Money laundering measures could risk RI competitiveness

Zakki P. Hakim, The Jakarta Post, Jakarta

In its effort to remove Indonesia from the list of non- cooperative countries in the global fight against money laundering, the government should not adopt measures that would be harmful to local businesses and affect competitiveness, a business group says.

Indonesian Chamber of Commerce and Industry (Kadin) representative Thomas Darmawan said the government should consider input from the business community before adopting any anti-money laundering measures set by international institutions.

"The measures could mean more paperwork and confirmations, which would eventually result in extra costs for exporters and importers," Thomas told The Jakarta Post over the weekend.

International money laundering watchdog Financial Action Task Force (FATF), a Paris-based agency set up by some developed nations, decided on Friday to retain Indonesia and other five nations on its list of non-cooperative countries and territories in the battle against money laundering.

However, FATF has agreed to send their envoys, possibly in January next year, where Indonesia might be able to convince the global watchdog to remove the country from the list by presenting measures adopted by the government to stamp out money laundering.

Thomas urged government to negotiate with the FATF into not accepting rules that would hamper businesses in the country.

"The business community here fully supports efforts to fight money laundering, but we must be careful in adopting or ratifying international regulations as they could unnecessarily hamper businesses in the country by creating new costs," he said.

On the list of non-cooperative countries since 2001, Indonesia risks several sanctions, which include higher risk premiums imposed on local firms when making transactions with international firms; termination of correspondence alliances between local banks and banks in member countries of FATF; and the rejection of letters of credit (L/Cs) issued by local banks.

Publicly listed Bank Negara Indonesia president Sigit Pramono said that although his bank had yet to suffer from such negative consequences, he acknowledged the risks.

"There are risks that corresponding overseas banks might complicate procedures in transactions with local banks. That would be the biggest threat. And it could happen at any time," Sigit told the Post.

He said that it was the central bank's responsibility to ensure all banks meet international prudential management principles, which include the "know-your-customer" concept, requiring banks to know where their customers' money come from.

Many banks still neglected checking up on their clients and most customers preferred banks with less procedures than banks with rigid rules, he said.

Money laundering is the practice of transferring funds generated from criminal acts by investing them in legitimate businesses. Such criminal acts include corruption, bribery, smuggling, banking-related crimes, drug-related crimes, human trafficking, gambling and terrorism.

Indonesia's Financial Transaction and Report Analysis Center (PPATK) chairman Yunus Husein said there had been several cases where local banks had already encountered difficulties in dealing with foreign banks.

"Bank Mandiri had to have additional inquiries in London," he said. Moreover, an Indonesian was once denied to exchange currencies in the Netherlands, due to the non-cooperative list status, he said.

Indonesia has made some attempts to get off the list by adopting several measures, but to no avail. They include the drafting of the anti-money laundering law and the establishment of PPATK.

Under the law, PPATK is tasked with collecting, recording and analyzing all suspicious financial transactions provided by banks and non-bank financial institutions in the country. PPATK has the authority to carry out audits on banks and other financial institutions.

However, PPATK has no authority to freeze assets and/or accounts belonging to suspected money launderers, monitor phone calls or e-mail, or secretly record interviews or conversations involving suspected money launderers.