Crackdown on dirty money

Crackdown on dirty money

The House of Representatives' approval of the Anti-Money
Laundering bill on Monday may earn Indonesia a positive review
from the developed countries' Financial Action Task Force (FATF)
on money laundering and could eventually result in the removal of
its name from the blacklist of non-cooperative countries in the
global fight against dirty money.

But whether the legislation will really have any teeth will
depend on the Anti-Money Laundering Commission, which will be set
up as an independent agency in charge of enforcing the law, and
its operations room called the Financial Transaction and Report
Analysis Center.

Theoretically, the commission will be powerful as it will be
free from political intervention, be responsible only to the
House and be vested with the authority to investigate finance
companies and persons suspected of being involved in money-
laundering crimes. The Center will assist the commission to
analyze and investigate reports on suspicious transactions and
persons and financial institutions that allegedly fail to report
suspicious financial transactions.

Certainly the performance of the commission will still depend
on the integrity and technical competence of the persons to be
appointed as its members and the staff to be recruited to run the
center. And all this in turn will be greatly influenced by the
funding resources made available to it by the government.

The wording and scope of the 52-article law are clear-cut and
forceful and seek to create a conducive environment for cracking
down on money launderers by stipulating special provisions for
the protection of witnesses testifying against suspected money
launderers and the identity of those who report suspicious
transactions.

The punishments are also heavy. People who receive money or
other financial assets, which they know or reasonably suspect to
be derived from criminal offenses, are liable to prison sentences
of at least five years and a maximum of 15 years and by fines
ranging from Rp 5 billion up to Rp 15 billion.

The legislation makes it compulsory for banks and other
finance companies to report to the authorities any receipt of Rp
500 million (US$50,000) or more in cash or the equivalent sum in
foreign currencies. Failure to do so is liable to fines from Rp
250 million up to Rp 1 billion. They are also punishable by the
same range of fines if they do not report suspicious
transactions.

Loopholes for circumventing the compulsory reporting of cash
transactions are closed because smurfing practices whereby
persons deliberately use multiple cash deposits, each smaller
than the Rp 500 million minimum cash reporting requirement, are
liable to jail sentences of three to five years and fines of Rp 3
billion to Rp 10 billion.

The crimes covered by the legislation are so diverse that the
fight will hit almost all major sources of dirty money from
corruption, drug trafficking, smuggling, bribes, banking crimes,
crimes related to psychotropic substances, terrorism to trade of
slaves, women and children.

However, enacting the law is only the first step on the long
road towards an effective anti-money laundering system. More than
10 government regulations have yet to be issued to implement the
law.

Anti-money laundering programs have yet to be prepared for all
financial transactions of different characteristics and different
modes of transactions. This work alone is already an uphill one
as it involves the formulation of policies, procedures and
controls designed to prevent the institutions from being used to
launder money.

Anti-money laundering compliance officers have to be trained,
an independent audit function has to be established to test the
program integrity, an effective system of information sharing
between the institutions and of monitoring transactions have to
be developed.

As laundering crimes have grown hand-in-hand with
globalization, the development of international payment systems
and the complexity of financial transactions, the anti-money
laundering drive will require alliances across many other
countries and institutions.

But all in all, robust anti-money laundering processes will
help strengthen the anti-corruption drive and the fight against
other major crimes as criminals will find it extremely difficult
to circulate their ill-gotten money into the legal financial
system.