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Jakarta Post

Bank Indonesia steps up fight against illegal money changers

Attractive exchange rates and a long list of currency options are the main reasons why travelers pick particular money changers to sell or buy foreign bills.

Grace D. Amianti and Stefani Ribka (The Jakarta Post)
Jakarta
Wed, April 26, 2017

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Bank Indonesia steps up fight against illegal money changers A money changer sits while waiting for people wanting to exchange money into small bills in Jakarta on April 17. (The Jakarta Post/mos)

Unlicensed moneychangers facing forced closure Rp 3.6 trillion in drug money laundered through money changer outlets

Attractive exchange rates and a long list of currency options are the main reasons why travelers pick particular money changers to sell or buy foreign bills.

However, with the increasingly popular use of foreign currencies to support extraordinary crimes such as graft, drug distribution and terrorism, Indonesian authorities now want customers of money-exchange outlets to keep an additional rule in mind: “Carry out your transactions in licensed outlets only.”

As a lucrative business that is relatively easy to start, money changers have mushroomed at tourist spots and trade centers across the archipelago. Such outlets even offer better exchange rates than banks, making them popular among travelers and customers seeking quick services.

Bank Indonesia (BI) and the National Police, however, have claimed that there has been an upward trend in money laundering activities involving unauthorized money changers.

Drug kingpin Pony Tjandra, who was sentenced to 20 years in prison in February, for example, was known to have exchanged Rp 3.6 trillion (US$270 million) in cash into various foreign currencies at eight money changers in North Sumatra, Riau Islands and Jakarta throughout 2015. None of the money changers were aware of the origin of the money.

With support from the Financial Transaction Reports and Analysis Centre (PPATK) and the National Narcotics Agency (BNN), the central bank instructed unauthorized non-bank money changers to apply for an operational license during a transition period between Oct. 6 last year and April 7 this year.

To apply for such a license, a money changer outlet must be registered as a legal business entity with a minimum capital of Rp 250 million for those located in Jakarta, Bandung, Batam and Denpasar. Outside those locations, a money changer is required to have a minimum capital of Rp 100 million.

As the transition period ends, the central bank and law enforcers have now started to crack down on illegal money changers that fail to comply with the regulations.

Those who have met the assigned conditions have expressed support for the government’s efforts to reshape the market.

“It will protect us from being accessories to crime,” Hardi Darmawan, the owner of PT Valas Asia Perkasa in Pasar Baru, Central Jakarta, told The Jakarta Post recently.

(Read also: EDITORIAL: Shady money changers)

The 59-year-old man started his money-changing business in 1985 as an extension to his jewelry shop. After several years operating without a proper license, Hadi finally obtained one in 1992.

Apart from curbing the spread of extraordinary crimes, the new rules are also aimed at protecting the rights of customers in a country known as a center for counterfeit money. BI reported that local authorities confiscated 320,000 pieces of counterfeit money throughout last year.

Despite efforts to promote licensed money-changers, customers often choose outlets merely because of their proximity, said Nuke Leli, a branch manager at registered money changer PT Binavalasindo Dollar Asia in Melawai, a popular shopping district in South Jakarta.

“Most of our customers do not ask whether we are legal or not,” she said.

Money-changers have become a profitable alternative business for small-scale entrepreneurs and the number of such companies has increased over the past few years to 1,069 head offices and more than 800 branches, BI data shows.

BI data also reveals that total transactions at money changers nationwide increased to Rp 257.4 trillion last year from Rp 146.2 trillion recorded in 2012.

Meanwhile, the National Police have identified almost 200 money-changer outlets operating without a proper license. These businesses have been put under supervision. Around a dozen have applied for licenses, while 95 others have been labeled “illegal” and are facing forced closure.

“These 95 outlets disguise their operations with other businesses such as travel agencies, jewelry and souvenir shops, car rental agencies and massage parlors,” said National Police director for special and economic crimes Brig. Gen. Agung Setya.

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