Combating The Money Laundering in Bank Financial Instituition Based on Indonesian Money Laundering Law
BACKGROUND
A. Brief Introduction of Money Laundering
Troughout the year, the world financial development has become a vast system that are critical for sustaining the civilization globally. This fast growing sector grow to a point where its open up a series of possibilities to a detrimental effects for the sector itself. There are a lot of crimes that happen in financial system, one of them is money laundering.
Al Capone, the Chicago gangster, that often reffered as the first person of the modern illegal form of money laundering. The term money laundering itself was firstly used in 1973 during the Watergate Scandal and is therefore no original legal definition but a colloquial paraphrase describing the process of transforming illegal intolegalassets.1 Asanactofreintroducing anillegalmoneyintothelegaleconomy form that implicate a series ofcomplex bank or commercial transfers,but also could be as simple as a cash transaction, money laundering occasionally associated with other illegal activities, like terrorism, drug and human trafficking, and corruption.
However, money laundering is a practice that almost as old as money itself.
Since the mid 1980s, governments and law enforcement have developed an increasingly global, intrusive, and routinized set of measures to affect criminal revenues passing through the financial system.2 There appears to be a disjunction between the legal construct of laundering, which includes acts as modest as the placing of proceeds of crime in a bank account in one’s own name, and the analytical construct of laundering, which one would expect to mean the
1 Schneider, F., & Windischbauer, U. (2008). Money laundering: some facts. European Journal of Law and Economics, 26(3), 387 404. Accessed November, 2021.
2 Force, F. A. T. (1999). What is money laundering. Policy Brief July 1999. Accessed November, 2021
Ayu Regina Teresa Kawatu and Denise Maureen Rebecca Aling Universitas Sam Ratulangi
sanitizing of proceeds of crime so that one can spend the funds although they had been acquired legitimately.3
B. Money Laundering in Indonesia
As a developing country, there are many issues that Indonesia’s currently have to deal with; health care, law enforcement, human rights issues, education, and one ofthemost commonis economicissues,suchas corruption,tax invasionandmoney laundering. Moreover, world wide trade between countries has substantially increased in recent years, and one consequence of this globalized economic activity is a parallel escalation in economic crime; this remains a major threat to many countries including Indonesia.4 In addition, world wide trade plays a big role as a source of funding and investments that the country need for its development, but at the same time it could open up a risk and vulnerability to series of economic crime issue.
Based on Indonesian Financial Transaction Reports and Analysis Centre Statistics, between January 2020 to January 2021, there were a total of 42.008 suspicious transaction reports from the banking institution5. In the last few years, there are quite so cases regarding this economic case, some of the big cases is about money laundry. The Indonesian government first regulated the money laundering offenses through Law No. 15 of 2002, but as years passed, the money laundering crime not only threatens the nation and state life based on the Pancasila and The Constituition of The Republic of Indonesia 1945, it also endanger the economic stability and financial security that already are fragile in the first place.
FORMULATION OF ISSUE
In order to to explain the concept more futher and apply the concept, this paper will be based on answering these folowing questions:
3 Levi, M., & Reuter, P. (2006). Money laundering. Crime and justice, 34(1), 289 375.
4 Lukito, A.S. (2016), "Financial intelligent investigations in combating money laundering crime: An Indonesian legal perspective", Journal of Money Laundering Control, Vol. 19 No. 1, pp. 92 102. Accessed November, 2021.
5 PPATK. (2021). LTKM, Jan 2020 s.d Jan 2021. https://www.ppatk.go.id/statistik_laporan/read/9/ltkm jan 2020 sd jan 2021.html, Accessed November, 2021.
1. What are the Regulations for the Indonesia’s money laundering and How effective it is in preventing and also combating the cases that happened in bank constitution?
2. To what extent does money laundering effect the Indonesia’s financial institution?
ANALYSIS
1. The Regulations and Effectiveness of the Indonesia’s Money Laundering Regulations in Preventing and also Combating the Cases that Happened in Bank Constitution
The Republic of Indonesia’s Law Number 8 of 2010 concerning Prevention and Eradication of Money Laundering Crimes is a not nation’s first regulations regarding the case. It began in 2002, with Law Number 15 of 2002 concerning Money Laundering, where in it regulated the arrangement of the reversal burden of proof. The government's rationale justifies the application of the reverse burden of proof principle as an effort to recover the injustices that occur in the community, for the sake of ease of proof and investigation, which are considered quite relevant as a process of renewing Indonesian criminal law.6
Based on Law No. 8 of 2010 concerning Prevention and Eradication of Money Laundering Crime, Money Laundering is any act that fulfills the elements of a criminal act in accordance with the provisions of this Law. There are three categories of money laundering that mentioned in the Law, wich are:
First, any person who placed, transfers, assigns, spend, pay, donate, deposit, take abroad, change shape, exchange with currency or securities or other actions on assets that s/he knows or deserves suspected to be the result of a criminal act;
Second, any person who hides or disguises the origin proposal, source, location, designation, diversion of rights, or actual ownership of the Assets is known or reasonably suspected to be the result of criminal, and;
Third, any person who receives or controls placement, transfer, payment, grant, donation, deposit, exchange, or use assets that s/he knows or deserves suspected to be the result of a criminal act.
