LAW AND PRACTICE OF ASSET RECOVERY IN
INDONESIA: CHALLENGES AND OPPORTUNITIES
Hikmahanto Juwana, M. Ajisatria Suleiman, and Harjo Winoto
Abstrak
Pelaku kejahatan kerah putih, seperti korupsi, sering menyimpan aset-aset curian dan kekayaan mereka di luar negeri. Mereka melakukannya agar para penegak hukum di negara dimana kejahatan tersebut dilakukan tidak memiliki akses terhadap aset-aset serta kekayaan tersebut. Walaupun demikian, kejahatan kerah putih akan menyadari bahwa usaha mereka tersebut gagal apabila terdapat kerja sama yang erat antara negara di mana kejahatan tersebut dilakukan dan negara di mana aset-aset tersebut disimpan. Dewasa ini, Perjanjian Bantuan Hukum Timbal Balik telah dapat diterima sebagai suatu bentuk untuk mewujudkan kerja sama internasional. Meskipun Bantuan Hukum Timbal Balik bukanlah satu-satunya pilihan, tetapi dipertimbangkan sebagai metode hukum yang efektif dari pengembalian aset.
Kata kunci: Aset, Perjanjian, Hukum
1. Introduction
One of the most important objectives of an MLA treaty is to retrieve the asset that is either belong to the perpetrator of the crime, or that is considered as the proceed of the crime. Cooperation in criminal matter for the purpose of asset recovery is of paramount importance, especially for country such as Indonesia, in order to gain more benefit than commencing cross border civil proceeding over the asset in the country where the asset is traced. Even so, the existence of an MLA treaty does simplify the procedure, but there are still practical challenges that Indonesia needs to encounter when ensuring the return of asset to the home country. This article deals with the challenges that the law officials must cope with, as well as the recommendations as to the steps that they can take. Therefore, this article discusses the problem of asset recovery both at the legal and practical level, as well as the national and international sphere.
2. Asset Recovery in International Treaties
First of all, one must note that MLA, which deals with international cooperation in criminal matter, is not the only way to make effective of asset recovery. A country that suffers losses from a crime can commence a civil lawsuit in a country where the asset of the criminal perpetrator is found without prior MLA arrangement. Another method also involves the combination of civil lawsuit and criminal MLA treaty to ensure the return of assets to the home country.52
However, if a country opts for an arrangement at the public international law sphere, MLA becomes essential. As a cross border initiative, asset recovery is subject to international norms governed under international agreement. The international community has managed to enter into various treaties. Meanwhile, country such as Indonesia has also promulgated a law to govern treaty implementation at domestic level by virtue of Law 1/2006 on mutual legal assistance (MLA). Cooperation in
52 For comparison, see “The Legal Framework”,
form of treaty may become optional if countries agree to operationalize asset recovery initiative on the basis of reciprocity.
Provisions concerning asset recovery, or MLA in general, have been mentioned in, for example, the 1988 UN Convention Against Illicit Traffic Narcotics Drugs and Psychotropic Substances, Article 7; the 2000 UN Convention on Transnational Organized Crime Article 7, 18, 27; and Financial Action Task Force (FATF) 40 Recommendation point 36, 37 and 40 (including interpretative note to recommendation 40). At the bilateral and regional level, Indonesia has entered into several MLA treaties, which contain provisions on asset recovery, with Australia, South Korea, and China, in addition to a regional MLA treaty within the ASEAN sphere, all still not yet ratified. One MLA treaty that Indonesia has ratified is with Hong Kong, by virtue of Law 3/2012.
However, the most comprehensive treaty regulating asset recovery is that of the UN Convention against Corruption (UNCAC), ratified by Indonesia under Law 7/2006. UNCAC governs asset recovery both within the context of MLA in criminal matter, as well as cross border civil litigation (non-MLA asset recovery). This explains why MLA and asset recovery are two separate chapters in the UNCAC. The specific chapter on asset recovery under UNCAC also comprehensively discusses about the preventive measure (including anti-money laundering norms and the issue of bank secrecy and financial market disclosure) and repressive/enforcement of asset recovery through criminal cooperation or civil lawsuit. The scope of international cooperation in criminal matter also includes case still under ongoing investigation or the enforcement of an already legally binding decision.53
3. Practical Challenges in Indonesia
The existence of a treaty or a set of domestic law is surely not enough to ensure effective enforcement of a law, especially for asset recovery that has cross-border nature. The followings are challenges encountered in the context of Indonesia’s legal practice.
