PPATK suspects money launderers behind stock rally

PPATK suspects money launderers behind stock rally

The Jakarta Post, Jakarta

The government antimoney-laundering agency admitted on Friday
that "hot money" being laundered through the local stock market
might have been a key driver behind the high-flying bourse in
recent months.

Yunus Husein, chairman of the Financial Transaction and Report
Analysis Center (PPATK), said that a money-laundering probe was
in full swing.

"We don't have any numbers as yet, but we did receive reports
on the matter and an investigation is already underway," Yunus
announced during a discussion on Friday.

PPATK is tasked with collecting, recording and analyzing all
information reported by financial service providers -- banks and
non-banks -- both for suspicious transaction reports (STR) and
cash transaction reports (CTR).

If their probe indicates criminal activity, all findings will
be forwarded to the police or the Attorney General's Office (AGO)
for further investigation.

Law No. 25/2003 on Money Laundering defines it as the practice
of converting illegal money into legal investments. Most of the
ill-gotten gains are derived from such things as corruption,
bribery, smuggling, banking-related crimes, drug-related crimes,
people trafficking, gambling and terrorism.

Yunus' remarks should confirm earlier suggestions by a number
of economists that hot money had played a role in pushing the
Jakarta Stock Composite Index to recent record highs, especially
when taking into account that little had been done to improve the
fundamentals of local companies.

The Jakarta stock market -- despite suffering a setback this
week due to heavy profit-taking and the bird flu outbreak -- has
been on an upward bound roller-coaster over the last several
months.

The index is currently hovering at a level higher than it was
before the 1997-8 economic crisis, reaching new record highs
several times in recent weeks.

Under the money-laundering law, PPATK has the authority to
carry out audits on banks and other financial institutions and to
freeze assets and/or accounts belonging to violators once
investigators -- the police or AGO -- declared them suspects.

PPATK is also authorized to monitor phone calls and e-mail, as
well as secretly recording interviews or conversations with
persons of interest.

Once someone is declared a suspect, the burden of proof is
reversed and he or she has to prove his or her innocence.

However, Yunus acknowledged that the agency was playing a sort
of passive role in the fight against money-laundering, saying it
could only go into action after it received credible reports on
suspicious activity.

In a related development, PPATK also confirmed that it was
investigating a report alleging that a high-profile political
party figure had received part of the Rp 1.7 trillion embezzled
from state-owned Bank Negara Indonesia (BNI) in a lending scam.

Yunus did not provide the name or the party, but did predict
that funds derived from money-laundering activities by or for
political parties might increase during this year's national
election campaigns.

There seems to be a gaping window-of-opportunity for such
machinations, particularly because there is no law or regulation
that authorizes any institution to track the sources of funds for
each political party.

Under the election law, there merely a limitation on donations
to political parties. But, Yunus said, there were no regulations
on the sources of funds of political party members.