Fighting dirty money

Fighting dirty money

Those who still don't believe that foreign, rather than
domestic, pressures are often more effective to force the
Indonesian government to pursue reform measures, simply look at
the speed and urgency in which the House of Representatives had
acted to strengthen the antimoney laundering (AML) law of 2002.

The House on Tuesday approved a series of amendments to the
law not because of the politicians' great concern about the
rampant laundering of dirty money in the country but due to
strong threats from the developed nations to impose hefty risk
premiums on all transactions with Indonesian parties.

The government White Paper on reform agenda, which was
unveiled on Monday, also stipulates a comprehensive list of
measures to be taken within the next few weeks to strengthen the
AML regime.

Compare the House treatment of this AML legislation to that of
many other bills, which are not less important and yet which have
laid ignored for more than a year on the House document shelf.

The Paris-based Financial Action Task Force (FATF) on money
laundering has threatened to take counter-measures against
Indonesia unless the government strengthened its AML system. Such
penalties would hamper international banking and trade
transactions from Indonesia, which has been on the FATF list of
non-cooperative countries and territories (NCCT) since 2001,
together with eight other countries such as Nauru, Nigeria,
Myanmar and the Cook Islands.

The United States, the leader of the global campaign against
money laundering and terrorist financing, also has held up this
country with a very powerful gun -- the U.S. Patriot Act, which
could isolate Indonesia virtually from all international
financial centers.

The amendments will provide the 2002 AML law with stronger
teeth by: Giving more protection to those reporting suspicious
transactions, shortening the reporting deadline for reporting
suspicious transactions to three days, enhancing international
cooperation in combating cross-border money laundering, removing
the limit on the size of transactions that can be labeled as
suspicious, broadening the categories of crimes defined as the
source of dirty money.

These improvements will certainly gain a positive review from
FATF at its next plenary meeting in Stockholm, Sweden, early next
month and will consequently spare Indonesia from FATF's tough
counter measures with their horrifying impacts.

However, the stronger legislation measures alone would not
automatically lift Indonesia from the NCCT list as FATF still
wants to see more evidence that Indonesia is really serious about
combating dirty money. The best assessment Indonesia may get at
the FATF meeting next month is being lifted out of the NCCT list
but subject to close monitoring.

This is simply understandable, at least within the Indonesian
context.

Amending the law is one thing and properly enforcing the law
to achieve its goal is something else. For example, the
government has significantly strengthened its anti-corruption
law, yet very few major graft cases have been brought to court,
even though Indonesia is perceived to be one of the most corrupt
countries in the world.

Likewise, not a single money-laundering case has so far been
brought to court, even though the Financial Transaction and
Report Analysis Center (financial intelligence unit), which was
set up last year to enforce the AML law, has thus far received
more than 250 instances of suspicious financial transactions for
further investigations and prosecution.

The problem is that the center, known under its local acronym
PPATK, is not yet fully operational. It is inadequately funded.
As a financial intelligence unit, which has to analyze complex
financial transactions and which must work under a high degree of
confidentiality, the PPATK should have employed highly-skilled
and highly experienced financial experts with high integrity. But
the center at present has less than 10 permanent staff and is
poorly equipped.

PPATK will never be able to function effectively without full
cooperation from law enforcement agencies as the police and
public prosecutors but the acute lack of legal clarity about the
PPATK function and scope of responsibility and authority makes it
extremely difficult for this center to gain cooperation from
other government agencies.

Hopefully, these deficiencies will be addressed by the four
presidential decrees, which, according to the White Paper on
reform measures, will be issued within the next few weeks to
strengthen the AML system.

We are confident that FATF would not be too harsh on Indonesia
but would treat it in gradual, proportionate and flexible manners
as long as the government acts in good faith in fighting against
money laundering.

After all, money laundering is still a new concept within
Indonesian financial system. Financial institutions have yet to
be trained to avoid dealing with criminal elements, to check the
identity and legitimacy of clients.