The Jakarta Post,Vincent Lingga
Has
anyone seen our financial intelligence agency? The whereabouts of the
Financial Transaction Report and Analysis Centre (PPATK) is a big
question prompted by the fact that the Corruption Eradication Commission
(KPK) took about three years and questioned almost 300 witnesses to
build a case on the suspected Rp 2.3 trillion (US$170 million)
corruption within the Rp 5.9 trillion electronic identification card
(e-ID) project.
Yet the KPK has so far indicted only two defendants.
How
could such a huge amount of money — the Rp 2.3 trillion that was
allegedly stolen from the project — be moved around between 2011 and
2012 without being detected by the PPATK through its anti-money
laundering radar, which is supposed to monitor suspicious transactions
in all financial services companies?
The
fact that the KPK questioned almost 300 witnesses but was able to
compile indictments against only two defendants out of about 50
politicians, senior officials and institutions implicated in the
country’s biggest corruption case shows that it is extremely difficult
to trace the illicit money.
This means the
alleged stolen money was distributed in cash, using United States
dollars or rupiah. Further down the line this boils down to a miserable
failure of the anti-money laundering system that was launched in 2002
under a special law.
The PPATK, as the
politically independent implementing agency of the Money Laundering Law,
monitors suspicious transactions through banks and other financial
institutions in fighting money laundering. Other providers of goods and
services such as property developers, timber companies, car dealers and
jewelry stores have also been required to report to the PPATK any big
cash transactions (more than Rp 500 million) and other financial deals
that are beyond their customers’ profiles.
The
PPATK, which has many police officers, lawyers and financial experts
among its staff, analyzes and examines the reports to ascertain as to
whether a suspicious transaction smacks of money laundering. Only
transactions with strong evidence of money laundering are submitted to
law enforcers for further investigation and prosecution.
Likewise,
the central bank has issued a “know-your-customer” code for all
financial services companies, requiring them to report any suspicious
transactions or cash transactions worth Rp 500 million or more.
Suspicious transactions mean financial transactions that do not fit the
income, business or economic profile of the parties involved.
The
e-ID corruption case also points to the weak enforcement of the Money
Laundering Law. Many local financial services companies and other
providers of goods and services seem inconsistent in implementing the
“knowyour-customer” code, afraid that reporting suspicious transactions
could cost them big customers.
Seen from
the big sums of dollars used in suspicious transactions, the central
bank’s supervision of money changers also seems to be lacking.
As
the KPK has increasingly caught corruption suspects redhanded with lots
of rupiah or dollars, there has been mounting demand for amendments to
the Money Laundering Law to strengthen the PPATK, and for reducing the
minimum cash transactions for compulsory reporting to only Rp 100
million.
In fact, the global fight against
big cash transactions and money laundering has continued unabated as
cash transactions have been used by criminals and others engaged in
illicit and corrupt activities.
Indian
Prime Minister Narendra Modi in November ordered the withdrawal of 500
and 1,000 rupee notes from circulation. The European Central Bank
announced in May last year that it was cracking down on
high-denomination notes by gradually phasing out the €500 bill.
High-denomination
notes or big cash transactions are indeed key to the illicit economy,
given the anonymity and lack of transaction documents involved and the
relative ease with which they can be transferred (laundered) and stored.
As
Harvard economist Kenneth Rogoff asserts in his book, The Curse of
Cash, cash facilitates crime, tax and regulatory evasion and other forms
of corruption. Paper money fuels corruption, terrorism, tax evasion and
illegal immigration.
Indeed with the
growth of debit cards, electronic transfers and mobile payments, the use
of cash has long declined in the legal economy, especially for medium
and large transactions. A central bank survey shows that only a small
percentage of large denomination notes are being held and used by
ordinary people or businesses.
Obviously,
cash will remain important for small, daily transactions. The issue is
more about a balancing act between fighting crime and the need for
governments to keep in place a monetary instrument that provides their
citizens with a way to conduct payments in relative privacy.
The
PPATK also needs to be more aggressive in teaming up with the
Directorate General of Taxation to follow up on the PPATK reports on
financial transactions and audit the annual tax returns of individuals
or companies implicated in suspicious transactions.
Cross-checking
money flow to the bank accounts of those implicated in suspicious
financial transactions against what they reported in their annual tax
returns would be effective in discovering tax evasion and other tax
crimes.
The rationale is that even though
the police or Attorney General’s Office are not able to discover any
predicate crimes related to suspicious financial transactions, PPATK
reports could still lead to the discovery of tax evasion and
consequently generate additional revenue for the state.
