Can money-laundering law catch illegal loggers?<\/p>\n
Bambang Setiono, Policy and Financial Analyst, Center for International
\nForestry Research (CIFOR), Bogor<\/p>\n
The writers JM Winer and TF Roule in their January paper The
\nfinance of illicit resource extraction, state the need for a
\ngenuine drive to link efforts at preventing the illegal
\nexploitation of natural resources with antimoney-laundering
\ninitiatives currently on the increase throughout the world.<\/p>\n
Such initiatives have so far focused more on efforts to combat
\nterrorism, drug trafficking and corruption. In their opinion, the
\nspoils of illegal extraction of natural resources have helped
\nfinance undemocratic and corrupt governments, armed rebellions
\nand terrorist and criminal organizations. Such illegal
\nexploitation has also contributed to poverty, the spread of
\ndisease, people's displacement and environmental destrcution.<\/p>\n
Of course the illegal exploitation of timber, gold, oil and
\ngas occurs here too. Here, gains are used in part to finance the
\nlifestyles of corrupt officials, partly to finance criminal
\norganizations and also for "money politics."<\/p>\n
The spoils of this illicit exploitation are used by those who
\ncould not get public support through legal means to retain their
\npower, geographical areas or the resources themselves. Thus, the
\naim of reformasi to enforce people's sovereignty will remain
\nrhetorical if this illegal exploitation of natural resources is
\nnot quickly stopped. The above writers believe this can be done
\nthrough an effective antimoney-laundering regime.<\/p>\n
The government and the legislature has named forestry crime,
\nmarine crime and environmental crime as predicate offenses in its
\nnew regulations on money laundering. Indonesia is the first
\ncountry in the world to do so. This will have a far-reaching
\nimpact on eradicating such crimes -- if the regulations are
\nactually enforced.<\/p>\n
Under the UN convention on transnational organized crime,
\nmember nations must promote cooperation to prevent and combat
\ntransnational organized crimes.<\/p>\n
One such transnational crime is illegal logging. It causes
\nannual losses of approximately Rp 30 trillion in Indonesia and,
\naccording to the Ministry of Forestry, illegal logging allegedly
\ninvolves importing countries such as Malaysia and Singapore.<\/p>\n
With the revised money laundering law passed in September,
\nthere is now an international financial mechanism to make
\nrequests to, or even exert pressure on foreign governments to
\nhelp the Indonesian government prevent the laundering of gains
\nfrom illegal logging in Indonesia.<\/p>\n
The spoils from the illegal exploitation of natural resources
\npass through national and international finance systems also used
\nby those who launder drug money, as well as those who carry out
\ntheir business legally.<\/p>\n
Therefore, banks and other financial institutions have a
\ncritical role in preventing and eradicating laundering of such
\nspoils. Financial service providers are obliged by the G-7's
\nFinancial Action Task Force (FATF) to identify their customers,
\nundertake effective reporting systems and report any suspicious
\nfinancial transactions to their financial intelligence units.<\/p>\n
In Indonesia, such reports are filed with the Reporting and
\nFinancial Transaction Analysis Center (PPATK).<\/p>\n
Financial service providers are not expected to understand the
\nintricacies of natural resources crimes. However, they must be
\nable to identify suspicious financial transactions connected to
\nthem. Banks are expected to implement effective checks and
\nbalances to evaluate financial transactions involving natural
\nresources.<\/p>\n
Do financial service providers have an incentive to report
\nsuspicious financial transactions involving natural resources
\ncrimes to the PPATK? Before the money-laundering law was revised,
\nthere were no incentives for financial service providers to
\nreport such transactions.<\/p>\n
When the original law was passed in April 2002 and before the
\nPPATK came into full operation, banks were obliged to report
\nsuspicious transactions to the banking activities investigation
\nunit of Bank Indonesia, the central bank.<\/p>\n
In spite of illegal logging stories appearing daily in the
\nmedia, as of now not one suspicious financial transaction dealing
\nwith natural resources crime has been followed up.<\/p>\n
Does this new money laundering regulation offer incentives for
\nIndonesian financial service providers to prevent and combat
\nlaundering of gains from the criminal exploitation of natural
\nresources? Such providers are now obliged to understand
\ndifferent types of suspicious transaction associated with
\nforestry, marine and environmental crimes.<\/p>\n
Nevertheless, the PPATK may not be strong enough. The
\nlegislature did not ratify the proposal to grant it the power to
\nimpose sanctions on financial service providers that break
\napplicable rules on money laundering.<\/p>\n
Thus, PPATK cannot force banks to be proactive in combating
\nmoney-laundering crimes. It also has to use the bureaucracy, and
\nthus may find it difficult to maintain its integrity and
\nindependence, as has happened with other government institutions.<\/p>\n
Finally, PPATK failed to change its name to Agency for the
\nPrevention and Eradication of Money Laundering -- a change aimed
\nat improving coordination in eradicating money laundering between
\ngovernment agencies. If PPATK cannot make financial service
\nproviders proactively combat money laundering crimes, the final
\nhope rests with Bank Indonesia and other financial regulators.<\/p>\n
These regulators are expected to see natural resources as
\nlong-term national assets that require careful management. Bank
\nIndonesia, the Capital Market Supervisory Board (BAPEPAM) and the
\nDirectorate General of Financial Institutions in the Ministry of
\nFinance, need clear policies to regulate financial service
\nproviders so they have incentives and the capacity to report
\nsuspicious natural resources financial transactions to the PPATK.<\/p>\n
The success of national and international monetary systems to
\nreport suspicious transactions involving natural resources to the
\nPPATK is only the first step in ending illegal exploitation of
\nnatural resources.<\/p>\n
The next step depends on the effectiveness of law enforcement.
\nAttempts by financial service providers and the PPATK will be to
\nno avail without significant improvement in law enforcement here.<\/p>\n
Nevertheless, the antimoney-laundering regime prioritizes the
\neradication of corruption. Financial service providers can report
\nsuspicious financial transactions by corrupt law enforcement
\nofficers to the PPATK. In turn, the PPATK can ask the president
\nto form a special commission to examine the case.<\/p>\n
Pessimism with regard to the new regulation on money
\nlaundering will not save natural resources and society.
\nEstablishing a special commission on law enforcement is obviously
\nnot a new idea and perhaps remains as elusive as ever.<\/p>\n
Building social stability and democracy is an enormous task.
\nThe sad reality is there is no easy path to solving the problems
\nfacing the Indonesian people and their natural environment.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/can-money-laundering-law-catch-illegal-loggers-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}