Combating dirty money

Combating dirty money

Not a single money laundering case has been brought to court,
although it has been two years since the country joined the
global campaign against dirty money in March 2002 by enacting the
Anti-Money Laundering Law and establishing a financial
intelligence institute, the Financial Transaction and Report
Analysis Center (PPATK).

While investigating and prosecuting money laundering
activities require a special skill in analyzing complex financial
transactions and in constructing a strong legal case, records
compiled thus far have been weak, indicating an acute lack of
political will to combat the issue.

This comes as no surprise -- after all, hasn't the
international community rated the government as one of the most
corrupt in the world? Moreover, large cash transactions -- a
common way to launder money -- are still the rule rather than the
exception here.

Under such circumstances, Coordinating Minister for the
Economy Dorodjatun Kuntjoro-Jakti, in his capacity as deputy
chairman of the Committee to Combat Money Laundering and PPATK
supervisor, took the right step last Tuesday when he sounded the
alarm at a meeting with banking and securities executives.

It is indeed high time to stress the urgency of this issue, as
Indonesia will remain on the list of non-cooperative countries
and territories (NCCT) of the Financial Action Task Force (FATF),
which consists of developed countries grouped under the global
money laundering watchdog, the Organization for Economic
Cooperation and Development (OECD).

Indonesia is considered a high-risk country, and financial
institutions in developed countries are thus required to give
special attention to businesses and transactions with
individuals, companies and financial institutions based in
Indonesia.

All this boils down to higher transaction costs for local
companies.

The financial records presented at last week's meeting by
PPATK chief Yunus Husein were indeed poor. Over the past two
years, the PPATK had received only 558 reports on suspicious
transactions from a mere 37 of 137 commercial banks and a pension
company, a funding institution and one securities company.

The records seem dismally poorer against the fact that,
besides the 137 commercial banks, there are almost 3,800 other
financial service companies -- including pension firms, mutual
funds institutes, securities firms, secondary banks and foreign
exchange traders -- that are required to submit reports of
suspicious transactions to the PPATK.

More disappointing yet is that none of the 85 money laundering
cases that the PPATK had constructed and submitted to the
National Police has reached the courts.

There is a prevailing impression that corruption, either
within law enforcement institutes such as the police and the
Attorney General's Office or within the financial companies
themselves, has been responsible for the miserable enforcement of
the Anti-Money Laundering Law.

Even though the government amended the law last September to
give it greater force and authority, the PPATK still cannot
fulfill its function without the full cooperation of all
financial institutions, law enforcement agencies and other
relevant state institutions such as the customs and tax office
and the stock market watchdog.

Cooperation, coordination and information sharing among the
various parties are thus vital for an effective application of
the law.

Indeed, Indonesia is racing against time to prove that it is
truly serious about clamping down on dirty money, as a lack of
significant progress might result in the OECD or the FATF to
impose harsher sanctions on Indonesia at their annual meeting in
June.

Further, the as-yet fragile economy could be put at greater
risk if penalties included the prohibition of deals between banks
in OECD member countries and Indonesian banks and companies,
while business transactions with Indonesian firms would be
subject to premium-risk charges.

It is thus imperative for the government to prove its
seriousness in regards this matter with concrete measures and
tangible results. In this context, money laundering cases
connected to the US$200 million Bank Negara Indonesia export
credit scam, when they are taken to court, will be the litmus
test of political resolve to combat dirty money.

However, international pressure should not be the sole reason
for strengthening the anti-money laundering framework.

An effective system to prevent and eradicate money laundering
will also strengthen the anticorruption drive as well as efforts
against other financial crimes, such as tax evasion, as criminals
will find it extremely difficult to circulate their ill-gotten
gains in the legal financial system.

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