Shawn Donnan, Jakarta – Authorities in Indonesia said yesterday they believed the perpetrators of last year's $200 million fraud at one of the country's leading state-owned banks used domestic capital markets to launder proceeds from the scam.
The announcement comes at a time when Indonesia's stock and bond markets are booming because of an influx of foreign funds, and regulators are struggling to introduce new laws to control the markets. But it also serves as an example of the difficulties the archipelago's regulators are having in enforcing new edicts.
According to officials, police are investigating four transactions between September and November last year in which a total of 11.4 billion rupiah (US$1.4 million) was laundered through local mutual funds, stocks and bonds.
Authorities identified the suspicious transactions last December and believe the money was part of the 1,700 billion rupiah pilfered from Bank Negara Indonesia, the country's second-largest state-owned bank, during an export credit scam last year.
Investigators had begun questioning brokers and referred the matter to police last December, said Yunus Husein, the head of the Financial Transaction Reports and Analysis Centre at Bank Indonesia, the central bank. So far, however, no action had been taken.
Mr Husein said the transactions were also a sign that the push Indonesian regulators began last year to require brokers and investment managers to "know your customer" was not working. That meant Indonesia's capital markets remained open, he said, to being used as a giant "laundry machine" for illicit funds.
"The 'know your customer' system is a kind of early warning system – and it still doesn't work here," he said. "That's why those transactions could easily happen." Herwidayatmo, the head of Indonesia's Capital Markets Supervisory Agency (Bapepam), said yesterday that the "know your customer" regulations had yet to generate a single concerned report from brokers.
Mr Herwidayatmo, who like many Indonesians uses only one name, said Bapepam's spot checks at local investment houses last year showed a majority of brokers had systems in place to identify clients properly.
He also said most funds obtained through illicit means in Indonesia were likely to have been laundered offshore, just as they were during the 1997-98 Asian financial crisis.
Billions of dollars in government liquidity support to banks funnelled out of the country by Indonesian businessmen during the crisis, as well as other illicit funds, were now returning to Indonesia, he said.
"They do the laundry in another country," Mr Herwidayatmo said. "Now the money is coming back to us, and it is clean."
[Additional reporting by Taufan Hidayat.]