Crack down on bad bankers<\/p>\n
Many citizens have become very skeptical about the willingness
\nand\/or courage of law enforcers to dig deep into the roots of the
\nRp 1.7 trillion (US$200 million) lending scam at the country's
\nsecond largest bank, state-owned Bank Negara Indonesia (BNI).<\/p>\n
However, in a Cabinet meeting on Monday, ministers gave
\npriority to a discussion on the BNI loan fraud, which is perhaps
\na strong signal that the government seems determined to get to
\nthe bottom of the scandal.<\/p>\n
That the President chaired the Cabinet meeting with several
\ncoordinating ministers, the central bank governor, the attorney
\ngeneral and the chiefs of the police, military and the national
\nintelligence, shows that the government really means business
\nthis time.<\/p>\n
Judging from the influence and power held by the senior
\nofficials who were at the meeting, the government wanted to see
\nto it that investigations into the BNI scandal should be well
\ncoordinated and thorough.<\/p>\n
President Megawati Soekarnoputri should indeed be outraged by
\nthis wanton fraud because it took place on her watch and just a
\nfew years after the government had spent more than Rp 650
\ntrillion in taxpayers' money to bail out and restructure the
\nbanking industry.<\/p>\n
What made this even more worrisome was the fact that the
\nfraud, which involved only the use of bogus letters of credit,
\nhad been ongoing for more than a year up to July 2003, apparently
\nwithout detection by internal auditors, senior management
\nexecutives, independent auditors or the supervisors from the
\ncentral bank.<\/p>\n
Perhaps even more mind-boggling is the fact that state-owned
\nBank BNI is a publicly listed company, and therefore subject to
\ntough disclosure requirements. It also must have a compliance
\ndirector, who is specifically in charge of ensuring that the bank
\nfully complies with all laws, rules and standards set both by the
\nbank itself and the central bank.<\/p>\n
If such a crudely conceived, multimillion dollar hoax could
\noccur at such a giant, publicly listed bank for over a year
\nwithout being detected by the internal and independent auditors,
\ndirectors and commissioners, we have reason to be greatly
\nconcerned about the quality of supervision at state-controlled
\nbanks.<\/p>\n
It is rather ominous that what took place at Bank BNI may
\nreflect the quality of governance at other state-controlled
\nbanks, and thus the situation is quite worrying indeed because
\nafter the massive banking recapitalization in 1998-2000, most of
\nthe large banks are now government-controlled.<\/p>\n
Hence, the President's direct involvement in the handling of
\nthis high-profile case is greatly warranted. We can still clearly
\nremember how the law enforcers deliberately botched up the
\nhandling of the Rp 654 billion Bank Bali scandal in 1999, which
\nimplicated many well-known politicians and senior officials. In
\nfact, all of the defendants in the Bank Bali scandal that were
\neventually taken to court were acquitted of all charges.<\/p>\n
The BNI loan scandal also has an element of a high-level
\ncover-up because, as the preliminary investigations found, the
\nflow of the funds derived from the swindle was very similar to
\nthe Bank Bali scandal, with cash flowing to more than 150
\naccounts belonging to persons and companies within the country
\nand overseas.<\/p>\n
So it is encouraging that now the President herself has paid
\nkeen attention to the BNI scandal and has instructed all agencies
\nrelated to the case to work in a coordinated effort to
\ninvestigate and prosecute all those involved, as well as
\ntracking the money trail. There is a better chance that the
\nculprits will be brought to justice this time.<\/p>\n
The success in bringing all those implicated in the BNI
\ndebacle to justice is quite vital as a deterrent to banking
\ncrimes in the future, because the authorities now have a chance
\nto demonstrate to all would-be corruptors that the costs of
\ncorruption will be very dear indeed. Most believe that there is
\nno chance at all for those involved in the BNI fraud to escape
\njustice as they can now be convicted by multi-layered criminal
\ncharges based on the Criminal Codes and the laws on banking,
\nmoney laundering and corruption.<\/p>\n
But justice is only part of the solution, and is not enough to
\nprotect the banking industry from bad bankers and white-collar
\ncriminals. The BNI calamity should be a strong reminder to the
\nbank supervisors at the central bank and the banking industry as
\na whole to realize that integrity and technical competence are
\nthe primary prerequisites for good bankers willing to ensure good
\ngovernance practices.<\/p>\n
The BNI scandal, which was followed by a another similar case
\nof fraud at state Bank Rakyat Indonesia, once again proves how
\nthe government can never be a good banker. It is therefore most
\nimperative and urgent now for the government to put all state-
\ncontrolled banks under private management and ownership so that
\nit can focus its attention on the regulatory system.<\/p>",
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"sponsor": "Okusi Associates",
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