storage;
g. Exchange,
of assets known or reasonably suspected by him to constitute the proceeds of crime, shall be subject to the criminal sanction of imprisonment for a minimum of 5 (five) years and for a maximum of 15 (fifteen) years and to a minimum fine of Rp.5,000,000,000.00 (five billion rupiah) and to a maximum fine of Rp.15,000,000,000.00 (fifteen billion rupiah).
Money changers should know that when they run afoul of the anti-money laundering laws, they are highly likely to violate the anti-terrorism financing laws too. They can end up in jail for 30 years and paying 15 billion rupiah worth of fines.
Article 13E states that one of the criteria for being a money changer in Indonesia:
Never been sentenced for being proven to have committed a criminal act of money laundering within the last 2 (two) years under a court decision having a permanent legal force;
In other words, once Indonesian money changers have been convicted of money laundering, they are out of business for at least two years and they will lose their license, in addition to the jail terms and fines.
