Banks required to report suspicious transactions

JAKARTA (JP): Bank Indonesia said on Wednesday that its new "know your customer" ruling required banks to report any suspicious transactions as part of a concerted effort to improve prudential banking practices and help curb money laundering.

Bank Indonesia deputy director for legal affairs Junus Husein said Bank Indonesia Ruling No. 3/2001 was issued on June 18, and had since been put into effect.

"What this ruling basically does is to require banks to improve their risk management," he said during a press briefing.

He said that knowing customer transaction patterns would help banks anticipate financial troubles involving their customers.

But the new ruling required banks first and foremost to identify customer transactions that deviated from normal patterns.

Junus said the ruling set no criteria for what constituted a suspicious transaction, but contained examples of those that were.

For instance, banks should be suspicious when a customer received a transfer involving an unusually large amount, when cash payments frequently contained counterfeit bills, or when cash payment instructions requested large amounts of money to be transferred to or from other countries.

As to the use of bank accounts, unusual practices were, for example, where a single account received a large number of small transfers from different parties which, if combined, made up a large amount.

Suspicious investment activities included the introduction of investors from banks located in countries producing illegal drugs. Another example was of banks acting as custodians for commercial papers owned by customers whom they knew didn't have the financial wherewithal for such investments.

Junus said that to help banks spot such dubious transactions, they would have to maintain a profile of their customers.

For that purpose, banks must require new customers to submit more detailed information on their backgrounds, including their sources of income.

The ruling allows banks six months to prepare internal guidelines for establishing customer profiles.

But the requirement for more information applies to new customers from the date of issuance of the ruling last week.

Junus added that walk-in customers, those who didn't have an account but used the bank's services, were exempted from scrutiny.

Included in the information banks were required to obtain from government officials was their salaries. This measure would help deter those guilty of corruption from stashing their illegally acquired funds in new banks accounts.

Banks, he said, would have to maintain a customer profile for five years after the customer closed his or her account with the bank.

If a bank identified a suspicious transaction, it had to report the transaction to the central bank within seven days, he went on.

Banks submitting their reports late would face a penalty of Rp 1 million (about US$87.79) for each day of delay, or a maximum of Rp 30 million.

But when asked what Bank Indonesia would do with these reports, Junus said he wasn't sure yet.

"We'll meet with the police to talk about follow-up measures in respect of the bank reports," he said.

The new ruling came after the Financial Action Task Force (FATF) added Indonesia to its blacklist of countries considered uncooperative in the fight against money laundering.

The task force, founded in 1989 by 29 developed countries, said last week it would warn companies making investments in countries that had been added to the blacklist.

Junus said the central bank issued the ruling five days before the FATF announced its new blacklist.

Also, in the same week as the FATF made its announcement, the government proposed a money laundering bill to the House of Representatives.

The bill focuses on the criminal aspects of money laundering, something the new ruling does not cover, Junus explained.

Commenting on the impact the ruling would have, Junus said he was upbeat it would not affect investment into Indonesia, other than investments that were illegal.

"There is no intention of stopping transactions from happening. We are still applying an open foreign exchange policy," he added. (bkm)