6 Setiadi, W., & Harefa, B. (2019). The Principle of Reversal Burden of Proof in Act of Money Laundering in Indonesia. International Journal of Innovation, Creativity and Change, 9(7).
Although money laundering is a stand alone crime and the Law No. 8 of 2010 is clearly said to be a law to prevent and eradicate money laundering, but if it is explored and understood in depth, this law can be used to prevent and eradicate other criminal acts including corruption due to the relationship between corruption and money laundering is very close and regulated in Article 2 of Law Number 8 of 2010.7
In Indonesia, the lack of general knowledge that law enforcements agents in the criminal justice system, namely the police as the investigator, the general attorney as the prosecutors, and the other important institution; the independents institution; Financial Transaction Reports and Analysis Centre Statistics (PPATK) as the as parties involved in providing Consolidated Results Analysis of the Law on Money Launderingmakes thedueprocess oflaw enforcementofficials in applyingtheLaw on Money Laundering far from optimal.
2. MoneyLaundering’sEffectin the Indonesian Financial Institution
Starting from the legal umbrella of Law no. 8 Year 2010 concerning Prevention and Eradication of Money Laundering Crimes, the attention to the practice of money laundering in Indonesia seems to increase, although previously there was a polemic about whether or not to immediately criminalize.8 Usually money laundering illicit money was made by mixing with legitimate money so that a legitimate business will not compete with companies who are honest, undermining the integrity of the financial markets due to the financial institutions (financial institutions) even rely on the proceeds of crime can face the danger of liquidity; resultinginalossofgovernmentcontroloftheeconomyofacountrywhosepolicies result in lack of confidence in other countries against its policies.9 Money
7 Bintoro, S., Sjamsuddin, S., Pratiwi, R. N., & Hermawan, H. (2021). Prevention Policies for Money Laundering through Capital Market Instruments: The Case of Indonesia. The Journal of Asian Finance, Economics and Business, 8(2), 1269 1275. Accessed November, 2021.
8 Wibowo, M. H. (2018). Corporate Responsibility in Money Laundering Crime (Perspective Criminal Law Policy in Crime of Corruption in Indonesia). Journal of Indonesian Legal Studies, 3(2), 213.
9 Nugroho, N., Sunarmi, S., Siregar, M., & Munthe, R. (2020). Analisis terhadap Pencegahan Tindak Pidana Pencucian Uang oleh Bank Negara Indonesia. ARBITER: Jurnal Ilmiah Magister Hukum, 2(1), 100 110.
laundering activites actually become a dilemma for banks.10 This is due to presence of large amounts of funds saved will make banking grow rapidly, while on the other side of the bank faced the act wich prohibits such activities.11 If banks in operations tend to rely on the proceeds of the money laundering, the bank will sufficient liquidity serious problems if funds are suddenly withdrawn without prior notice.12
There are basically three threats that caused by money laundering for a developing country like Indonesia. First, on the enforcement level, laundering increases the threat posed by serious crime, such as drug trafficking, racketeering, and smuggling, by facilitating the underlying crime and providing funds for reinvestment that allow the criminal enterprise to continue its operations.13 Second, laundering poses a threat from an economic perspective by reducing tax revenues and establishing substantial underground economies, which often stifle legitimate businesses and destabilize financial sectors and institutions.14 And, money laundering shows undermines the democratic institutions and threatens good governance by promoting to public corruption through kickbacks, bribery, illegal campaign contributions, collection of referral fees, and even misappropriation of corporate taxes and license fees.15 Bank as a trusted institution on society plays an important rather vital role on nation’s financial system, therefore provided that, money laundering is considerably big crime for a nation.
The effect of money laundering on economic development to a nation including Indonesia, are difficult to enumerate but it is clear that such activity damages the financial sector institutions that are critical to economic growth, reduces productivity in the economy's real sector by diverting resources and encouraging
10 Naheem, M.A. (2018). FIFA Highlighting the links between global banking and international money laundering. Journal of Money Laundering Control.
11 Karim, A. S., Mohamed, N., Ahmad, M. A. N., & Prabowo, H. Y. (2020). Money Laundering in Indonesia Bankers: Compliance, Practice, and Impact.
12 Pramod., V., Li., & Gao P. (2012). Information Management & Computer Security. A Framework for preventing Money Laundering in banks. Vol 20(3)
13Schroeder, W. R. (2001). Money laundering: A global threat and the international community's response. FBI L. Enforcement Bull., 70, 1.
14Lanning, V. (2000) Southeastern Pennsylvania Transportation Authority 2000 W.L. 1790125
15 Craig M. & Gary M. (2000) FBI Law Enforcement Bulletin. “Investigative Uses of Computers: Analytical Time Lines,”
16
crime and corruption, which slow economic growth and distort external economic sector.
