Marzuki calls for new law to curb money laundering

JAKARTA (JP): Indonesia needs a special law to curb money laundering activities through the country's banking industry, a senior official said here yesterday.

Chief of the Ministry of Finance's monetary and financial analysis agency, Marzuki Usman, said the introduction of such a law was urgently needed to detect the inflow of illegal money from overseas.

"To prevent and limit money laundering practices, it is time Indonesia established a law to prevent money laundering," Marzuki said, as quoted by Antara.

Heru Soepraptomo, the managing director of Bank Indonesia (central bank) said that besides introducing such a law, Indonesian banks should also set a mechanism which would allow them to know more about their clients.

It would be very helpful for banks to know their customers better, while the law to prevent money laundering was pending, he said about essential approaches for banks to curb laundering activities.

Calls for the government to issue such a law were also aired earlier this year by the International Narcotics Control Board (INCB). The board said Indonesia needed the law to strike at crimes related to narcotics and psychotropic substances.

The board said members of drug trafficking cartels and other organized international crime syndicates always found "developing countries with sound economic growth like Indonesia to be a good haven for money laundering".

INCB president Oskar Schroder said in February, that the only way to efficiently fight international drug trafficking cartels was to cut them off from their financial means.

He said Indonesia was susceptible to drug trafficking and money laundering practices not only because of the country's huge size, but also because Indonesia's rapid economic development had led the government to encourage foreigners to invest here.

Marzuki acknowledged yesterday that while an anti-money laundering law was required, establishing one would not be easy.

He said an obstacle to such a law was an article related to banking secrecy in the country's Banking Law, which imposed strict penalties on bankers or other bank officials who revealed information about their clients.

Marzuki said a ruling was therefore needed to accommodate the anti-laundering law while at the same time continuing to protect bank clients' confidentiality.

The anti-laundering law should not in any way discourage the flow of direct investment because foreign investment was still needed to sustain the country's economic growth.

"In other words, it is time to revise Law No. 7, 1992 on banking and add the issue of money laundering to the revised law," he said.

Heru said Indonesian banks found it difficult to prevent dirty money from entering their banking systems, although suspicions might arise.

"Banks don't have a legal basis to detect and prevent money laundering," he said, as quoted by Antara.

Although Indonesia had ratified the 1988 United Nations Convention against the trafficking of narcotics and psychotropic substances, he said: "It is clear there is no legal basis for declaring money laundering a criminal act".

He said banks should apply a "reporting system" which compelled them to report any suspicion of money laundering to the authorities.

"After this reporting system is established, technical knowledge is then needed to detect money laundering practices, which can be achieved if a bank 'knows' its customer," he said. (pwn)