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Blight of money laundering
The indictment against prosecutor Pinangki Sirna Malasari that was read out last Wednesday at the Jakarta Corruption Court evinced the failure of many private and state banks as well as money changers in fully implementing Bank Indonesia’s Know Your Customer (KYC) principle as a preventive measure to mitigate money laundering.
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he Financial Transaction Reports and Analysis Center (PPATK), which most other countries call the financial intelligence unit, at a virtual conference last Saturday reported a 240 percent increase in suspicious transactions through the capital market over the last two quarters.
The indictment against prosecutor Pinangki Sirna Malasari that was read out last Wednesday at the Jakarta Corruption Court evinced the failure of many private and state banks as well as money changers in fully implementing Bank Indonesia’s Know Your Customer (KYC) principle as a preventive measure to mitigate money laundering.
The indictment that charged Pinangki with aiding and abetting corruption convict Djoko Soegiarto Tjandra while he was a fugitive of the law also alleged that the state prosecutor had made cash transactions totaling around US$440,000 between November 2019 and July 2020. The transactions included the purchase of a BMW car, rental payments for luxury apartments in Jakarta and the United States, and payment for a cosmetic treatment in the US.
Pinangki often broke up large cash payments into smaller transactions (smurfing) to evade government scrutiny, so that each transaction was below the Rp 500 million reporting threshold. Despite her smurfing efforts, however, the banks where she had accounts and the money changers that converted her dollars into rupiah should have been prompted to report her activities as “suspicious transactions” to the PPATK. This is because the total sum of the transactions grossly exceeded the combined monthly salaries of Rp 29 million that Pinangki and her police officer husband earned.
The 2010 Anti-Money Laundering (AML) Law and the Bank Indonesia Regulation (PBI) on AML issued in 2017 expand the list of designated parties responsible for submitting suspicious activity reports (SARs). The expanded list of financial services firms subject to the KYC principle include payment service providers (PSPs), savings and loans cooperatives, pawnbrokers, commodity future traders and money transfer agents.
The PBI also requires providers of certain goods and services such as property companies and agents, auto retailers, notaries and auction houses, as well as traders of jewels and jewelry, precious metals and arts and antiques, to conduct due diligence on customers making big cash transactions.
Even so, money laundering has remained rampant.
The lackluster implementation of the required safeguards and controls in customer due diligence apparently stems from companies’ fear of losing big customers. Financial services firms and other providers of goods and services often seem to be less than stringent about customer verification.
Many companies also seem to consider that AML compliance negatively impacts productivity and customer acquisition. Another problem is the prevalence of identity document forgery, especially among occasional customers.
It is therefore most imperative that BI, the PPATK and law enforcement agencies strengthen enforcement of all regulations on KYC requirements and customer due diligence. Else, the Financial Action Task Force, the global anti-money laundering agency headquartered in Paris, could put Indonesia back on its list of “Jurisdictions under Increased Monitoring”.