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1. Transforming Treaty into Domestic Law
Upon ratification of a treaty in Indonesia, there is still a requirement to transform the treaty provision into national legislation. This is important to operationalize and make effective of the provisions contained in such treaty into enforceable legislation.54
2. Differences in Legal System
The differences in legal system and legal tradition (such as the continental-based civil law and the Anglo-Saxon-based common law) and differences in forfeiture system (value-based system as opposed to property-based system) are indeed major obstacles to effective asset recovery regime. There is also another issue of legal definition of certain crime that may vary from one jurisdiction to another. What constitutes “embezzlement” or “corruption” in one country may be considered simply as “administrative error” in another country. At the enforcement level, differences also arise with regard to procedural law, burden of proof, and the timeframe to obtain assistance for recovering the assets in a court proceeding.
For example, there is a difference between the continental legal system (civil law) and the Anglo Saxon system (common law) with regard to the authority to freeze, seize, and confiscate assets. The main issue is whether the public attorney and/or the court bailiff is entitled to directly seize or confiscate the asset, as opposed to requiring prior registration of the court decision. If one jurisdiction already considers a certain legal documentation is sufficient, while in another jurisdiction requires further order to operationalize the confiscation, this may cause confusion in the court proceeding and thus delay the enforcement of a court decision. At worst, the country where the asset is located can deny a request for an asset recovery.
54
See Hikmahanto Juwana, Hukum Internasional dalam Perspektif Indonesia sebagai Negara Berkembang, (Jakarta: Yasrif Watampone, 2010), specifically in the chapter “Kewajiban Negara Mentransformasikan Ketentuan Perjanjian Internasional Pasca Keikutsertaan” (State Responsibilities to Transform Treaty Provisions upon
One concrete example is the asset recovery effort related to the Bank Century criminal case. The District Court of Central Jakarta has found Hesyam al Warraq, Rafat Ali Risvi, and Robert Tantular, former shareholders of Bank Century, guilty in an in absentia judicial proceeding. Hesyam and Rafat were convicted of 15 years imprisonment, monetary fine of Rp. 15 billion, and monetary compensation penalty (uang pengganti) of Rp. 3,1 trillion, and in addition their assets located overseas were ordered to be confiscated.55
In Hong Kong, Indonesia is trying to confiscate their assets with nominal value of around Rp. 1,2 trillion. The presence of an MLA treaty between Hong Kong and Indonesia has surely made the initiative simpler, despite the objection launched by the convicts. An issue yet still arises whether the verdict issued by the District Court is already sufficient to confiscate the asset, or whether the Indonesian authority (i.e. the judiciary) needs to issue a further confiscation order.56 Meanwhile, asset recovery in Switzerland encounters even more difficult problem. The Government, along with Bank Mutiara (as the successor of Bank Century) has initiated civil proceeding at the Cantonal Court of Zurich, Switzerland, in the absence of MLA arrangement. Problem arises because the criminal act of the convicts, upon which the claim is based, is considered as merely banking mal-administration according to the Swiss law. In addition, there is a counter claim over the asset with nominal value of US$ 155,9 million placed in the LGT Bank (formerly Dresdner Bank).57
55“Kasasi Robert Tantular ditolak MA”, Merdeka.com, 27 Maret 2012,
http://www.merdeka.com/peristiwa/kasasi-robert-tantular-di-tolak-ma.html (last access 25 May 2012).
56“Freezing of Century’s Assets in Hong Kong Face Problems, “
http://www.tempointeractive.com/hg/nasional/2010/01/12/brk,20100112-218709,uk.html” (last access 25 May 2012).
57“AGO is Trying to Recover Bank Century Assets from Hong Kong and Switzerland”,
3. Inter-agency Coordination at the Domestic Level
A classical issue within the Indonesian legal institution is weak coordination among law enforcement officials and public institutions. This may affect negatively initiative at the international level.
For example, the central authority for MLA according to Law 1/2006 is the Ministry of Law and Human Rights (MOLHR). MOLHR is not a law enforcement agency within the Indonesian criminal justice system having the authority to investigate or prosecute criminal matter.58 Therefore, in the administration of justice, the MOLHR must coordinate with the institution in charge such as the Attorney General’s Office (AGO), the National Police, or the Corruption Eradication Commission (KPK). This is different with countries such as the United States (US), whereby the AGO, the Department of Justice (DOJ), as well as the investigation authority (Federal Bureau of Investigation, FBI) are all under the same institution.
There is also an implicit rivalry between law enforcement officials. This may create competing authority claim when there is a requirement to coordinate with foreign authority where the asset is located. Agency coordination among the MOLHR, AGO, KPK, and the National Police can delay the cooperation at the international level.
Indonesia’s financial intelligence unit, represented by Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK) is not well equipped with sufficient authority. PPATK is merely entitled to set up reporting and analysis system over financial transaction, but it has no authority to grant consent over suspicious transaction. Therefore, PPATK cannot prevent transaction from occurring, nor its result can be used as a basis for confiscation overseas.