CONCLUSION
Based on the previouselaborations, money Laundering already has a law that both, rigid and clear. The Law No. 8 year of 2010 concerning Prevention and Eradication of Money Laundering Crimes as the basic law of money laundering crimes provided a clear line of what are the acts that categorized as money laundering. But the certainty of the law is obviously not enough to be the hope and the answer to current situation of money laundering cases that happened in Indonesia In addition to that, the fast growing of the financial sector opened up a wide possibility and room for a crime, in this case money laundering to happened untrack. The lack of general knowledge in the law enforcements such as criminal justice system, the investigators, the prosecutors, and the independents institution; Financial Transaction Reports and Analysis Centre Statistics (PPATK) as the as parties involved in providing Consolidated Results Analysis of the Law on Money Laundering makes process of law enforcement far from optimal.
SUGGESTION
Therefore after reviewing and researching the facts and reviewing The Law and the revision of the Law, the researcher has several suggestions that the prevention and the combat against Money Laundering in Indonesia can only be done effectively if all the parties that involved in enfrorcing the law could have the same depth of general knowledge to enforcing the law. In other words, the agents in the criminal justice system must be involved in all the aspects started from the prevention, the investigation, and the prosecution of the money laundering case, according to their responsibility. Furthermore, the money laundering regulations should provide the anticipation for the impact wich is left by money laundering for the financial institution, in this case the bank. Besides that, the crimes that happen in economic sector are growing exponentially, therefore the government has a big part to review
16 Idowu, A., & Obasan, K. A. (2012). Anti money laundering policy and its effects on bank performance in Nigeria. Business Intelligence Journal, 6(3), 367 373.
and fixated the money laundering law according to current situation. As the writer opinions in advance, to support the efficiency of the implementation of the Law No. 8 of 2010 concerning Prevention and Eradication of Money Laundering Crime, the government needs to set a clear parameter of the catagories regarding money laundering. The financial institutions also have the responsibility to watch every transactions that happened and work as the government partner to report any suspicious transactions that happened.
BIBLIOGRAPHY
Law No. 8 of 2010 concerning Prevention and Eradication of Money Laundering Crime
Schneider, F., & Windischbauer, U. (2008). Money laundering: some facts. European Journal of Law and Economics, 26(3), 387 404. Accessed November, 2021.
Force, F. A. T. (1999). What is money laundering. Policy Brief July 1999. Accessed November, 2021
Levi, M., & Reuter, P. (2006). Money laundering. Crime and justice, 34(1), 289 375.
Lukito, A.S. (2016), "Financial intelligent investigations in combating money laundering crime: An Indonesian legal perspective", Journal of Money Laundering Control, Vol. 19 No. 1, pp. 92 102. Accessed November, 2021. PPATK. (2021). LTKM, Jan 2020 s.d Jan 2021. https://www.ppatk.go.id/statistik_laporan/read/9/ltkm jan 2020 sd jan 2021.html, Accessed November, 2021.
Setiadi, W., & Harefa, B. (2019). The Principle of Reversal Burden of Proof in Act of Money Laundering in Indonesia. International Journal of Innovation, Creativity and Change, 9(7).
Bintoro, S., Sjamsuddin, S., Pratiwi, R. N., & Hermawan, H. (2021). Prevention Policies for Money Laundering through Capital Market Instruments: The Case of Indonesia. The Journal of Asian Finance, Economics and Business, 8(2), 1269 1275. Accessed November, 2021.
Wibowo, M. H. (2018). Corporate Responsibility in Money Laundering Crime (Perspective Criminal Law Policy in Crime of Corruption in Indonesia). Journal of Indonesian Legal Studies, 3(2), 213.
Nugroho, N., Sunarmi, S., Siregar, M., & Munthe, R. (2020). Analisis terhadap Pencegahan Tindak Pidana Pencucian Uang oleh Bank Negara Indonesia. ARBITER: Jurnal Ilmiah Magister Hukum, 2(1), 100 110.
Naheem, M.A. (2018). FIFA Highlighting the links between global banking and international money laundering. Journal of Money Laundering Control.
Karim, A. S., Mohamed, N., Ahmad, M. A. N., & Prabowo, H. Y. (2020). Money Laundering in Indonesia Bankers: Compliance, Practice, and Impact.
Pramod., V., Li., & Gao P. (2012). Information Management & Computer Security. A Framework for preventing Money Laundering in banks. Vol 20(3)
Schroeder, W. R. (2001). Money laundering: A global threat and the international community's response. FBI L. Enforcement Bull., 70, 1.
Lanning,V.(2000)SoutheasternPennsylvaniaTransportationAuthority2000W.L. 1790125
Craig M. & Gary M. (2000) FBI Law Enforcement Bulletin. “Investigative Uses of Computers: Analytical Time Lines,”