Containing money laundering

By K. Basrie

JAKARTA (JP): An executive of the International Narcotics Control Board (INCB) has called on Indonesia to soon establish a law against money laundering to strike at crimes related to narcotics and psychotropic substances.

Visiting INCB president Dr. Oskar Schroder told The Jakarta Post in an interview Wednesday that members of drug trafficking cartels and other organized international crime syndicates have always found developing countries with sound economic growth like Indonesia to be good havens for money laundering.

"You can fight those big international drug trafficking gangs and cartels efficiently only if you cut them off from their financial means," said Schroder.

The Vienna-based board is the quasi-judicial control organ for the implementation of the United Nations' drug conventions.

According to Schroder, Indonesia's rapid economic development needs a huge amount of money and has led the government to encourage foreigners to invest here.

"Nobody knows exactly whether an investment is clean money or dirty money. It's a problem," he said.

Moreover, Indonesia "is susceptible to drug trafficking because it's an assembly of over 17,000 islands," said Schroeder.

Therefore, he said, Indonesia badly needs to establish a money laundering law immediately, based on the 1988 UN Convention.

Giving no exact figures, Schroeder said drug trafficking syndicates always have millions of dollars in deposits which are ready to be "cleaned" in many legal projects all around the world, particularly in developing countries.

Local bankers here have expressed worry about the absence of a money laundering law.

"Money laundering has been haunting our banking system," a Bank Indonesia director, Heru Soepraptomo, said at a seminar last month, adding that the central bank had no clear-cut rules to stop it.

According to Sutan Remy Sjahdeini, a director of the publicly listed state-owned PT Bank Negara Indonesia 1946, Indonesia's rigid regulations on banking secrecy and the absence of regulations on money laundering have turned this country into a haven for money launderers.

Worse still, criminals nowadays transfer their dirty money between accounts and even by credit card across borders instead of using suitcases, making it difficult for developing countries to trace the money.

The secretariat of Interpol, the world police organization based in Lyon, France, estimated the total amount of illicit drug transactions had thus far reached US$175 billion. Some Interpol members are worried that the money might have been used to finance the activities of certain international terrorist groups.

According to the chief of Indonesia's Coordinating Body for Drug Control, Brig. Gen. (ret.) Tony Sidharta, Indonesia has never explicitly had a law against money laundering, due to its open-door policy.

"But the members of the House of Representatives are now revising the old law on narcotics to comprise the rulings on money laundering," said Sidharta, who also accompanied Schroder during the interview.

Sidharta said hopefully, the revision will be completed in March.

A specific money laundering law, which will cover a wide range of crimes, is still being deliberated at the House, he said.

In the meantime, Indonesian authorities -- as stipulated in the Criminal Code -- have the right to seize a defendant's property once they have collected enough material evidence to support the action, said Sidharta.

According to Heru, the Attorney General's Office is coordinating joint efforts between the central bank and the Capital Market Supervisory Agency to draft a money laundering law.

Heru also said the central bank was considering establishing a rule requiring local banks to report large transfers from foreign banks.

"Such transfers need to be reported. If not, people will continue offering to transfer large sums of money into our banks," Heru said, referring to agents which launder dirty money from abroad.

But do we have any estimates of the amount of drug money that has been laundered here?

Secretary of the National Central Bureau for Interpol Brig. Gen. Ahwil Lutan said: "I have no idea about the amount. But the fact is, most of the dirty money is kept at island states in the Pacific, where it is invested."

So, there's no use worrying about money laundering in Indonesia, Ahwil told the Post.

"Among the reasons are first, a developing country like us still needs money for its economic growth and secondly, crimes involving narcotics here are not as serious as those in the United States, for instance," he said.

The current popular drug among Indonesian youths is Ecstasy, which is mostly imported from European countries.

Acknowledging this fact, Schroder explained that most psychotropic substances are produced in Europe, the home of big pharmaceutical factories.

"Some European countries were hesitating to ratify the 1971 UN Convention, but we of course try to keep on encouraging them. One of their reasons for hesitating is to protect their own industries so they can export those substances without any control worldwide," Schroder said. "Many of the substances are shipped to Africa, where the prices are much cheaper than those of heroin or cocaine."

The recent issuance of Indonesia's first law on psychotropic substances, which was based on the 1971 UN Convention, was welcomed by INCB.

"We're very satisfied with the news and the results we learned about during our visit here. We appreciate it very much that the Indonesian government has made an enormous effort in taking steps to help reduce the trafficking and misuse of these psychotropic substances," he said. He hoped that more countries could follow Indonesia's move.

"The international drug control system can only work efficiently if all the countries cooperate based on the UN convention and its implementation," he said.

During his five-day visit here, which ended last Thursday, Schroder met top-ranking officials related to the drug control system, collecting data about progress and steps which had been taken by Indonesia so far. Among the officials he met were those from the police, customs and the ministries of health, social affairs, trade and industry, foreign affairs and justice, as well as education and culture.