Government to issue new policy on money laundering

Dadan Wijaksana, The Jakarta Post, Jakarta

The fight against money laundering would appear to be intensifying with the government announcing plans on Friday to issue a ruling requiring non-bank financial institutions to find out more about their customers so as to avoid illicit money being used in transactions.

According to a press release from the Ministry of Finance, the upcoming policy, while moving in accordance with international prudential management principles, would also lessen the risk of the local financial industry becoming the target of money launderers.

"The ruling will require insurance firms, pension funds and investment fund managers, and other firms to draw up policies and guidelines to accommodate the concept, while being in line with industry best practice and international standards," the press release stated.

The policy would be similar to that of the "know your customers" concept introduced earlier by Bank Indonesia for local banks, which requires them to know where their customers' money originates from.

Money laundering is the practice of transferring funds generated from criminal acts by investing them in legitimate businesses. Such criminal acts include corruption, bribery, smuggling, banking-related crimes, drug-related crimes, human trafficking, gambling and terrorism.

The release did not provide details but the move was deemed to be the latest attempt to get the country off the list of countries considered uncooperative in curbing such illegal practices.

Indonesia is among 15 countries blacklisted by the developed countries grouped in the Financial Action Task Force (FATF), which operates under the auspices of the Organization for Economic Corporation and Development (OECD).

Set up in 1989, the global organization is based in Paris.

The government has said that it hoped to be excluded from the list at the next FATF meeting slated for February. The ruling would add to a series of measures taken by the government with a view to having the country's name cleared.

They include the passage of the Anti-Money Laundering Law in April last year and the establishment of the Financial Transaction and Report Analysis Center (PPATK) last December to take charge of analyzing and investigating suspicious financial transactions both by individuals and corporations.

Elsewhere, the ministry revealed that it hoped to officially issue the ruling by the end of this month, adding that it was currently gathering input from the industry.

Data shows that the amount of money in the country's non-bank financial institutions is growing each year.

In the case of the insurance industry, for instance, assets have been rising over the last couple of years with total assets in 2001 amounting to Rp 64.9 trillion (about US$7.1 billion).

Of all non-bank financial institutions, however, the most likely sector to be infiltrated by money laundering-generated funds would be the investment firms, as they usually care less about where their investors' money comes from.