Indonesia has taken steps to address some shortcomings in the legal framework for PF-TFS and has listed all the Iran-related UN listings over the review period.
Indonesia has carried out domestic designations without delay. However important technical gaps remain affecting effectiveness (See R.7). Indonesia has not frozen any funds related to WMD TFS. Banks and money changers filed 197 STRs to PPATK over the review period, none of which had direct ties to designated persons. This indicates awareness and compliance of these supervised entities with their obligations. DNFBPs demonstrated relatively less understanding of PF obligations as compared with their TFS-TF obligations. DNFBPs could not demonstrate the screening mechanisms used for PF, as they are generally not aware of the WMD lists. DGCE has taken some monitoring and enforcement measures with a view to detect PF-related activities. Outreach by supervisory authorities has directly contributed to ensuring compliance by FIs with PF requirements. There is limited outreach and targeted supervisory oversight on PF related TFS obligations for DNFBPs. Limited sanctions were imposed for non- compliance with PF related TFS, without delay.
Indonesia is rated as having a Moderate level of effectiveness for IO.11.
Chapter 5. PREVENTIVE MEASURES
Key Findings and Recommended Actions
Key Findings
a. Generally, banks have a good understanding of ML/TF risks, while other FIs exhibited a mixed understanding of ML risk and less developed understanding of TF risk. VASPs appear to have a good understanding of the specific ML risks to which they are exposed with less developed understanding of TF risk. DNFBPs rely predominantly on the SRA findings in developing their general understanding of the ML/TF risks present in their industry, although the level of understanding of specific ML/TF risks specifically arising out of client interactions needs to be developed further. The notary profession does not regard ML risk as a prominent issue,however, demonstrates an awareness of heightened TF risk in their services due to their involvement in the creation of foundations (NPOs).
b. Banks and security firms demonstrated good understanding and implementation of the risk-based approach, customer/enhanced due diligence, suspicious transactions reporting, record-keeping and TFS measures. However, the identification of the beneficial ownership needs to be enhanced, in particular, as banks seem to rely heavily on the beneficial ownership register and self- declarations in order to meet their obligations. Other FIs demonstrated an evolving level of implementation of the AML/CFT requirements. VASPs have taken steps to implement their obligations, but they are in the early stages of implementing AML/CFT requirements (e.g., on the travel rule).
c. DNFBPs are generally compliant with risk profiling of clients using the SRA as a guide; they, however, could not demonstrate the nature or purpose of mitigating measures. DNFBPs do not adequately conduct ML/TF risk assessment of their customers and follow a risk averse/avoidance approach in general, indicating that high risk clients from a ML perspective would not be onboarded and that there are no TF risks present. Compliance with TF obligations seems limited to screening against the DTTOT list at onboarding stage for their direct client.
d. Overall, FIs and VASPs have developed tools and controls such as internal policies and procedures (including for group compliance), business and customer risk assessments and training. However, these measures are more robust for major FIs such as the banks, securities firms and insurance companies with measures implemented by smaller FIs such as the future trading, money changers and MVTS relatively less strong.
e. Generally, STR filing by banks is strong, with NRAs, SRAs and other external and internal sources informing the development of red flags. STR reporting by other FIs also seems consistent with the risk profile. There has been no STR filings by lawyers, accountants, land title registers and financial planners for the last six years. STR reports for DPMS and notaries are also limited, with most reports being submitted by the real estate sector equating to only 0.8% of known estate agents on average. This low volume of reporting is not commensurate with the risk profile of the DNFBP sector. Notaries and lawyers raised barriers to STR reporting due to confidentiality concerns despite the provisions contained in the AML Regulations.
Accountants’ industry practice results in no STR reports being submitted.
Recommended Actions
a. Building on NRA and SRA, DNFBPs should develop their understanding of ML/TF risks they face, based on their own specific risks factors resulting from their client engagements.
b. Indonesia should ensure that small banks, the currency exchangers, MVTS, VASPs and DNFBPs consistently understand and implement their risk-based obligations, including on beneficial ownership obligations, domestic and foreign PEPs and targeted financial sanctions and sanctions evasion.
c. Indonesia should take proactive steps to develop understanding of TF risks across all sectors, in particular, by smaller financial institutions, DNFBPs and VASPs by sharing more information on TF methods and typologies.
d. Indonesia should take more vigorous measures, including supervisory actions, education and outreach, to improve STR reporting from the DNFBP sector, in particular, real-estate agents, notaries and lawyers. Supervisors should focus, particularly, on correcting notaries’ perceived barrier to STR reporting and on avoiding tipping off by the accountancy profession.
e. Indonesia should continue to raise awareness of AML/CFT obligations, specifically in relation to updates made to regulations and the implementation of a risk-based approach by accountants, real estate agents and notaries.
310. The relevant Immediate Outcome considered and assessed in this chapter is IO.4.
The Recommendations relevant for the assessment of effectiveness under this section are R.9-23, and elements of R.1, 6, 15 and 29.