This authority problem can be counter-productive to what foreign authority where the asset is located has achieved. For example, a proceeding that has come under public attention is that of the proceeding to retrieve a bank account in the value of 36 million Euro in Guernsey, a UK protectorate, registered under the ownership of Garnet Investment Limited, a company controlled by Tommy Soeharto.
58
For discussion, see OECD – Indonesia, in
In this case, the initiative to commence the proceeding was from the bank where the account is registered, namely BNP Paribas (now Credit Suisse). The case started when BNP reported a suspicious transaction in the amount of 36 million euro as the proceeds for the sale of shares of Lamborghini SA in 2002. BNP, following up its due diligence obligation, reported this transaction to Guernsey’s Financial Intelligence Service (FIS) under the suspicion that Garnet’s source of fund was proceed of crime.
BNP’s due diligence was confirmed by the FIS, which was also convinced that the beneficial owner and the controlling owner of Garnet was in fact Tommy Soeharto. Garnet’s account in BNP was frozen subject to Garnet’s explanation regarding the source of fund. The case went to the court because Garnet refused to provide such explanation. The Indonesian AGO became party to the case as an intervening claimant; unfortunately its argument was not admitted by the court.59
4.The Interest of the Country where the Asset is Located
Another main obstacle to asset recovery is that the country where the asset is located does not have interest to help the country requesting for assistance. In most cases, the interest to settle the case is merely upon the country where the crime was committed. To exacerbate the problem, some countries have become globally known as the destination of stolen assets because they provide the necessary infrastructure for illegal assets, because of their tax and legal structure. These countries are mostly small countries with limited natural resources, therefore assets stolen overseas are considered “investment”, and they become the world’s “safe haven”.
The existence of safe haven has disrupted the financial system globally, and it has received major attention nowadays for its contribution to the global financial crisis. In several global forums following the 2008 financial crisis such as the G-20, safe haven is a major problem that must be reduced, although political dynamics put the issue back at the very beginning: there is practically no interest for a country to assist another
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country retrieve stolen asset, if that country actually gains benefit from such illegal asset.60
5. Asset Tracing
Another practical problem is asset tracing. An asset is difficult to trace if placed in countries where bank secrecy is guaranteed. Ownership over an asset can also be structured by virtue of complex legal, financial, and tax arrangement to distort the real owner of such asset. A criminal perpetrator can transfer asset to other individual or corporation that is still within its control to eliminate its formal ownership over the asset. For example, trust system or nominee arrangement can make it difficult to trace the real/beneficial ownership over an asset, as opposed to the formal registered ownership.
From the perspective of the country where the crime was committed, it is difficult to trace the asset because it falls beyond its jurisdiction. Meanwhile, for the country where the asset is located, it may not follow up asset recovery request because it is not within its interest, and it does not want to incur the cost that is basically originated from its taxpayer money.
6. The Cost of Asset Recovery
As a cross border initiative, recovering stolen asset is not a cheap procedure and it requires enormous financial resources. A country may assist another country for asset recovery, but if such country has no stake in that cooperation, it may not be willing to incur the cost for that initiative. A country may be involved in an asset recovery initiative if there is a guarantee that all costs incurred will be reimbursed by the country requesting for such assistance.
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7. Counter Claim from the Alleged Perpetrator or from Third Party In the event of an asset confiscation proceeding, there is a high probability that the owner of such asset, or even a third party, may challenge the confiscation, either through court proceeding or other official channel. Either way, this counter claim may incur more costs than what have been incurred already for the original asset recovery procedure. The problem is whether the country where the asset is located will be willing to allocate its resources to entertain this counter claim or legal challenge, especially, again, when that country has no interest to take the matter seriously.
In the case of Bank Century, there are challenges from Robert Tantular in Hong Kong; or in Switzerland from a third party, a company called Tarquin Ltd., that also claims ownership over Tellcorp, a company controlled by Hesyam and Rafat. Counter claims can also come through non-asset recovery proceeding but can affect the procedure.61 Still in the same case, the two convicts, Hesyam and Rafat, have initiated arbitral proceeding against the Indonesian Government in the ICSID (International Center for the Settlement of Investment Dispute) and the Organization of Islamic Conference (OIC). This has affected the procedure and delayed the entire process of asset recovery.62
4. The Available Legal Solutions for Consideration
Having considered the abovementioned problems, the followings discuss the available legal solutions that the Indonesian Government must consider to make effective the asset recovery initiative.
61 “Optimis Kasus Century, Pasrah kepada Tommy”, hukumonline, 11 Maret 2011,
http://hukumonline.com/berita/baca/lt4d84ab3aeed23/optimis-kasus-century-pasrah-kepada-tommy- (last access 25 May 2012).
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1. National Legislation and Bilateral Cooperation
Indonesia needs to conform its national legislations to the treaties that country has ratified, including the UN convention on Transnational Organized Crime, and more importantly, UNCAC. This is to encounter the problem of different legal term and definition, as well as to incorporate new legal concepts that can contribute to better asset confiscation regime. One important concept is, among other, the notion of illicit enrichment.
