Fighting Money Laundering

Posted by AsiaViews | Sep 24, 2017 | 0 |

The Jakarta Post

Sept 18, 2017

Bank Indonesia’s (BI) latest regulation to strengthen the monitoring and oversight of financial technology (fintech) operators and money changers should be welcomed as another boost to the concerted campaign against money laundering.

Money laundering is believed to still be a rampant practice in the country, as evidenced by the large number of US and Singapore dollar banknotes seized by the Corruption Eradication Commission (KPK) from graft suspects during stings. Early this year, Bank Indonesia and the National Police uncovered almost 800 illegal money changers in several provinces. In fact, many gold and jewelry shops were suspected to be illegally providing money exchange services.

As the financial intelligence unit, the Financial Transaction Reports and Analysis Center (PPATK) has strengthened its monitoring of suspicious transactions through the banking system and non-bank financial companies, criminals have increasingly laundered their ill-gotten money through money changers.

And as the estimated 135 fintech firms/e-wallets now play a growing role in the national financial system, this industry is equally vulnerable to be used as a new vehicle for money laundering. Even remittances have been identified by the G-20 group’s Financial Action Taskforce (FATF) against money laundering being highly prone to abuse by criminals.

The new regulation requires non-bank payment system operators to implement prevention measures against money laundering through comprehensive customer due diligence (CDD) and to report any suspicious transactions to the PPATK and to freeze suspicious accounts. BI will also tighten the eligibility requirements for owners and directors of money exchange and remittance service providers.

One of the main problems is the weakness in implementing the necessary safeguards and control mechanisms relating to customer due diligence requirements. Because of the absence of durable relationships with customers and the nature of transactions, money remitters and currency exchange providers often find it particularly challenging to perform ongoing monitoring to detect anomalies and establish risk profiles.

The nearly 800 illegal money changers that were uncovered early this year are believed to have operated for many years before they were uncovered by BI and the National Police. Studies and surveys by the FATF have concluded that money laundering through remittance and currency exchange providers poses a number of challenges for regulators and law enforcement authorities.

At the same time, there is low detection of money laundering in comparison to the size of the industry as a whole. Money laundering in the sector has attracted criminals, because these payment system providers offer speedy transmission (in the case of remittances), transactions are in cash with very low threshold amounts and customer identification procedures often less than stringent compared to the opening of a bank account.

The use of forged identity documents is another method commonly identified and which appears to be increasingly used. This is particularly difficult to detect by currency exchange providers, especially due to the increasing quality of forged papers and given that clients are often occasional customers and that the business relationship is not of a continuous nature. False identities are often used to hamper investigation of transfers or other financial operations.

(http://www.thejakartapost.com/academia/2017/09/18/editorial-fighting-money-laundering.html)

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EXTRICATING NDONESIAN CHILDREN FROM ISIS INFLUENCE ABROAD

Indonesia urgently needs to revisit the possibility of repatriating the neediest of its young citizens stranded abroad, whose families had earlier joined ISIS. Most of these children are in camps in northern Syria but there are also small numbers in the Philippines, Afghanistan and Iraq. “Extricating Indonesian Children from ISIS Influence Abroad”, the latest report from the Institute for Policy Analysis of Conflict (IPAC) argues that the government could begin by bringing back small groups of unaccompanied children under ten years of age, who pose minimal security risk and are most vulnerable to deteriorating conditions in the camps.“The problem is that health and security conditions are worsening by the day in the Syrian camps, and the children are growing older,” says Dyah Kartika, IPAC analyst. “They need access to schools, a nurturing environment, and medical attention. If the government waits too long, the children will be further exposed to ISIS ideology.” The new report examines a 2019 list of Indonesians in camps and prisons run by the Kurdish Syrian Democratic Forces (SDF). The Indonesian government has been trying to verify their citizenship, but with pseudonyms, misspellings and bad transliterations, it is a daunting task. At the time the data was collected, between March and June 2019, there were 555 Indonesians in SDF camps and prisons, including 367 children. Among the children, approximately 277 were under the age of ten and 34 were unaccompanied. In June 2021, there are fewer than ten children who are both unaccompanied and under the age of ten that could be prioritized for return. Bringing back children of ISIS families is no easy task. The report analyses the main challenges faced by the Indonesian government. These include definitional issues, bureaucratic competition, the difficulty of verifying nationality, evaluating the toll of exposure to conflict, assessing security risk, and finding relatives or others willing to provide care once the children are returned. In addition, COVID has meant stringent restrictions on travel, placing further obstacles in the way of repatriation. There are several models for rehabilitation of children exposed to violent extremism in Indonesia that could be modified to accommodate the needs of children repatriated from abroad. The report examines these models and argues that the government does not need to have every detail of rehabilitation programs in place before it starts extricating children from ISIS influence. It can start by bringing back the most vulnerable children and then modify programs as needed.

“It’s important that the government see these children as victims” says Dyah. “They deserve a chance to be children again.”

Fighting Money Laundering