RI vows to combat money laundering

JAKARTA (JP): Coordinating Minister for the Economy Burhanuddin Abdullah said that the government of Indonesia would cooperate in the worldwide fight against money laundering.

Burhanuddin said over the weekend that in addition to the bill to outlaw money laundering proposed to the House of Representatives earlier this month, Bank Indonesia was preparing a set of new regulations which would force banks to carefully scrutinize the source of their customers money.

"The 'know your customer' regulation is expected to be completed later this month," he told reporters late on Friday.

Burhanuddin, a former Bank Indonesia deputy governor, said that a team from the so-called Financial Action Task Force (FATF), which was formed by G-7 member countries in 1989 to fight international money laundering activities, was expected to arrive in Jakarta soon to check on the country's legal tools designed to curb money laundering.

Earlier on Friday, the FATF added Indonesia to a money laundering blacklist for not doing enough to curb the flow of dirty money into the country.

Indonesia and five other countries, which were entered on the list Friday -- Myanmar, Guatemala, Hungary, Nigeria, and Egypt -- will face increased scrutiny from the Paris-based task force, whose 31 members include the world's major economic powers.

Burhanuddin acknowledged that the developed nations had been warning Indonesia on the need to step up efforts to curb money laundering since 1996. A failure to cooperate would further hurt the country's relations with the international community, he added.

Among the retaliatory steps that task-force member governments might take against the blacklisted countries: warning multinational corporations away from doing business in those countries; forcing banks to collect detailed information before conducting transactions with citizens or companies in those countries; and making it more difficult for banks based in those countries to operate overseas.

A Bank Indonesia official had earlier warned that if the country was included on the blacklist it would further damage international confidence in the domestic banking sector, including the risk that international banks might no longer accept letters of credit (L/Cs) issued by local banks.

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

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

Despite the current political and economic woes, Indonesia remains a target for investment, particularly as the Indonesian Bank Restructuring Agency (IBRA) is offering some Rp 600 trillion (US$53 billion) in banking assets for sale at discounted rates.

There has been speculation 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.

Indonesia's lack of exchange controls, and the strong appetite for foreign investment amid conditions of low saving and investment are seen as being among the factors encouraging the recycling of dirty money in the country.

The government, however, proposed a bill to deter money laundering to the House earlier this month.

The bill identified two new kinds of evidence that could be used in investigating money laundering. The first relates to any information that was sent, received or stored electronically, other than electronic data interchange, electronic letters, telegrams, telex and facsimiles. The second deals with documents, which comprise manuscripts, pictures, sounds, photos, codes, signals, and other meaningful data.

The bill will also provide for the establishment of a commission on the eradication of money laundering activities. The independent commission is expected to forge bilateral cooperation with law enforcers, the finance ministry and the central bank in carrying out investigations.

The bill would enable judges to gain the necessary information from banks about the accounts of those suspected of involvement in money laundering, despite the existence of the Banking Secrecy Law. (rei)