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ASIA/PACIFIC GROUP
ON MONEY LAUNDERING
nd
APG 2 MUTUAL EVALUATION REPORT ON
Indonesia
Against the FATF 40 Recommendations (2003) and 9 Special
Recommendations
Adopted by the APG Plenary
9 July 2008
1
PREFACE - INFORMATION AND METHODOLOGY USED FOR THE EVALUATION OF
INDONESIA
1. The evaluation of the anti-money laundering (AML) and combating the financing of terrorism
(CFT) regime of Indonesia was based on the Forty Recommendations 2003 and the Nine
Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force
(FATF), and was prepared using the AML/CFT Methodology 2004. The evaluation was based
on the laws, regulations and other materials supplied by Indonesia, and information obtained
by the Evaluation Team during its on-site visit to Indonesia from 29 October to 12 November
2007, and subsequently. During the on-site visit the Evaluation Team met with officials and
representatives of all relevant Indonesian government agencies and the private sector. A list
of the bodies met is set out in Annex 3 to the mutual evaluation report.
2. The evaluation was conducted by a team of assessors composed of APG experts in criminal
law, law enforcement and financial regulatory issues. The Evaluation Team consisted of:
Legal Expert
Mr Graham Goodman, Senior Government Counsel, Department of Justice
Hong Kong, China
Financial/Regulatory Experts
Ms Hyun Soo Kim, Deputy Director, Planning and Administration Office, Korea Financial
Intelligence Unit, Ministry of Finance and Economy, Korea
Mr Vinay Baijal, Chief General Manager, Dept of Banking Operations & Development,
Reserve Bank of India
Mr Amjad Iqbal, Jr. Joint Director of Banking Policy and Regulations Department, State Bank
of Pakistan, Pakistan
Law Enforcement Expert
Mr Paul DerGarabedian, Senior Policy Advisor, US Department of the Treasury, Office of
Terrorist Financing & Financial Crimes, United States
APG Secretariat
Mr David Shannon, Principal Executive Officer
3. The experts reviewed the institutional framework, the relevant AML/CFT laws, regulations,
guidelines and other requirements, and the regulatory and other systems in place to deter
money laundering (ML) and terrorist financing (TF) through financial institutions and
Designated Non-Financial Businesses and Professions (DNFBPs), as well as examining the
capacity, the implementation and the effectiveness of all these systems.
4. This report provides a summary of the AML/CFT measures in place in Indonesia as at the
date of the on-site visit or immediately thereafter. It describes and analyses those measures,
sets out Indonesia’s levels of compliance with the FATF 40+9 Recommendations (see Table
1), and provides recommendations on how certain aspects of the system could be
strengthened (see Table 2).
2
Table of Contents
EXECUTIVE SUMMARY 4
1 GENERAL 10
1.1. General information on Indonesia 10
1.2. General situation of money laundering and financing of terrorism 17
1.3. Overview of the financial sector and DNFBP 18
1.4. Commercial laws & mechanisms governing legal persons & arrangements 24
1.5. Strategy to prevent money laundering and terrorist financing 25
2 LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES 32
2.1 Criminalisation of money laundering (R.1 & 2) 32
2.2 Criminalisation of terrorist financing (SRII) 42
2.3 Confiscation, freezing and seizing of proceeds of crime (R.3) 49
2.4 Freezing of funds used for terrorist financing (Sr.III) 55
2.5 The financial intelligence unit and its functions (R.26) 61
2.6 Law enforcement, prosecution and other competent authorities – the framework for the
investigation & prosecution of offences, and for confiscation and freezing (R.27 & 28) 70
2.7 Cross border declaration or disclosure (SR.IX) 77
3 PREVENTIVE MEASURES - FINANCIAL INSTITUTIONS 84
3.1 Risk of money laundering or terrorist financing 87
3.2 Customer due diligence, including enhanced or reduced measures (R.5 - 8) 87
3.3 Third parties and introduced business (R.9) 106
3.4 Financial institution secrecy or confidentiality (R.4) 108
3.5 Record keeping and wire transfer rules (R.10 & SR.VII) 110
3.6 Monitoring of transactions and relationships (R.11 & 21) 113
3.7 Suspicious transaction reports & other reporting (R.13-14, 19, 25 & SR.IV) 116
3.8 Internal controls, compliance, audit & foreign branches (R.15 & 22) 123
3.9 Shell banks (R.18) 127
3.10 The supervisory & oversight system - competent authorities and SRO’s role, functions,
duties and powers (including sanctions) (R.23, 29, 17 & 25) 128
3.11 Money or value transfer services (SR.VI) 151
