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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