House urged to immediately amend money-laundering law

Dadan Wijaksana, The Jakarta Post, Jakarta

The House of Representatives is being urged to pick up the pace in deliberating an amended money laundering law, so that it can be endorsed by September as required by the Financial Action Task Force (FATF).

Yunus Husein, chairman of the Financial Transaction and Report Analysis Center, and noted economist Faisal Basri said passing the law was crucial to avoiding sanctions, the impact of which would be severe on an economy already crippled by the prolonged economic crisis.

"At the last FATF meeting, it was decided Indonesia would remain on the blacklist of non-cooperative countries in the drives against money laundering activities.

"They gave us until September to finish the deliberations, the main prerequisite before being removed from the list," Yunus said, referring to the June 18 to June 20 FATF meeting in Berlin.

Yunus said that the FATF -- a Paris-based international grouping that works under the auspices of the Organization for Economic Cooperation and Development (OECD) -- is scheduled to meet again in early October.

The draft of the amendment was submitted to the House on June 8, but no schedule has been set for its deliberation, giving rise to fear the endorsement will not be completed on time. This fear is heightened because legislators are scheduled to take a five-week recess starting early in July.

Failure to meet the deadline could prove costly, as Indonesia would risk sanctions.

These include a much higher risk premium imposed on local firms when making transactions with international companies, termination of correspondence alliance between local banks and banks in member countries of FATF and a rejection of letters of credit issued by local banks.

Aside from that, there also could be sanctions from international investors, in the form of putting Indonesia below their investment radar. The worst result for Indonesia would be if the U.S. implemented the Patriot Act, which forbids all financial institutions in the U.S. from doing business with individuals or financial institutions in countries that have received money laundering countermeasures.

Taking all of this into account, Faisal said, Indonesia has no other choice but to comply with the FATF's requirements.

"I cannot even imagine what would happen if the sanctions materialized. That would only deepen our misery. A higher risk premium would mean higher transaction costs, which would further hurt our competitiveness," Faisal said.

He added that even without sanctions, Indonesia was already lagging behind other countries in the region in terms of competitiveness.

"We are less competitive than Vietnam, India, forget about China. Sanctions would only put our economy on the brink of collapse," he said.

Indonesia is still included on the money laundering blacklist despite having enacted a money laundering law last year, because the task force demanded some clauses be revised. First, FATF wants banks and other financial institutions to be required to report suspicious transactions within three days, compare to the 14 days in the current law.

Second, the amended law would include a clause requiring banks or financial institutions to report to the authorities if they found suspicious transactions of at least Rp 500 million.

Third, there would be a clause banning banks or financial institutions from leaking the reported transactions to other parties.

"In Berlin, they also point out one point that needs to be added to the amendment, which is strengthening regulations on nonbank financial institutions," Yunus said.