4 PREVENTIVE MEASURES – DESIGNATED NON-FINANCIAL BUSINESSES &
PROFESSIONS 155
4.1 Customer due diligence and record-keeping (R.12) 155
4.2 Suspicious transaction reporting (R.16) 156
4.3 Regulation, supervision and monitoring (R.24-25) 156
4.4 Other non-financial businesses & professions - modern secure transaction techniques
(R.20) 157
5 LEGAL PERSONS AND ARRANGEMENTS & NON-PROFIT ORGANISATIONS 159
5.1 Legal persons – access to beneficial ownership and control information (R.33) 159
5.2 Legal arrangements – access to beneficial ownership & control information (R.34) 161
5.3 Non-profit organisations – NPOs -(SR.VIII) 162
6 NATIONAL AND INTERNATIONAL CO-OPERATION 169
6.1 National co-operation and coordination (R.31) 169
6.2 The conventions and UN special resolutions (R.35 & SR.I) 173
6.3 Mutual legal assistance (R.36-38, SR.V) 175
6.4 Extradition (R.37, 39, SR.V) 186
6.5 Other forms of international co-operation (R.40 & SR.V) 191
7 OTHER ISSUES 196
7.1 Resources and statistics 196
8 TABLES 197
9 ANNEXES 215
3
APG Mutual Evaluation Report of Indonesia
EXECUTIVE SUMMARY
Background Information
1. This report provides a summary of the AML/CFT measures in place in Indonesia as at the
date of the on-site visit in November 2007 or immediately thereafter. It describes and analyses
those measures, and provides recommendations on how certain aspects of the system could
be strengthened. It also sets out Indonesia’s levels of compliance with the FATF 40+9
Recommendations.
2. Indonesia has made very significant progress in recent years with its implementation of AML
measures, but relatively little implementation of CFT measures has occurred.
3. In 2002 Indonesia enacted Law No. 15 of 2002 concerning the Crime of Money Laundering
which was amended by Law Number 25 Year 2003 (the AML Law) which imposed AML/CFT
requirements on financial institutions. Indonesia has now developed a strong FIU. Since 2004
Indonesia has begun to investigate and prosecute ML cases. Indonesia is set to significantly
amend its AML Law and is in the process of passing specific proceeds of crime legislation.
4. A range of significant money laundering (ML) and very significant terrorism and terrorist
financing (TF) risks exist in Indonesia. The scale of the terrorism threat is evidenced by
Indonesia’s success in apprehending terrorists, with 423 arrests and 367 convictions of
terrorists. In addition to domestic laundering of proceeds of crime, Indonesia notes a particular
challenge from the movement of funds to regional financial centres. Indonesia is emerging
from a period marked by weak rule of law and extreme levels of corruption. Corruption
remains a very significant issue for all aspects of Indonesian society and a challenge for
AML/CFT implementation. Combating corruption and strengthening rule of law are priorities
for Indonesia.
Legal Systems and Related Institutional Measures
5. Indonesia has criminalised ML under Articles 3 and 6 of the AML law. Indonesia’s ML offence
uses a combined list and threshold approach to cover predicate offences. The scope of
property subject to the ML offence is narrow and does not cover interest in any such movable
or immovable property, and legal documents evidencing title to such property. The offence
covers relevant types of ML activity, with the exception of conversion, simple possession and
disguising the true nature, disposition, movement, rights with respect to, or ownership of
property, or helping any person who is involved in the commission of the predicate offence to
evade the legal consequences of his or her actions. Criminal sanctions for money laundering
are generally proportionate and dissuasive. The AML Law creates corporate criminal liability
for the ML offence; however there are concerns that application of corporate liability has not
been tested in practice for any offence.
6. Since 2004, there have been 176 ML investigations, 18 prosecutions and 11 convictions.
Most of the prosecuted ML cases have been limited to the proceeds of corruption or fraud.
There are few investigations and prosecutions of ML cases in parallel with predicate offences.
The number of prosecutions is increasing, although the size of the country and the risk of ML
should be noted.
7. Terrorist financing is criminalised in articles 11-13 of Law No.15 of 2003 Concerning
Government Regulation in Lieu of Law Number 1 Year 2002 concerning Combating Criminal
Acts of Terrorism (the Anti-Terrorism Law), which came into force in October 2002. Article 11
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