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recent agreement between the Home Ministry'€™s population and civil registry bureau and Bank Indonesia that requires bank accounts to be supported by an electronic national identity card (eID) would contribute greatly to preventing money laundering.

Banks are no longer able to open accounts for citizens who use only old forms of identification (non-electronic), which can easily be falsified and are not effective nationally.

Corruptors and other criminals have often used false or fake IDs to open bank accounts that serve as the repository of their ill-gotten money, but since the introduction of biometric-based national identity cards in 2011 it has been rather impossible to produce fake IDs.

Since the registration for an eID requires citizens to have their fingerprints, irises and faces captured as images through biometric equipment and their personal information stored as a record associated with each eID, which is effective nationwide, it is extremely difficult for citizens to own two IDs.

The eID program was launched with a wide range of purposes, including providing identity for voter registration, passport issuance, tax and financial matters and driving licenses, and so far more than 150 million eIDs have been issued.

Many financial and taxation regulations have become less effective because under the old ID-card processing system, people could easily produce fake or false IDs.

The compulsory use of eIDs will help banks properly implement Bank Indonesia'€™s Know-Your-Customer Code to detect money launderers or customers engaged in transactions not in line with their financial profiles. This rule also will be a great help for the Financial Transaction Reports and Analysis Centre (PPATK).

The effectiveness of the data stored at Bank Indonesia'€™s credit bureau also has often been affected by the use of fake IDs whereas this bureau plays an important role in helping banks better manage risks because the bureau contains data on debtors, including borrowers and credit-card holders.

The experiences of countries with much more developed financial infrastructure have shown that a reliable credit bureau will help banks and finance companies not only to better score customer risk, but also to reward borrowers with exemplary credit records with incentives. Conversely, debtors considered to be of high risk will be charged with higher interest rates and fees to reflect their risk profile.

The bureau'€™s operations will greatly help improve the management of credit risks as banks and finance companies will be able to share up-to-date information on borrowers'€™ financial performance. Comprehensive, reliable and up-to-date credit profiles or credit history will certainly help banks and finance companies assess the creditworthiness of a borrower or debtor.

The credit bureau also receives information not only on loans but also credit and charge cards, overdrafts, revolving lines of credit, motor vehicle loans, margin trade accounts, personal loans and real estate loans.

Reliable data on debtor profiles will enable banks to charge their borrowers differently according to their risk profiles, thereby allowing for a graduated risk-pricing system.