Govt prepares bill to check money laundering, tax evasion

JAKARTA (JP): The government is drafting a financial transaction report bill designed to thwart money laundering, tax evasion and corrupt practices.

The chairman of a special team preparing the bill, Amien Sunaryadi, said on Thursday it would better equip the legal system with data to track white-collar crime.

"So far, in any corruption case, the government has only been able to recover about 5 percent to 10 percent of the lost money because legal apparatus could not track where the money went," he said at a discussion held by the Indonesian Transparency Society.

"With this bill, all movement of big money will be recorded by a special agency and, therefore, legal apparatus could follow the money to track the crime."

According to a draft bill, prepared by the special team at the office of the coordinating minister for development supervision/state administrative reforms, all suspicious transactions must be reported to a financial transaction recording agency, to be set up under a separate law.

International fund transfers and domestic fund transfers exceeding particular amounts would also be reported to the agency.

The bill has yet to specify the value of transactions or transfers which must be reported. Amien said the team would refer to other developed countries which implemented the requirement.

The United States, for instance, requires all transactions exceeding US$10,000 to be reported to the Financial Crime Enforcement Network. Australia requires transactions over A$10,000 to be reported to the Australian Transaction Reports and Analysis Center.

Those required by the bill to report the transactions include banks, financial institutions, insurance firms, insurance brokers, securities brokers, precious metal traders and traveler's check issuers.

The agency must be an independent body under the Ministry of Finance, like in the U.S., or the Ministry of Justice, as in Australia, or the central bank.

Amien believed it would be best for Indonesia to use the latter model because it would reduce the likelihood of duplication in reporting.

"This agency will be very powerful because it could interfere in anybody's privacy. Thus, its operation must be controlled by a special team at the House of Representatives," Amien said.

Entitled to access data at the agency include the National Police, the Attorney General's Office, the Supreme Audit Agency, the Development Finance Comptroller, the Stock Market Supervisory Agency, the Directorate General of Taxes, the Directorate General of Customs and Excise and the provincial revenue offices.

With enough data from the transaction report agency, the police would be able to track white-collar crime or even cross- broker drug trafficking because the latter normally involved international fund transfers.

Authorities could also track money laundering in and out of the country.

The government could also increase its tax and nontax revenues the tax office could track tax evasion practices through transfer pricing, a reinvoicing center and unrealistic debt to equity ratio.

Amien said he anticipated businesspeople would not be receptive to the bill because it provided no benefit to them and was bothersome to their operations.

Institutions which would be required to report financial transactions would also not be too supportive of the bill because it would definitely increase their costs.

Amien defended the bill as necessary and timely to build people's confidence in the business sector and particularly the banking industry.

Clauses concerning bank secrecy in the banking law have the potential to become a hurdle in the implementation of the financial transaction report law, Amien said.

"If our banking law gives too much protection to those who break the law, I think we need to amend that law," he said. (rid)