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.