Government to sign new decree on money laundering

A'an Suryana The Jakarta Post Jakarta

Minister of Finance Boediono is expected to sign an anti-money laundering decree on Jan. 31 requiring non-bank financial institutions to apply certain measures to help fight money laundering practices.

"The decree will take effect immediately after it has been signed," director general of financial institutions Darmin Nasution told reporters on Wednesday on the sidelines of a meeting with industry players.

Details of the new decree are not yet available. The decree basically forces non-bank financial institutions like insurance companies, pension funds, multi-finance firms, and investment funds to apply a "know your customers" principle, an internationally accepted practice.

This means that the above companies must apply a set of systems and procedures to obtain information on where customers get their money from to help avoid money laundering activities. They must report any suspicious transactions.

The government would impose sanctions on companies that fail to comply with the above requirement.

The finance ministry is currently seeking input from industry players before it finalizes the new ruling.

The banking industry has already applied the above principle.

The requirement is part of a set of measures demanded by the international Financial Action Task Force (FATF) on money laundering to remove Indonesia from its list of countries deemed uncooperative in the world's drive to fight money laundering.

Money laundering is the practice of transferring funds generated from criminal activities like drug-related crime, smuggling, corruption, human trafficking, and gambling into legitimate businesses or investments.

The drive to fight money laundering has also now been linked to efforts to cut financing for terrorist activities.

Currently there are 15 countries included in the Paris-based FATF black list.

Large-scale money laundering activity may occur in countries like Indonesia because economic and business transactions are largely cash based.

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 already taken by the government with the purpose of 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) in December to take charge of analyzing and investigating suspicious financial transactions both by individuals and corporations.