This also applies to the DNFBP sector, where although there are remedial measures ranging from warnings to license revocations, the majority of the sector's constituents have only been subject to warnings. j) Indonesia has assessed and developed a comprehensive understanding of ML/TF risks of legal persons and legal arrangements through a series of SRAs, which have been widely disseminated to competent authorities and the private sector. In the DNFBP sector, the application of the risk-based approach must be developed.
Priority Actions
Note: Effectiveness ratings can be either a High-HO, Substantial-SE, Moderate-ME or Low-LE level of effectiveness. Note: Technical compliance ratings can be either a C - Compliant, LC - Largely Compliant, PC - Partially Compliant, or NC - Non-Compliant.
MUTUAL EVALUATION REPORT
Preface
ML/TF RISKS AND CONTEXT
With more than 269 million people living across 1,000 islands, Indonesia is the fourth most populous country in the world. While Indonesia's economy is now recovering, the country's GDP growth is expected to increase by 5.1% in 2022, supported by growing commodity exports and accommodative fiscal policy to withstand the pandemic.1 Indonesia has a mixed economy and as the only G20 member state in Southeast Asia, it is the largest economy in the region.
ML/TF Risks and Scoping of Higher Risk Issues Overview of ML/TF Risks
Indonesia used a series of assessments to identify, assess and understand its ML/TF risks. Judges focused on how well authorities understand and mitigate the ML/TF risks arising from the use of cash and movement of illicit flows.
Materiality
Second, the pension fund sector is relatively small in Indonesia and is identified as low ML/TF risk in the 2015 NRA, considering ML typologies, patterns of STRs and regional risk factors. In addition to the scoping exercise, assessors also examined how entities and authorities have identified, assessed and understood the new ML/TF risks due to the impact of COVID-19, to what extent the pandemic has led to a change in the overall ML /TF risk profile in Indonesia and how Indonesia has responded to these emerging risks.
Structural Elements
Assessors therefore limited their focus only to the extent to which illegal casino activity may occur in Indonesia.
Background and Other Contextual Factors
NATIONAL AML/CFT POLICIES AND COORDINATION
Key Findings and Recommended Actions
Key findings
Recommended Actions
Immediate Outcome 1 (Risk, Policy and Coordination)Country’s understanding of its ML/TF risks
Considerable efforts have been made to inform reporting entities of the existence of the national supervisory authorities and supervisory authorities. Certain NPOs were also involved in the development of the national regulatory authorities and the sector-specific risk assessment of NPOs.
Overall Conclusion on IO.1
LEGAL SYSTEM AND OPERATIONAL ISSUES
Key Findings
Immediate Outcome 6
Immediate Outcome 7
However, PP investigations and prosecutions related to corruption, forestry and environmental crime and tax crime are not consistent with PP risk. This appears to be a result of the fact that LAAs see the value of PP investigations primarily to support the pursuit of asset recovery.
Immediate Outcome 8
Immediate results 7 . a) Indonesia should develop a high-level operational policy for all competent authorities to ensure that parallel money laundering investigations are conducted for all relevant cases. In view of the money laundering risks related to corruption, the KPK should use its expertise and resources to conduct more money laundering investigations, especially complex third party, stand-alone money laundering and money laundering involving legal entities. e) Indonesia should increase the capacity of specialized ML investigators and experts in forensic accounting and digital device forensics, and update ML training in investigative techniques regarding the use of emerging technology in ML crimes.
Immediate Outcome 6 (Financial Intelligence ML/TF) Use of financial intelligence and other information
Some LEAs also reported obtaining information from open sources (social and traditional media), dedicated complaint telephone numbers (KPK) and information obtained from their foreign partners. Competent Indonesian authorities involved in the investigation of terrorist financing, including BIN, BNPT and Squad 88, also rely on financial intelligence from PPATK dissemination and other sources such as information from foreign partners and information from social media.
Erriq Levianto (2021)
IR Wijaya (2022)
The timeliness of response to information requests from competent authorities varies depending on the complexity of the information requested. LEAs were satisfied with the timeliness of PPATK's response to their requests for information.
Overall conclusions on IO.6
Immediate Outcome 7 (ML investigation and prosecution) ML identification and investigation
ML is being investigated by both the home office in Jakarta and the regional offices of the INP. Most money laundering investigations are conducted by the INP and AGO, while the KPK prosecutes only a few cases of money laundering.
