Anti Money Laundering (AML) in Indonesia
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|Money laundering in Indonesia is a significant problem due to a poorly regulated financial system, a lack of effective law enforcement, and widespread corruption. Most money laundering in the country is connected to non-drug criminal activity, such as gambling, prostitution, bank fraud, piracy and counterfeiting, and illegal logging and corruption. Indonesia also has a long history of smuggling, facilitated by thousands of miles of unpatrolled coastline and a law enforcement system riddled with corruption. The proceeds of these illicit activities are easily parked offshore and only repatriated as required for commercial and personal needs.
In 2002, Indonesia established a Financial Intelligence Unit (FIU) called the Pusat Pelaporan dan Analysis Transaksi Keuangan (PPATK), also known as the Indonesian Financial Transaction Reports and Analysis Centre (INTRAC). The FIU was established by Law number 15 Year 2002 concerning the crime of Money Laundering. This has since been amended through Law of the Republic of Indonesia Number 8 Year 2010.
The following practice guidances have been issued by public authorities regarding AML requirements over the years:
AML Training in Indonesia
Indonesia’s Regulation Concerning Application of Know Your Customer Principles requires financial institutions in the country to train their employees on Know Your Customer (KYC) principles to help protect the financial institution against money laundering.
The Economy of Indonesia
Indonesia has a market-based economy in which the government plays a significant role. There are more than 100 state-owned enterprises and the government administers prices on several basic goods, including fuel, rice, and electricity. The Indonesian economy has seen drastic change since President Yudhoyono took office in 2004, particularly with the implementation of his “pro-growth, pro-poor, pro-employment” economic program. In 2005, the State Ministry of National Development Planning (BAPPENAS) released a Medium Term Plan focusing on four broad objectives: creating a safe and peaceful Indonesia; creating a just and democratic Indonesia; creating a prosperous Indonesia; and establishing a stable macroeconomic framework for development.
The banking landscape in Indonesia is comprised of 128 commercial banks, of which 11 are majority foreign-owned and 17 are foreign joint venture banks. Additionally, there are four state-owned banks that control about 37.4% of assets within the country.
Banking in Indonesia
Bank Indonesia is the Central Bank of Indonesia. In its capacity as Central Bank, Bank Indonesia has one single objective of achieving and maintaining stability of the Rupiah’s value. To achieve this objective, the Central Bank uses a three pillar system, which includes: formulating and implementing monetary policy; regulating and ensuring a smooth payment system; and regulating and supervising the national banking system.
Bank Indonesia is the sole institution authorized to issue and distribute Rupiah currency and to withdraw the currency from circulation. Bank Indonesia is also authorized to arrange and operate an inter-bank clearing system both in Rupiah and in foreign currency.
The Rupiah is the currency of Indonesia and is issued by the Central Bank. Banknotes appear in 1,000, 5,000, 10,000, 20,000, 50,000 and 100,000 Rupiah denominations. Coins come in 50, 100 and 500 Rupiah denominations.
Other Key Statistics of Indonesia
Time Zone: various (UTC+7 to +9).
Location: Southeastern Asia, archipelago between the Indian Ocean and the Pacific Ocean.
Population: 252,164,800 (2014 estimate.).
Languages Spoken: Indonesian.