RI unwittingly a party to money laundering: BI

JAKARTA (JP): Bank Indonesia has admitted that some dirty money from international organized crime may have entered Indonesia in the form of legal foreign investment via a complex money laundering process.

Yunus Husein of Bank Indonesia's directorate for legal affairs said on Friday that the country's free foreign exchange system, and the strong appetite for foreign investment amid a low saving- investment gap were among factors encouraging the inflow of the money.

"If you ask me whether there's ill-gotten money coming here, of course there is. But it's like the wind, you know it exists but you can't hold it," Yunus told a seminar on money laundering.

Former deputy of the national police chief Koesparmono Irsan was also convinced that international drug cartels had targeted Indonesia, like other developing nations, as a place to recycle their money.

"They (drug cartels) have been enthusiastic in investing their money in developing nations including Indonesia," said Koesparmono, also a speaker in the seminar.

"There's a huge possibility that some of the foreign loans (investments) entering Indonesia are directed here for money laundering," he added.

Money laundering is the practice of converting ill-gotten wealth, mostly obtained from drug runs, into legal investments particularly in developing nations that lack measures to prevent it.

According to some estimates, the volume of global money laundering activities per year was around US$400 billion.

Despite the current political and economic problems, Indonesia remains an attractive country for investment particularly as the Indonesian Bank Restructuring Agency (IBRA) is offering some Rp 600 trillion (US$65 billion) worth of various banking assets for sale at discounted rates. The agency is mandated to raise cash to help finance the huge state budget deficit.

Last year, IBRA raised around Rp 18.9 trillion in cash from the sale of banking assets, and this year it is targeted to raise some Rp 27 trillion.

The government is also offering to sell state-owned companies via initial public offering and private placement. The target is to raise some Rp 6.5 trillion in privatization proceeds.

Yunus said that Indonesia was facing a dilemma over the money laundering problem.

He said that there has been strong international pressure for the country to participate in the curbing of the global money laundering problem.

But he added that the crisis-hit country badly needed the foreign investment.

"There has been heavy international pressure ...," he said, adding that the country risked being isolated if it failed to respond to the pressure.

He explained that as part of the response, the government and Bank Indonesia had jointly drafted a law on anti-money laundering.

He added that the draft law had been proposed to the House of Representatives. It is not clear when the legislators would approve the bill.

Yunus said that according to the draft law, money coming from corruption, smuggling, banking crime, narcotics and drug operations, terrorism, and the trading of women, children and slaves were considered as ill-gotten money.

Yunus said that if Indonesia declined to participate in the international effort to curb money laundering, the so-called Financial Action Task Force of the G-7 nations might include the country in its "hit list."

He said that the G-7 nations had vowed to cut bank dealings with countries that declined to halt the flow of such money.

"If this happens, domestic banks will also suffer," he said. (rei)