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ver the past few weeks, the Malinda Dee case has taken a new turn with the recent involvement of the Financial Transaction Reports and Analysis Center (PPATK) in its investigation.

The authorities believe that Malinda was involved in money laundering offenses presumably to cover up traces of the embezzled money. At least eight banks and two companies have been identified as being used by Malinda to launder her illicit money.

This should not come as a surprise considering that generally in most if not all fraud cases there are three essential elements in the perpetration of the offense: the act, concealment and conversion. Fraud itself is a crime, but not all crimes are considered fraud. Fraud is constituted by four main characteristics: a false statement by the offender; the offender’s awareness that such a statement was false; the victim’s reliance on the statement and damages resulting from the victim’s reliance on the false statement.

A successful fraud offense is often supplemented by acts of concealment by the fraudster to avoid being caught.

Finally, conversion is the act of ensuring that proceeds from crimes can be enjoyed by the offender.

A common means is to transfer the illicit assets to other parties over which the fraudster has a degree of control such as spouses, children, close relatives and close friends. These practices are often categorized as acts of money laundering.

Although in practice its elements can be difficult to identify, money laundering consists of three important stages: placement, layering and integration. In the placement stage, the illicit funds are introduced to the financial system by means of a cash-heavy business or sending the money to offshore countries with tight secrecy and privacy laws.

In the layering stage, the fraudster will try to hide the origin of the money. A common method in this stage is again using offshore accounts in countries with strict secrecy and privacy laws.

In the integration stage, the illicit funds are converted back to the hands of the fraudster by means of, for example, mixing laundered money with legitimate money in cash-heavy businesses.

The aim of this stage is none other than to ensure that the fraudster will be able to use the illicit money. Worthy of note is that money laundering can be used in more than one stage (e.g. a cash-heavy business is used in both placement and integration stages).

As stated by the head of the PPATK Yunus Husein, “Her transferring of the illicit money to multiple entities, purchases of luxurious cars, conversion into foreign currencies, to name a few, are strong indications that money laundering is used to cover the traces of her fraud (embezzlement of Citibank customer funds).” Subsequent investigation also revealed that in doing so, she utilized four IDs with the same name, presumably as an attempt to avoid suspicion.

The same also applies to her “husband”, Andhika Gumilang, who is accused of involvement in her fraud scheme. He used seven IDs, three of which had different names.

In Indonesia, with the absence of centralized identity management, money laundering investigations have often been hindered by the use of multiple and, in many cases, false IDs by the offenders.

This is a major problem as offenders will often use false addresses. However, this is also a common problem in crime investigations all around the world.

In the United States, for example, investigation revealed that the 9/11 attacks could have been prevented had the US government established a sound identity management mechanism in the first place.

A statement by the Indonesian Police in early April suggested that in this year alone there have been at least eight banking fraud cases involving bankers of several major banks in Indonesia.

From all these cases, the weak internal controls within the organizations had been at the center of the authorities’ attention.

As the “fraud triangle” theory suggests, opportunity is a major factor that caused fraud to occur (other factors being motivation/pressure and rationalization). Loose internal controls will provide potential fraud offenders with the necessary means to commit their offenses.

Additionally, as most if not all fraud offenses will be concealed (and subsequently converted into usable money) by the offenders, money laundering will almost certainly be part of major fraud schemes everywhere in the world.

Over the years, the trusted means of preventing money laundering within a banking system was known as the “Know-Your-Customer” policy, which diminishes the opportunity to launder money through the Indonesian banking system, at least for large amounts of money.

Recently, with the emergence of cases of fraud perpetrated particularly by employees of banks, it appears that Indonesian banks may need to also have the “Know-Your-Employee” mechanism.

A few years ago, Indonesian banks were worried about the threats of external fraud such as debit card and credit card fraud.

Schemes such as “skimming and counterfeiting”, “card-not-present fraud” and “fictitious merchants”,  to name a few, have been highlighted as major threats to banking  customers.

Losses from these fraud schemes were at the time already at an alarming level. Furthermore, some of  the proceeds from these offenses were believed to have been used  to support other crimes, including terrorism.

Therefore, Bank Indonesia finally decided to begin the nationwide implementation of smartcard technology in Indonesia in January 2010. Evidenced by the success of countries, such as the United Kingdom and Malaysia, in addressing the problem of card fraud in particular “skimming and counterfeiting”, smartcard technology was hoped to be able to protect Indonesian banking customers from external threats (e.g. credit card fraud offenders).

Nowadays, with the emergence of banking fraud cases perpetrated by people who are supposed to  be the protectors of customer  interest, one question arises in society’s mind, “Where should we keep our money?”

For this, Bank Indonesia as the highest authority in the Indonesian payment system, needs to act quickly to restore public trust in the nation’s banking system because no banks in this world can exist without the trust of society.

The writer is the director of the Center for Forensic Accounting Studies in the Department of Accounting at the Islamic University of Indonesia. He obtained his Master’s and Ph.D. in forensic accounting from the University of Wollongong, Australia