Wed, 14 Jun 2006

RI a good place to learn ins and outs of dubious dealing

Rendi Akhmad Witular, The Jakarta Post, Jakarta

As a world heavyweight in corruption, Indonesia may be a haven for novice corruptors and white-collar criminals around the world to learn how to launder money derived from illicit sources.

From the most simple method, smuggling cash overseas, to the most complicated manipulations involving insurance firms, banks and securities houses -- there's a supporting infrastructure for all of them, such as easy ways to get a fake identification card.

The most simple method of money laundering is to deposit the dirty cash in several bank accounts, under different fake IDs, by breaking the money into portions of less than Rp 100 million (US$10,752).

Under the existing money laundering law, financial and non-financial institutions can only report a suspicious transaction if it involves a sum amounting more than Rp 500 million in a one-day transaction. But it is safer for money launderer if the transactions are made in much smaller portions so as to escape the suspicion of the institutions as the transactions seem to be made by ordinary individuals.

If a money launderer does not want to go to through this relatively laborious process, he or she can simply go to tiny banks in villages and deposit all the money there without having to limit the amount.

With more than 2,100 micro-banks across the country, it is difficult for the Financial Transactions Reports and Analysis Center (PPATK), the country's money laundering watchdog, to monitor suspicious transactions at them, especially since the agency faces a lack of human resources.

A rather complicated method is to cooperate with big-fish gangsters in Jakarta or Surabaya to set up a company which engages in the gambling, prostitution, and hotel businesses.

These companies cover their tracks by having operating licenses as automotive parts traders.

"This is the most popular method used by corrupt tax and customs officials because these businesses are the most liquid. Whenever they need cash they can obtain it quickly," said an official with the Finance Ministry.

"The companies that run the business also act as banks where the corrupt officials can easily store their illegal money. Since the inception of the PPATK it is not very safe to store such money in banks," said the official.

Aside from putting their money in property, jewelry and cars, money launderers also like to invest in restaurant and cafe businesses, most of which will be closed after operating for less than a year.

A more complicated money laundering method involving insurance firms has recently become popular. Based on a report from the PPATK, money launderers usually apply for insurance products and pay a large amount of premium.

Many insurance salesmen avoid the "know your customer" policy in order to get as much as the clients, although some evidences suggest some irregularities in the form of huge gap between the income receive by the policyholder with the paid premium.

In the capital market, money laundering usually occurs by indirectly selling and buying stocks, mutual funds and bonds using small securities houses, according to the PPATK.

After pooling enough funds, these small brokerages then turn over the investment portfolios to larger securities firms to avoid suspicion.

In some cases, investment managers and lawyers are hired to work as executives in several companies on behalf of corrupt officials, using the positions as a cover while managing and laundering their money.