House approves money laundering legislation

Dadan Wijaksana, The Jakarta Post, Jakarta

The House of Representatives passed a bill on money laundering into law on Monday, signaling the country's commitment to fighting the practice and shedding its image as a haven for money laundering.

Minister of Justice and Human Rights Yusril Ihza Mahendra said the importance of the law was such that its passage could win Indonesia wider support from the international community.

"With this (law), hopefully we can be regarded as cooperative (in curbing money laundering)," Yusril told reporters after a plenary session of the House to pass the bill.

Although there is insufficient data on the scope of money laundering activities here, Indonesia has long been regarded as a haven for the practice.

Given the fact that Indonesia is known as one of the world's most corrupt nations, there has to be money laundering occurring in the country to legalize ill-gotten fortunes, Yusril said.

Money laundering is the practice of converting money generated from corruption, bribery, smuggling, banking-related crimes, drug-related crimes, human trafficking, gambling and terrorism into legal investments. Such activities flourish in developing nations, which often lack the regulations and laws to fight the practice.

The enactment of the law comes at a crucial time, with the government meeting with the Paris Club of creditor nations next month to seek the rescheduling of some US$5.5 billion in sovereign debts maturing in 2002 and 2003.

The rescheduling of the debts, both the principals and the interest, is critical in helping to limit the 2002 state budget deficit at a safe level of 2.5 percent of gross domestic product.

The foreign creditor nations of the Paris Club have demanded that Indonesia have a money laundering law on the books as one of the conditions for a rescheduling facility.

The passage of the money laundering bill also comes ahead of the Paris-based Financial Action Task Force (FATF) meeting in June, which will evaluate the performance of countries in curbing money laundering activities.

FATF, a global task force set up in 1989 under the auspices of the Organization for Economic Corporation and Development, has placed Indonesia, along with several other countries, on its blacklist of counties deemed "uncooperative" in fighting money laundering.

Inclusion on FATF's blacklist has serious consequences. Among the steps that task-force member governments can take against blacklisted countries are: warning multinational corporations away from doing business in those countries; forcing banks to collect detailed information before conducting transactions with citizens or companies in those countries; and making it more difficult for banks based in those countries to operate overseas.

Indonesia's newly approved 34-page money laundering law contains 10 chapters and 52 articles, most of which outline measures to control attempts to hide illegally amassed funds.

Those convicted of money laundering will be subject to between five years and 15 years in jail, plus between Rp 5 billion (about US$510,000) and Rp 15 billion in fines.

The new law states that financial institutions (banks) must report to the authorities if they uncover any suspicious transactions involving at least Rp 500 million.

Indonesian residents who either bring in or take out of the country Rp 100 million in cash must report the money to the customs office.

The new law also will become a legal basis for the establishment of the independent Financial Transaction and Report Analysis Center (PPATK).

PPATK will be in charge of analyzing and investigating reported suspicious transactions, as well as individuals and financial institutions who fail to report suspicious financial transactions.

The crimes covered by the law are so diverse as to include money amassed through almost all illegal activities.

The law covers proceeds not only from corruption and drug trafficking, but also from a wide range of other crimes, including smuggling, bribery, banking crimes, crimes related to psychotropic substances, terrorism, the slave trade and the trafficking of women and children, gun trafficking, fraud, kidnapping and theft.