Govt to act on money laundering

JAKARTA (JP): The government wants to draft rules to stop money laundering, Bank Indonesia (the central bank) director Heru Soepraptomo said yesterday.

"Money laundering has been haunting our banking system," Heru told a seminar at the Jakarta Fairground.

He acknowledged the central bank had no clear-cut rules to stop it.

"Related institutions must think of how to deter money laundering," Heru said.

Sutan Remy Sjahdeini, a director of the publicly listed state- owned PT Bank Negara Indonesia 1946, said earlier that Indonesia had become a haven for money launderers.

The absence of regulations on money laundering and rigid regulations on banking secrecy had created the haven, Sjahdeini said.

He suggested the government draft a bill on money laundering to improve public faith in the banking system.

Money laundering is when individuals or companies deposit or transfer large amounts of money that were earned illegally.

Heru said the Attorney General's Office was coordinating efforts to draft a bill and regulations to stop money laundering.

He said at least three institutions would help draft the bill, including the Attorney General's Office, the central bank and the Capital Market Supervisory Agency.

The Attorney General's Office would be responsible for prosecuting money launderers. The central bank would monitor the banking system for money laundering. And the Capital Market Supervisory Agency would monitor the capital market.

Heru said the central bank was considering issuing a rule requiring local banks to report large transfers from foreign banks.

"Such transfers need to be reported. If not, people will continue to offer to transfer large sums of money into our banks," Heru said, referring to agents who laundered dirty money from abroad.

Heru did not specify the minimum transfer which would have to be reported to the central bank. He said this should be decided after consultation with other institutions.

"If we use the ruling in the United States as a guide, the minimum transfer would be US$10,000," Heru said.

Under the United States' Bank of Secrecy Act, financial institutions must report cash deposits of US$10,000 or more, and multiple deposits from depositors that add up to $10,000. These transactions are reported to the Treasury and the U.S. Secret Service.

The U.S. Money Laundering Control Act of 1986 requires that banks and savings institutions have reporting systems to monitor cash transactions under $10,000. Under new federal regulations, some cash transactions under $10,000 must be reported in some states.

The local banking system lets Indonesians and foreign residents deposit large sums at banks without reporting their money's origins.

Dirty money can be easily deposited in time-deposit accounts at local banks without explanation.

Local tax officials are not authorized to investigate sources of bank deposits. (rid)