PPATK warns insurance firms of money laundering schemes

Urip Hudiono, The Jakarta Post, Jakarta

An insurance company receives a customer, who wants to sign up for a life insurance policy worth a whopping Rp 100 billion (US$ 11 million) and makes no fuss in having to pay whatever premium is required.

Eyeing a prospective deal at hand, the unsuspecting insurance company welcomes the new business and fulfills the customer's request.

However, within only a year of paying the premium in just several installments, the customer cancels it and withdraws the funds, agreeing to pay any required cancellation fee.

Although the company has verified that it did not fall victim to any scam, common sense says that something fishy had just occurred.

"And it might likely have been at the public's expense, because the insurance company could have been used to launder money," Ministry of Finance director for insurance Firdaus Djaelani said on Monday during a seminar on money laundering.

For this, the directorate, together with the country's money laundering watchdog, the Financial Transaction and Report Analysis Center (PPATK), will continue discussing the issue with insurance companies, and urging them to report any questionable transactions to the center.

"We require every insurance company to establish a unit, or at least assign a staff member, to monitor such transactions," Firdaus said.

Money laundering is the practice of transferring funds generated from criminal activities -- graft, smuggling, drug trafficking, terrorism -- by investing them in legitimate businesses.

Fortunately, Firdaus said, almost all insurance companies in the country have complied with the request.

From 16 insurance companies, 12 pension fund managers and 12 financing companies the directorate had surveyed this year, only a few have not trained their staff on the issue. Data from the Indonesian Insurance Council shows that there are some 160 insurance companies in the country.

"We can say that 90 percent of the companies have complied," he said. "And those who have not will be given sanctions, from warnings to closing them down."

Meanwhile, PPATK vice chairman Bambang Setiawan asserted that his office would also impose sanctions in accordance with Law No. 35/2003 on money laundering.

As of December, PPATK has received 1,149 reports on suspicious transactions from 59 banks, three securities, three foreign exchange dealers, one pension fund and one financing company.

Despite the establishment of the law and the PPATK, Indonesia is still on the Financial Action Task Force's list of non- cooperative countries since 2001, resulting in higher premiums for international transactions and the rejection of letters of credit issued by local banks.

An envoy from the Paris-based anti-money laundering watchdog is expected to come to Indonesia in January next year, to review what the government has done so far to cope with the problem.