Bank Indonesia renews agreement to nab fraudsters

Bank Indonesia renews agreement to nab fraudsters

Urip Hudiono, The Jakarta Post, Jakarta

In light of the increasing number of fraud cases occurring in the
country's banking sector over the past year, Bank Indonesia (BI)
on Monday renewed its cooperation agreement with the National
Police and the Attorney General's Office (AGO) in order to better
tackle such cases.

BI governor Burhanuddin Abdullah said that the new agreement
would be a revamp of a similar agreement that the three
institutions had signed in 1997. Law enforcers would now be
given more authority to swiftly crack down on any possible
misconduct by bad bankers.

"Today's agreement will enable the police and prosecutors to
act immediately based only on BI's reports of fraud indications
in a bank," he told a press conference after the inking of the
agreement.

Previously, Burhanuddin explained, law enforcers could only
investigate such indications of banking crimes after there was
solid evidence from BI of wrongdoing.

Meanwhile, the central bank, which is responsible for
supervising every bank operating in the country, also had no
authority to investigate the cases on its own.

The country had witnessed several banking fraud cases over the
year, with the most recent leading to BI's closing of Bank
Global's operations last week due to its worsening financial
condition and indications of fraud.

The central bank had also shut down Bank Asiatic and Bank
Dagang Bali (BDB) in April for similar reasons.

Burhanuddin explained that preventing banking fraud was
particularly difficult as most of them stemmed from the bad faith
of the bank owners themselves.

"This would certainly lead to attempts to cover up their
criminal activities," he said.

In the case of Bank Global, BI officials had been denied
access to Bank Global documents in order to investigate
indications of fictitious lendings and other fraud. The
management had also attempted to destroy documents, before police
intervened.

The management of Bank Asiatic and BDB, meanwhile, had been
suspected of manipulating loans between themselves.

Burhanuddin stressed the critical importance for related
institutions to coordinate with one another.

"Learning from the particular experience with Bank Global,
which is a publicly listed bank, it is important that everyone
now helps in monitoring banks," he said.

BI has, however, been criticized by many -- including the
finance ministry -- for acting too slowly on indications that
Bank Global's management had been committing fraudulent acts.

Despite such criticism, Burhanuddin explained that BI has up
to now received 250 reports of possible frauds in 130 banks and
178 reports from 93 rural credit banks.

"Of those reports, 404 of them are now under intense
investigation," he said.

Meanwhile, Attorney General Abdulrahman Saleh said that what
was also important in banking fraud cases was how authorities
could redeem state and public funds that may have been lost in
the crimes.

"Besides bringing those responsible for such banking frauds to
court, there is also a duty to recover the funds," he said.

The government has spent over Rp 600 trillion (US$64 billion)
in public funds bailing out banks as a result of the 1997
financial crisis. Most of this money will never be recovered.

The country's banking law stipulates a maximum penalty of 15
years in prison and a Rp 500 million fine for bank fraud crimes.

In the case of Bank Asiatic and BDB, however, the Central
Jakarta District Court only sentenced their management to one
year in prison for their crimes.