Indonesia off the blacklist

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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