Overall Conclusions on IO.7
The case involved the commingling of funds in company accounts to conceal IDR 23 billion (€1.5 million) in corruption funds. Indonesia can use several tools to confiscate assets where a criminal conviction for money laundering cannot be obtained (see IO.8).
Immediate Outcome 8 (Confiscation)
To preserve the value of the assets, the ARC appraised the assets and auctioned off land, stocks and shares, as well as luxury vehicles. The foreign victims' evidence was admitted through signed statements and heard electronically by the court (due to travel restrictions during the pandemic).
Overall conclusion on IO.8
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
Immediate Outcome 9
This is because judges are putting more emphasis on mitigating factors such as remorse, rather than aggravating factors such as consequences, when making their judgments.
Immediate Outcome 10
Immediate Outcome 11
In general, major financial institutions are aware of their PF-TFS obligations regarding Iran and the DPRK. Understanding in the banking, capital market and finance and insurance sectors is better than in the exchange and MVTS sectors. e) Major financial institutions have a good understanding of their PF TFS obligations and have internal controls in place.
Immediate outcome 10
Immediate result 9. a) PPATK should continue to increase the number of authorities registered in SIPENDAR in all relevant sectors. Immediate result 11. a) Supervisors (other than OJK) should build and implement a more comprehensive program to ensure compliance for PF-TFS.
Immediate Outcome 9 (TF investigation and prosecution)
However, placing greater emphasis on TF cases involving the movement of funds will increase Indonesia's understanding of the wider networks that support terrorism and the vulnerabilities exploited in the financial system. PPATK as well as the relevant authorities involved in counter-terrorism and TF investigations and intelligence contribute to the development of the document.
Overall conclusions on IO.9
Immediate Outcome 10 (TF preventive measures and financial sanctions) Implementation of targeted financial sanctions for TF without delay
Details of the timing of the implementation of some of the recent UN 1267 lists are not apparent from the list8. If an NPO is in one of the remaining 19 Indonesian regions, it cannot qualify as high risk.
Overall Conclusions on IO.10
Indonesia has identified terrorist financing as high risk and the DTTOT Task Force is leveraging the DTTOT list to disrupt terrorist financing activities, particularly in relation to fundraising through crowdfunding and non-profit organizations as defined in the NRA-TF. From March 2020 to March 2022, the DTTOT Task Force submitted 22 entities, primarily nonprofit organizations, and 22 individuals, primarily nonprofit staff, for inclusion on the DTTOT list.
Immediate Outcome 11 (PF financial sanctions)
According to the results of the financial service providers' screening, no transactions had direct links with designated persons or entities. More generally, on-site inspections regularly cover the speed of response to the WMD list, screening and red flags for PF.
Overall conclusion on IO.11
PREVENTIVE MEASURES
Overall, banks have a good understanding of ML/TF risks, while other financial institutions showed a mixed understanding of ML risk and a less developed understanding of TF risk. VASPs appear to have a good understanding of the specific ML risks they are exposed to, while their understanding of TF risk is less developed.
Immediate Outcome 4 (Preventive Measures)
Smaller, domestically focused entities have limited understanding regarding the implementation of the SRA. There is a mixed understanding of the risks involved, and the enhanced measures required for high-risk countries.
Overall conclusions on IO.4
SUPERVISION
The understanding of individual institutional risks by the MLHR and the Department of Defense is less developed. D. Outreach initiatives should be strengthened to focus on developing a better understanding of RBA and improving the quality and volumes of STRs, especially in the real estate and notary sectors.
Immediate Outcome 3 (Supervision)
There is scope to refine the success of the IIATF by increasing the number of studies and to obtain more comprehensive feedback on studies and results to the IIATF. The anti-fraud reports provide an important contribution to OJK's analysis of how companies can be used for basic crime (for example, the bank crime risk found in the NRA).
