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AML/CTF compliance in Indonesia

WHAT ARE THE

Money laundering and terrorism financing laws in Indonesia?

The money laundering and terrorism financing laws in Indonesia include Law No. 3 of 2011, Law No. 5 of 2018, Law No. 8 of 2010, and Law No. 9 of 2013. The Bank of Indonesia has also issued Regulation No. 14/27/PBI/2012 on the implementation of Anti-Money Laundering and Combating the Financing of Terrorism Programs for Commercial Banks. Another regulation is No 19/10/PBI/2017, which pertains to the adoption of an “Anti-Money Laundering and Prevention of Terrorism Financing for Non-Bank Payment System Service Provider and Non-Bank Currency Exchange Service” Procedure.

WHAT ARE THE

Key obligations reporting entities have under Indonesian laws?

The key obligations under the AML/CTF laws in Indonesia include:

  • Customer Due Diligence (CDD): Includes identifying and verifying customers' identities, as you mentioned. It also includes the screening of customers against international sanctions lists, adverse media, and politically exposed persons (PEP) lists.

  • Appointment of a Compliance Officer: The AML compliance officer is responsible for overseeing the internal AML programme and ensuring compliance with AML/CFT laws and regulations.

  • AML/CFT Procedures: Implementing AML/CFT procedures that meet the standards of regulatory bodies like the Financial Services Authority (OJK in Indonesia) and international standards set by the Financial Action Task Force (FATF) is indeed a key obligation.

  • Training: Providing regular and ongoing AML/CFT training to employees is crucial to ensure that they are fully aware of these issues and the corresponding obligations of the reporting entity.

In addition to these, record keeping and reporting of suspicious transactions are also key obligations under Indonesian AML/CFT laws.

WHO ARE THE

ML/TF regulators in Indonesia and what functions do they perform?

In Indonesia, the regulators responsible for combating money laundering and terrorism financing are primarily:

  • Bank Indonesia: As the central bank of Indonesia, Bank Indonesia plays a significant role in supervising financial institutions, including banks, for AML/CFT compliance.
  • Indonesian National Police: While not a regulatory body, the Indonesian National Police play a crucial role in the investigation and prosecution of money laundering and terrorist financing offenses.

These institutions collectively work towards enforcing AML/CFT laws and regulations in Indonesia.

WHAT ARE THE

Industry sectors subject to ML/TF regulations?

In Indonesia the main industry sectors that are regulated include:

Banks

This refers to all commercial banks, rural banks, and sharia banks. They are required to conduct customer due diligence, report suspicious transactions, and maintain comprehensive records.

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Insurance Companies

All types of insurance providers, including life, general, reinsurance, and sharia insurance companies, fall under the purview of AML/CFT laws. They need to adhere to the same standards of due diligence and reporting as banks and non-bank financial institutions.

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Securities Companies and Capital Markets

Securities underwriters, brokers, dealers, and investment managers, as well as mutual funds. They are obliged to follow AML/CFT regulations in their operations.

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Non-Bank Financial Institutions

Including money remitters, finance companies, credit unions, pawnshops, and leasing companies. Similar to banks, they are also obligated to comply with AML/CFT regulations.

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Larger Financial Institutions

Are more closely regulated due to the higher risks associated with their size and the volume of transactions they handle. This includes larger banks, insurance companies, and other financial services providers.

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WHAT ARE THE

Penalties for non-compliance with AML/CTF laws?

In Indonesia, non-compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) laws can result in severe penalties.

  • Fines: Financial penalties can range up to IDR10 billion and IDR100 billion. The exact amount might depend on the severity and frequency of the violations.
  • Imprisonment: Depending on the seriousness of the offence, prison sentences of up to 20 years can be imposed.
  • Revocation of License: For financial institutions failing to comply with AML regulations, there is a risk of having their operating license revoked.
  • Shareholder Sanctions: Shareholders of non-compliant financial institutions can be blacklisted, preventing them from owning shares in similar institutions for a period of up to 5 years.

These penalties serve to emphasize the seriousness with which the Indonesian authorities view AML/CTF compliance. It's important for all regulated entities to have robust systems and controls in place to ensure full compliance with these laws.

WHAT ARE THE

Largest fines for non-compliance with AML/CTF laws?

The largest fines for non-compliance with AML/CFT laws in Indonesia are as follows:

  • Bandung Tipikor Court Case (Indonesia, 2023) - Several individuals were sentenced by the Bandung Tipikor Court for involvement in money laundering and implementing a pyramid scheme for distributing goods. Penalties included imprisonment terms ranging from 24 to 48 months and fines between IDR 1,000,000,000 and IDR 1,500,000,000, reflecting the serious consequences of such illicit activities.
  • PT Duta Palma Case (Indonesia, 2023) - An influential individual was given a 180-month imprisonment sentence and faced substantial fines for corruption, illegal deforestation, and money laundering, as ruled by the Jakarta Anti-Corruption Court. The illicit operations involving plantation permits for the company, PT Duta Palma, resulted in severe environmental harm and massive financial losses for the state, underscoring the profound consequences of corporate misconduct.
  • BNI Bank Case (Indonesia, 2021) - An individual was sentenced to 216 months of imprisonment and fined IDR 800,000,000 by the Jakarta Anti-Corruption Court for involvement in corruption and money laundering. The fraudulent activities, which involved falsified documents to obtain loans from the state-owned BNI Bank, resulted in state losses of IDR 1.2 trillion.
  • Jiwasraya Case (Indonesia, 2020) - Six individuals were penalized for money laundering, stock inflation, and corruption linked to state-owned company, Jiwasraya. The misconduct led to a state loss of IDR 16.8 trillion. Major penalties included life imprisonment and fines of IDR 6 trillion and IDR 10.72 trillion imposed on two key defendants by the Jakarta Anti-Corruption Court.
  • Garuda Indonesia Case (Indonesia, 2020) - Two individuals, including the former president director of Garuda Indonesia, were penalized for their involvement in a money laundering and bribery conspiracy. The Jakarta Corruption Court imposed fines of Rp 1 billion each, along with imprisonment sentences, underlining the severe repercussions of such financial misconduct.
  • Medan District Court Case (Indonesia, 2017) - Four individuals were penalized for their involvement in money laundering connected to the illegal drug trade. The Medan District Court imposed a fine of IDR 1 billion and various imprisonment sentences on the defendants, emphasizing the severe consequences of such illicit activities.
  • Citibank Case (Indonesia, 2012) - An individual was penalized for fraudulent transfers from Citigold clients' accounts between 2007 and 2011. The court sentenced the offender to 8 years' imprisonment and imposed a fine of IDR 10,000,000,000. Recovery of assets, including luxury vehicles and cash, was also ordered, demonstrating the stringent action against such financial crimes.

Jakarta Corruption Court (Indonesia)

  • In 2020, the Jakarta Corruption Court imposed severe penalties on an individual for money laundering, corruption, and stock manipulation, resulting in losses of IDR 16.81 trillion. The court imposed a life imprisonment sentence and a fine of IDR 6 trillion on the defendant, underscoring the gravity of such financial crimes.
  • The Jakarta Corruption Court filed their first significant proceeding against an individual in 2016, resulting in a fine of IDR 1,000,000,000 and a 72-month imprisonment sentence for involvement in a conspiracy to commit money laundering and corrupt practices. The court also ordered the seizure of his wealth, highlighting the stringent action against such financial crimes.