House passes new money-laundering legislation

House passes new money-laundering legislation

Fitri Wulandari, The Jakarta Post, Jakarta

The House of Representatives passed on Tuesday a new money-
laundering law to help the country avoid financial sanctions from
developed nations.

"The new law is aimed at combating money laundering, as well
as other related crimes," Minister of Law and Justice Yusril Ihza
Mahendra told reporters.

Yusril said that the new law was needed because the old one,
issued last year, was deemed insufficient by the Paris-based
Financial Action Task Force (FATF) to combat money-laundering
crimes.

FATF is a global money-laundering watchdog set up by developed
nations of the Organization for Economic Cooperation and
Development (OECD).

Under the new law, for instance, there is no limit on the size
of financial transactions that can be labeled as suspect. Under
the previous law, only financial transactions involving more than
Rp 500 million could be labeled as suspect, and had to be
reported to the authorities.

"Any transaction suspected to involve money laundering using a
financial institution should be reported, even if it is only for
one cent," Yusril said.

The new law also reduces the reporting deadline for suspicious
transactions to three days from 14 and widens the definition of
money laundering to include gambling.

Additionally, the law facilitates active cooperation with
other countries to combat cross-border money laundering.

Indonesia has been on the list of uncooperative countries and
territories (NCCTs) of the FATF since June 2001. The FATF will
convene early next month to decide penalties on uncooperative
countries.

Sanctions against NCCTs could include imposition of premium
charges on transactions with foreign companies, halting
correspondence between Indonesian banks and their counterparts in
FATF countries and rejecting Indonesian letters of credit.

The government hopes that Indonesia will not be penalized
after approval of the new money-laundering law, although hopes
for release from the blacklist could still take time, as the FATF
would first wish to be convinced of the seriousness of the
government in implementing the new law.

The U.S. has been particularly aggressive in pressing
Indonesia to adopt international standards in the fight against
money laundering since the Sept. 11 terrorist attacks.

Analysts have said, with rampant corruption and weak legal
enforcement, Indonesia is a safe haven for money laundering.

Indonesia has joined with Asian and Western countries to apply
measures to cut financing for terrorist groups. The measures
include the establishment of a financial transaction and report
analysis center (PPATK). Such an agency is tasked with receiving
and analyzing reports on suspicious financial transactions.

Following the Bali bombings on Oct. 12 last year and the
arrest of several terrorist suspects, the government has stepped
up measures to tighten the country's financial system.

The fight against money laundering is also included in the
list of government post-International Monetary Fund economic
reform programs, which was unveiled on Monday. According to a
government White Paper, banks must implement a know-your-customer
principle in a bid to detect suspicious transactions. The
requirement will also be adopted by the country's small rural
banks.

Chairman of PPATK Yuinus Husein hoped that approval of the new
money-laundering law would also pave the way for the FATF to
remove Indonesia from the NCCT list.

"We shall report progress on the money-laundering law to FATF
and other foreign institutions," he said.