Overall Conclusions on IO.3
LEGAL PERSONS AND ARRANGEMENTS
Since notaries are not required for the registration of SPLLCs, nor for subsequent changes to ownership information, there are significant gaps in the verification of BO data, leaving vulnerabilities that can be exploited by criminals. f) The relatively low number of BO registrations (about 28.5% of the entire universe of legal entities populated in the register and 47% of active legal entities) raises concerns about the overall efficiency of the system. g) Indonesia uses a combination of mechanisms to ensure that beneficial ownership information is available to the competent authorities. Some law enforcement and competent authorities have direct access to basic and beneficial ownership information held in the central register and may also request BO information held by FIs and DNFBPs, where available. h) Indonesia does not allow bearer shares/warrants or nominee shareholders or directors, although the use of strawmen has been observed in a number of ML/TF cases. i) Although available in law to some extent, Indonesia does not apply sanctions for failure to comply with the requirements regarding the disclosure of basic and BO information. a) Indonesia should reach out to notaries to promote greater understanding of the ML/TF risks associated with companies created to launder funds, as well as their role as gatekeepers in the registration and verification of information, especially BO information of companies .
Immediate Outcome 5 (Legal Persons and Arrangements) Overview of legal persons and arrangements in Indonesia
The ditjen AHU has a passive role in maintaining the register and carries out very limited verification of the registered basic information and beneficial ownership information. Here again, ditjen AHU plays a passive role in maintaining the register and does not verify the information.
Overall conclusion on IO.5
INTERNATIONAL COOPERATION
Key Findings and Recommended Actions a) Indonesia has a strong framework for international cooperation and has entered into a number of bilateral and multilateral agreements for legal assistance and extradition. Indonesia has a number of effective practices to use informal cooperation to repatriate assets from abroad (see also IO.8). g) PPATK, some LEAs and key regulators exchange information on fundamental ownership and beneficial ownership, including in relation to suitability testing. a) Indonesia should consider allocating more resources (especially for MLHR, INP, AGO and KPK) for the timely implementation of incoming MLA requests and prioritizing these requests based on the criteria of urgency and risk of dissipation .
Immediate Outcome 2 (International Cooperation)
Several factors are involved in the pending requests received (e.g. the request relates to the taking of witness statements and limited information is available on the whereabouts of persons of interest, in some cases a court order is required and to coordinate with other agencies such as immigration and INP). 16 United States; The Netherlands; Filipina; East Timor; Malaysia; Thailand; Australia; Saudi Arabia; Singapore; Germany; Turkey; Filipina; Malaysia; and Hong Kong, China.
Overall conclusions on IO.2
TECHNICAL COMPLIANCE
- Indonesia has established a National Coordination Committee (NCC) on Prevention and Eradication of ML (Presidential Regulation 6 of 2012, amended by
- Both ML and TF risk assessments are required to be updated on an annual basis (pages 54 and 55 of the National Strategic Plan on AML/CFT). Indonesia
- The ML NRA is a public document and PPATK and relevant competent authorities shared it with FIs, DNFBPs and SRBs and also shared its key
- The National Strategy on the Prevention and Eradication of Money Laundering and Terrorist Financing 2020-24 contains strategic priorities, which
- Not applicable) Indonesia has not exempted FIs or DNFBPs from the application of any of the FATF Recommendations
- FIs: OJK supervised FIs, which include all categories of FIs with the exception of futures traders (supervised by CoFTRA) are required to: a) identify,
- is rated largely compliant
- National Cooperation and Coordination
- In October 2017, PPATK established the Task Force in Prevention and Eradication of Proliferation of WMD (WMD Task Force) that consists of PPATK, MoFA,
- is rated largely compliant
- Money laundering offence
- Indonesia criminalises ML in line with the Vienna and Palermo Conventions (AML Law, art.3-5)
- As above, Indonesia applies a combined approach that also covers criminal acts subject to a maximum threshold of imprisonment of four years or more
- Indonesia’s ML offence extends to ‘assets’, which are defined as moveable or immoveable assets, either tangible or intangible, acquired either directly
- Predicate offences for money laundering extend to conduct that occurred outside of Indonesia, provided that such acts constitute a predicate offence
- The threshold for the ML offence is ‘assets known or reasonably suspected as originating from the proceeds of a criminal act’ (AML Law, art.3)
- Sanctions for natural persons are proportionate and dissuasive
- Indonesia’s ML offence includes a range of ancillary offences, including participation in, attempt, assistance or conspiracy to commit (AML Law,
- is rated compliant
- Confiscation and provisional measures
Article 5 of each of the three PPATK regulations indicates that identified risks must be managed and mitigated. MLHR KYC reg.9(2017) for notaries, art.4 contains most of the requirements for notaries, with the exception of updating the assessment and mechanisms to inform competent authorities.
