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)