Banks required to report suspicious transactions

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)