Indonesia off the blacklist

Indonesia is no longer considered a high-risk country within the global anti-money laundering (AML) system. This means financial institutions in developed countries are no longer required to give special attention to business and transactions with persons and companies in Indonesia.

Basically, this means lower costs for transactions with Indonesia.

All this is the result of a decision by the Financial Action Task Force (FATF), an independent, global AML agency of developed countries, at its meeting in Paris last Friday, to remove Indonesia from its list of Non-Cooperative Countries and Territories.

The FATF decision capped almost three years of hard work by the government, beginning with the enactment of an AML law in mid-2002, followed by the establishment of a financial intelligence unit, called the Financial Transaction and Report Analysis Center, and a series of cooperation agreements between the center and law enforcement agencies.

President Susilo Bambang Yudhoyono strengthened these efforts last month by dispatching four Cabinet ministers on separate missions to convince government leaders in Australia, Japan, the United States, France and Britain that Indonesia is serious about combating money laundering.

This achievement should not, however, make Indonesia complacent or lead it to relax its AML measures. Indonesia, like other countries, is still subject to periodical evaluations by the FATF and could be placed back on the blacklist if it fails to meet the minimum standards of effective AML measures.

Moreover, the FATF decision to remove Indonesia from its blacklist came with several tough conditions the government must meet.

Despite the AML law and the conclusion of a series of cooperation agreements between law enforcement agencies on AML measures, the government has very little to show in the way of jailing money launderers.

Even though Indonesia is recognized as one of the most corrupt countries in the world, not a single money-laundering case has been brought to court.

Over the last three years the financial intelligence unit has received reports of suspicious transactions from only 72 of the 134 commercial banks in the country, and only 10 of the approximately 3,800 financial services companies such as securities companies, money changers and insurance firms.

Yet more disappointing is that none of the 257 money laundering cases the financial intelligence unit has investigated and submitted to the National Police and Attorney General's Office have reached the courts.

We get the impression that corruption and a lack of cooperation, either within law enforcement agencies such as the police and Attorney General's Office or within financial services companies themselves, are responsible for the miserably poor enforcement of the anti-money laundering law.

Cooperation between law enforcement agencies and among financial services companies, as well as with other state institutions such as the customs and tax services and the stock market watchdog, is vital for the effective enforcement of the AML law, because information sharing is the brain of the AML drive.

Little wonder the FATF has also urged Indonesia to enact legislation on mutual legal assistance to expedite international cooperation on legal matters related to money laundering.

We believe Indonesia's removal from the blacklist can largely be seen as a testimony to the willingness of the FATF to give Indonesia the benefit of the doubt, fully realizing that it takes time to establish a full-fledged AML system. The investigation and prosecution of money laundering cases require special technical competence to analyze complex financial transactions and to construct strong legal evidence.

However, it would be misguided for the government to consider Indonesia's removal from the FATF blacklist a goal. This instead should be seen only as a confidence-building step in an ongoing process to strengthen the country's AML drive.

The global AML campaign was not prompted merely by the great concern among developed countries about terrorism financing, but also has a lot to do with combating corruption and tax evasion, both of which are quite rampant in Indonesia. An effective AML drive will make it extremely difficult for embezzlers and tax evaders to launder their ill-gotten money in the legal financial system.

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