Further, from the country’s experience with MLA between Indonesia and Hong Kong, a bilateral MLA arrangement is proven to be essential to ensure the effectiveness of asset recovery. In practice, it is not easy to induce a country to enter into MLA with Indonesia, especially if that country is a popular destination for Indonesian criminals to stash their assets and wealth. As a comparison, extradition agreement between Indonesia and Singapore has been long overdue because this apparently involves sensitive political and security issues that prevent the treaty from ratification at the parliamentary level.63
2. The Use of Private Investigator and Private Attorney
In order to trace and find the assets for confiscation, a country or party needs to consider engaging private investigator or private attorney at the jurisdiction where the asset is located to gain better understanding, knowledge, and culture of that foreign jurisdiction. This private investigator or attorney will convey information to the foreign government regarding the relevant assets that are hidden. The foreign government will channel the information to the requesting government, which will be responsible for all the costs incurred during the process. Therefore, all the costs and resources will be borne by the requesting government, instead of the foreign government.
The use of private investigator has been discussed, for example in a study commissioned by the World Bank. Private investigator is commonly used in an asset recovery initiative by virtue of civil
63 “S’pore refuses to renegotiate extradition treaty with RI” Jakarta Post, 29 September
proceeding, instead of MLA in criminal cooperation.64 However, there is no practical prohibition to also implement this approach for MLA, and therefore there will be close coordination between the two governments, and the private investigator will bridge them. Global private investigation firm has been familiar and engaged by private companies to detect corporate fraud or insider trading, or to conduct forensic accounting. With such skills, private investigation firm can add significant value to asset recovery, in addition to its less bureaucratic work plan compared to public institutions.
In the World Bank study, it is explained that one disadvantage of private investigation firms is their inability to access state file and documents that are still classified, or confidential information such as bank account information. In contrast, public investigation agencies (AGO, or financial intelligence unit) can oversee important activities through their intelligence system. They are also equipped with authorities to search, seize, intercept, or wiretap. Therefore, there is a need for strong partnership between public and private investigation techniques. Private firm can take more roles on obtaining public data, while it can also overcome the problem of weak coordination among public institutions and bureaucratic workflow. Private firm can also follow up the findings of a public agency, which findings can only be obtained through its legal authority that private firm is not entitled to.
3. Coordination among Authorities
Coordination among authorities is the cornerstone of an effective international cooperation to follow up asset recovery request or confiscation order. Legal problems will always arise regardless how well an MLA treaty is drafted because different jurisdiction will always pose different challenges. However, all can be encountered if there is mutual understanding as to how to ensure the cooperation in an effective fashion.
64
Jean-Pierre Brun, Larissa Gray, Clive Scott, dan Kevin M. Stepehenson, “Asset Recovery Handbook: A Guide for Practitioners”
Coordination is also vital to ensure the flow of information on facts or law about the concerned asset.
Indonesia should have appointed national authority with authorities within criminal justice system to commence investigation, prosecution, and/or enforcement of court order. This will cut the chain of bureaucracy significantly and reduce coordination problem among domestic institutions.
4.Assisting Foreign Authority and Guaranteeing Financial Disbursement
In order to deal with investigation in foreign jurisdiction and the problem of counter claim, the Indonesian government must coordinate with the foreign authority. After all, the burden of investigation will be upon them, and counter claim will address them. Therefore, the Indonesian Government must fully back up the foreign authority with data and even resources. Further, the Government must consider issuing guarantee to cover all the costs that the foreign authority incur in order to commence all procedures.
5. The Role of International Organization
International organizations and foreign donors have become more serious in assisting countries to combat transnational crime and to develop capacity in order to support good governance agenda. The World Bank, for example, devoted its resources through the Stolen Asset Recovery (StAR) Initiative,65 to help policy formulation and law enforcement with regard to asset recovery. UNCAC also appoints the UN Office for Drugs and Crime (UNODC) as the treaty custodian, and one of the tasks is to implement the UNCAC’s capacity building clauses for developing countries. Indonesia must make use of these opportunities very well and in strategic fashion, as long as it does not create financial obligation for the country (for example, all assistance must be in the form of grant instead of loan).
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5. Concluding Remarks
Recovering stolen assets is certainly not an easy task, let alone pursuing the assets to overseas jurisdiction. There are legal considerations (legal term differences, MLA treaty implementation) as well as technical issues (costs and resources of proceeding). There is also political consideration that one must aware of, and that may involve other issues not related to asset recovery, which may unexpectedly become an essential factor to shape state’s interests. Therefore, if the Government is really serious about recovering stolen assets, it must come up with strategic and innovative solutions.***
