A start to stopping money laundering?

A start to stopping money laundering?

Can the new regulation requiring banks to report any
suspicious transactions help curb money laundering? Bank
Indonesia senior deputy governor Anwar Nasution shares his views.

Question: Bank Indonesia has issued Regulation No.3/2001 which
requires banks to carefully scrutinize the source of their
customers' money and to report any suspicious transactions. Would
this show that the government is cooperating in international
efforts to combat money-laundering practices?

Answer: The new regulation is an attempt to obtain information
about banks' customers. Foreign banks have been practicing the
"know your customer" policy for a long time, a practice which may
annoy Indonesians who want to open accounts in the banks'
branches here. The foreign banks want to know many things
including the salaries of prospective customers. This is to avoid
suspicious activities.

Since the regulation was issued by Bank Indonesia, which is
not a judicial institute, the effectiveness of demonstrating our
cooperation in combating money laundering will also depend on the
processing of reports on suspicious transactions. It will be of
no use if there is no legal process.

At least there's been progress in Indonesia (to cooperate in
international efforts to combat money-laundering practices) with
the implementation of the new regulation.

(The regulation) is about trust and security. When the banks
obtain information about their customers, the data must be kept
with a high degree of confidentiality. It is not impossible to
have people trying to steal or leak customer data for criminal
purposes.

Will the BI regulation lead to people shifting their money to
overseas banks?

No. I don't think it will be easier to open accounts at
foreign banks, especially for a huge amount of cash.

Will the money laundering bill proposed to the House of
Representatives be more effective in curbing crime in Indonesia?

Since Bank Indonesia is not a legal authority, the banking
sector is not a police officer, judge nor tax officer, the
implementation of the bill should be supported by the judiciary
system, including the National Police, the Attorney General's
Office and the penitentiary. They should perform much better to
curb money laundering.

The Paris-based Financial Action Task Force (FATF) recently
added Indonesia to its blacklisted countries that are considered
uncooperative in the fight against money laundering. Your
comment?

We know this (money laundering) is a chronic problem in
Indonesia, in which corruption, collusion and nepotism (KKN) are
part of money laundering activities. Many of us do not have Tax
Registration Code Numbers (NPWP) and avoid paying various taxes;
this is also part of money laundering -- not only trafficking in
drugs or arms. There is also an increase in human smuggling and
international drug trafficking in certain areas in Indonesia.

So I think the international community (FATF) has reason to
add Indonesia to its blacklist of countries considered
uncooperative in the fight against money laundering.

Among diverse money laundering practices which are the most
popular patterns in Indonesia?

After my appointment at Bank Indonesia (1999) I haven't
conducted any research on the topic ... (Earlier) I understood
that there were many speculators on foreign exchange and property
trading. They avoided paying tax; this was a practice of money
laundering. To avoid paying tax has been a popular way (of money
laundering) especially prior to the financial crisis.

According to some estimates, the value of global money
laundering activities per year is around US$400 billion. We may
not have domestic estimates yet; but what is the impact on the
nation when money laundering is said to remain high in Indonesia?

It's very risky. Internationally, foreign nations will be very
cautious in dealing with Indonesia. They, particularly the
foreign banks, will be suspicious about the sources of money from
Indonesia.
In the past the practice of KKN was high but economic growth
remained high ...

But we have to try to be more transparent ... or else we will
remain behind (on the FATF blacklist with Myanmar, Guatemala,
Hungary, Nigeria and Egypt).

We have to be transparent, accountable and disciplined.

You said earlier that KKN was a chronic problem in Indonesia.
The IMF has also pushed Indonesia to curb KKN. Do you see any
effective measures taken by the government to eliminate KKN?

We should see this from the law enforcement side. The
government has shown good will to curb KKN. But there are still
many loopholes -- some people are treated exclusively like
journalists ... You get special counters to arrange for your
vehicle documents; a lecturer doesn't have this (facility). (I.
Christianto)