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Combating money laundering

Jakarta Post Editorial - March 16, 2023

It is again the right opportunity for Finance Minister Sri Mulyani Indrawati to revisit and strengthen her ministry's internal control after the disclosures by the Corruption Eradication Commission (KPK) and the Financial Transaction Report and Analysis Center (PPATK) of the hundreds of her ministry's officials suspected of money laundering, tax evasion and hiding much bigger assets than what they officially report annually to the KPK.

The revelations of suspected malfeasance, especially at the Taxation Directorate General, show that although the vigorous tax reforms the minister launched in 2007-2010 under the government of president Susilo Bambang Yudhoyono brought about substantial improvements in tax administration services, the internal control and tax intelligence system under the ministry's inspectorate general is still not effective.

In fact, virtually all the major corruption cases involving finance officials, mostly tax officers, uncovered over the past 10 years were led either by the KPK or the PPATK, the country's financial intelligence agency. The ministry's own inspectorate general and tax intelligence division hardly played a part in the disclosure of the corruption cases. What the inspectorate general claims to be three layers of defense within the ministry against malfeasance – the head of the work unit, the head of the department and the inspectorate general – have failed miserably to build up an effective early-warning system against financial crimes.

The latest big tax scandal involving mid-level tax officer Rafael Alun Trisambodo, whose further investigative audits revealed he owned financial and fixed assets five to 10 times what he reported to KPK, was disclosed early this month only after his son's aggravated assault of a minor went viral nationwide on social and mainstream media.

Further investigations by KPK and PPATK uncovered that Rafael, his spouse and children own several companies and 40 bank accounts, which over the past five years recorded Rp 500 billion (US$33 million) worth of transactions. Rafael also was found to own a safe deposit box at Bank Mandiri that holds the equivalent of Rp 37 billion in US dollar notes. The investigations also uncovered that 134 tax officials and their spouses owned shares in 280 companies, including two tax consulting firms, which create big conflicts of interest.

How could the inspectorate general and the tax intelligence agency have so far been so ignorant and oblivious to what has been uncovered by the wave of investigations made after the public uproar set off by the Rafael case? The PPATK claimed to have regularly reported a large number of suspicious financial transactions to the ministry's inspectorate general since 2012. So how could not a single money laundering case have been built out of those reports, except those related to corruption cases, which were built up by KPK and which were later tried in the Corruption Court?

The summary clarifications made by the Finance Ministry and the chief of the PPATK on Tuesday on the alleged Rp 300 trillion in suspicious financial transactions involving 467 Finance Ministry officials between 2019 and 2023 are not only unsatisfactory but also confusing.

The PPATK is responsible and authorized to monitor and record only suspicious financial transactions, not corruption, made by persons beyond their financial profile or characteristics. The PPATK does not report financial crimes. So, to our knowledge, what the PPATK reported to the Finance Ministry were only suspicious transactions that should further be investigated by the ministry's inspectorate general.

The public furor over the thousands of suspicious financial transactions reported last week by the PPATK also shows how weak the enforcement of the 2002 law on money laundering, amended in 2003 and 2010, is.

The problem is the PPATK is authorized only to monitor and analyze, but not to investigate, money laundering crimes. Yet more disappointing is many judges do not have a full understanding of what really is money laundering with all its complex forms of transactions.

The money laundering law is actually powerful to prevent and deter corruption because the onus of proof is shifted from the prosecutors to the defendant who must prove that their assets were acquired or owned through legitimate means. The law also stipulates that money-laundering cases do not need to prove first the predicate crimes from which the money involved is derived.

Source: https://www.thejakartapost.com/opinion/2023/03/15/combatting-money-laundering.htm