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Financial institutions are very vulnerable to the possibility of being used as a media for money laundering (ML) and terrorism financing (TF), due to many transaction options for perpetrators of crime to commit an offence. Through various transaction options, such as transfer transactions, financial institutions become the entrance of assets that are the proceeds of crime or terrorism financing activities into the financial system which can be utilized for the benefit of perpetrators of crime. For instance, ML perpetrators can withdraw proceed of crime that appear legitimate and conceal the origins of illegally obtained. Whereas, TF perpetrators use proceed of crime to finance terrorist activities.
As the development of products, business model, technology and information become increasingly complex, all Financial Service Providers under the supervision of Bank Indonesia are required to implement the AML and CFT programs optimally and effectively. The AML and CFT program is not only important for eradicating ML and preventing TF, yet also to support the prudential principles which can protect the Service Providers and users from various risks that may arise.
AML CFT to Achieve SPI Vision 2025
The Indonesian Payment System (SPI) 2025 guarantees a balance between innovation and the integrity of the payment system, through the application of Anti-Money Laundering, Counter Financing of Terrorism, and Prevention of Proliferation of Weapon of Mass Destruction Financing as Vision 4 of the SPI 2025 Blueprint "SPI 2025 guarantees a balance between innovation and consumers protection, integrity and stability as well as fair business competition through the application of KYC & AML CFT, the obligation to disclose data/information /public business, and the application of regtech and suptech as obligations in reporting, regulatory and supervisory".
The SPI 2025 Blueprint publication can be downloaded
Bank Indonesia has been conducted the risk assessment of Money Laundering (ML), Terrorist Financing (TF), and Financing of Proliferation of Weapons of Mass Destruction (PFWMD) in the sector of Non-Bank Payment Service Providers and Non-Bank Money Changers. The assessment is based on geographic, customer, products and services, and delivery channels. The risk assessment is outlined in the Sectoral Risk Assessment (SRA) which refers to the National Risk Assessment (NRA) on ML, TF, and PFWMD. The purpose of the SRA adjustment as follows:
NRA on Money Laundering publication can be
NRA on Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction publication can be
SRA publications can be
Payment System regulatory reform as part of the Indonesia Payment System Blueprint (BSPI) 2025 also regulates AML CFT obligations for Non-Bank Payment Service Provider and Non-Bank Money Changers, through the issuance of several PBIs as follows:
BI continues to expand the AML CFT cooperation with relevant authorities, both national and international in order to strengthen the implementation of AML CFT.
Asia / Pacific Group on Money Laundering is a regional organization (Asia Pacific) to prevent and eradicate money laundering, terrorist financing, and proliferation funding activities. Indonesia has been a member of APG since 2001.
Every country that is a member of APG is committed to implementing Mutual Evaluation (ME) to assess the level of compliance with FATF Recommendations as an international standard of Anti-Money Laundering and Counter Financing of Terrorism (AML CFT).
The 21st Asia / Pacific Group (APG) on Money Laundering session held on July 21-27 2018 in Kathmandu, Nepal, has ratified the Indonesian Mutual Evaluation Report (MER). The MER is the result of a review of Indonesia's compliance and effectiveness of anti-money laundering and terrorism financing regimes that are based on 40 Financial Action Task Force (FATF) recommendations.
Assessment of compliance with efforts to prevent and eradicate criminal acts of money laundering and financing of terrorism is carried out in a professional and objective manner. The MER Indonesia assessor team has representatives from the United States, Canada, Macao-China, China-Taipei, Pakistan and Bangladesh and the APG Secretariat.
The APG Annual Session in Kathmandu, Nepal has determined that compliance and effectiveness of Indonesia's implementation of international standards in the field of prevention and eradication of criminal acts of money laundering and financing of terrorism, is considered to be very adequate. Of the 40 FATF recommendations related to legal framework compliance, Indonesia received a 'C' (compliant) rating or the highest score for 6 recommendations. Then got an 'LC' (Largely Compliant) rating for 29 recommendations, and got a 'PC' (Partially Compliant) rating for 4 recommendations. Of the overall recommendations there is only one recommendation in which Indonesia received a 'NC' (Non-Compliant) rating, namely on recommendations related to funding for the proliferation of weapons of mass destruction.
Regarding the effectiveness of implementation, Indonesia received a Substantial rating for 5 Immediate Outcomes (IO), then a Moderate rating for 5 IO, as well as a Low rating for 1 IO related to funding for the proliferation of weapons of mass destruction. The results of the assessment indicate that the effectiveness of the implementation of APU / PPT in Indonesia is better when compared to APG countries such as Australia, Malaysia and Singapore.
The complete report of Indonesia's APG Mutual Evaluation Report (MER) can be downloaded
b. Preparation towards FATF Full Membership
The Financial Action Task Force on Money Laundering (FATF) is an inter-governmental organization formed in 1989 by the G-7 with the aim of developing systems and infrastructure to prevent and combat money laundering, terrorism financing, and funding for the proliferation of weapons of mass destruction.
FATF sets standards, namely FATF 40 Recommendations and procedures (policy making) and encourages the effectiveness of its implementation through legal instruments, regulations and other media (recommendations) to combat money laundering, terrorist financing and weapons of mass destruction that will threaten the integrity of the financial system. In its operations, FATF monitors the implementation of recommendations issued to its members, reviews technical and eradication media and encourages the implementation of its recommendations globally
In supporting the Government's efforts to become a Full Member of FATF, Bank Indonesia has prepared 3 strategies, namely
In May 2020, FATF had published the suggestion related to challenges, good practices and policies in responding of Money Laundering and Terrorist Financing threats and vulnerabilities namely COVID-19 related Money Laundering and Terrorist Financing - Risk and Policy Responses.
The suggestion including:
Bank Indonesia also suggests its Providers (Non-Bank Payment System Service Providers and Money Changers) to stay vigilant during Covid-19 pandemic.
Bank Indonesia suggestion including:
Suggestion from FATF which is COVID-19 related Money Laundering and Terrorist Financing - Risk and Policy Responses can be downloaded
INTRAC and Bank Indonesia Synergy to Prevent and Eradicate Money Laundering and Terrorism Financing