Source: 2003
Released by the Bureau for International Narcotics and Law Enforcement Affairs
Although by international standards not a major drug producing, consuming, or drug transit country, Indonesia has a growing narcotics problem in all three areas. The Indonesian National Police (INP) have participated in several international donor-initiated training programs and sought to commit increased resources to counternarcotics efforts. The INP has received equipment, including vehicles, computers, safety and tactical equipment to support its efforts against crime and drugs. INP efforts are firmly based on counternarcotics legislation and international agreements. The INP relies heavily on assistance from major international donors, primarily the U.S. Indonesia is a party to the 1988 UN Drug Convention.
Synthetic drugs (ATS) remain available in all major cities, including in schools, karaoke lounges, bars, cafes, discotheques, and nightclubs. Certain neighborhoods and villages are known for tolerating drug trafficking, notably of methamphetamine, in its crystalline ("shabu-shabu" or "ice") and tablet ("yaba") forms; Ecstasy (MDMA); heroin; cocaine; and marijuana. In 2002, the INP narcotics enforcement section, Narkoba, was reorganized, and now operates as the Narcotics and Organized Crime Directorate, which also addresses criminal syndicates, as well as money laundering. Additionally in 2003, two specialized counternarcotics task forces were created. An airport task force now operates at Jakarta Sukarno Hatta International Airport consisting of 40 officers working in teams of 14-15 officers on one-month shift rotations. Another task force of 61 officers from across Indonesia is designed to improve the capability of the Narcotics and Organized Crime Directorate's enforcement operations.
In response to the threat of terrorism in Indonesia, the Narcotics and Organized Crime Directorate received collateral counter terrorism duties during 2002, and is expected to continue with them until the deployment of an counterterrorist directorate. The counterterrorism duties of INP's narcotics detectives have impacted their ability to conduct complex drug investigations. The dominant role of U.S. trained INP narcotics investigators in counterterrorism duties highlights both the effectiveness of U.S. law enforcement training programs and the limited number of well-trained criminal investigators trained thus far.
The coordinator of the National Anti Narcotics Movement (Granat), the most prominent drug prevention NGO in Indonesia, notes that marijuana use has increased, particularly in Jakarta. Not surprisingly, arrests for distribution and possession of marijuana also have increased. Marijuana is harvested in North Sumatra, especially in Aceh province. The INP alleges that the Free Aceh Movement (GAM), a separatist group, traffics marijuana to support its operations. The INP, however, has produced no convincing evidence to support this charge.
The INP reports that the majority of heroin seized in Indonesia comes from southwest Asia. INP and DEA identify Indonesia as a transit country for West African and Nepalese traffickers, who often use Indonesian and Thai female drug couriers.
While the INP sees a growing problem in domestically produced MDMA and methamphetamine, international trafficking still represents the largest source of narcotics. The Golden Triangle serves as the main source of methamphetamine, in tablet and crystalline form, entering Indonesia via entry points throughout its 17,000-island archipelago. None of these entry points, including Jakarta, has adequate detection or enforcement mechanisms. Europe remains the primary source of Ecstasy.
The INP reports a 38 percent increase in seizures of cocaine during 2003. DEA reports that local arrest, rehabilitation and hospital statistics indicate that cocaine has not yet become a drug of choice among Indonesian drug users. It seems therefore likely that much, if not most, cocaine in Indonesia is transshipped, principally to Australia.
Policy Initiatives. Although Indonesia has not passed any counternarcotics legislation since 1997, its counternarcotics code is sufficiently inclusive to enable police, prosecutors and judiciary to arrest, prosecute and adjudicate narcotics cases. The lack of modern detection, enforcement and investigative methodologies and technology, as well as the presence of pervasive corruption, are the greatest roadblocks to successful interdiction.
Accomplishments/Law Enforcement Efforts. In 2003, INP formed a precursor chemical task force, comprised of officers from BNN, the Ministry of Trade, the Ministry of Health, Customs and INP, to address chemical diversion. INP's Narcotics and Organized Crime Directorate, utilizes dedicated BNN operational funding to sustain its counter narcotics efforts.
The USG has assisted Indonesian drug interdiction efforts at airports, provided safety training to investigators when investigating Clandestine Laboratories, and provided training in Basic Criminal Investigation skills. The U.S. plans to provide additional training in the coming months. U.S. programs focus on management; logistical and tactical considerations; detection; contemporary techniques and equipment to interdict narcotics; promotion of officer safety; and investigations. The Indonesian Navy continues to police Indonesian waters. Efforts to further refine the respective roles of the Navy and the INP's Air and Sea Police to avoid duplicative enforcement initiatives continue as well.
Indonesia increased the number of narcotics investigations by 4.9 percent in 2003 to a total of 3,729. These are broken down by principal drug involved, as follows: 39 percent marijuana/hashish investigations; 27 percent methamphetamine investigations; 19 percent Ecstasy investigations; 14 percent heroin investigations; and less than one percent cocaine investigations.
Under Indonesian Laws No. 22/1997 on narcotics and 5/1997 on psychotropic substances, the Indonesian District Court which handles drug cases has sentenced at least 21 drug traffickers to death since January 2000. None of the condemned has been executed yet.
Agreements and Treaties. Indonesia is a party to the 1988 UN Drug Convention and has signed, but has not yet ratified, the UN Convention against Transnational Organized Crime.
Corruption. Indonesia has laws against official corruption. Likewise, hospitals, health centers, drugstores and physicians who distribute or traffic drugs illegally can face not less than ten years in prison. Directors of scientific institutes who grow, buy, store or possess narcotic plants can be prosecuted. Indonesian law also penalizes anyone who seeks to hamper the investigation or prosecution of a narcotics crime with five years in prison and a fine of Rupiahs 150,000,000 (approximately $18,000). Despite these laws, corruption in Indonesia is endemic, and seriously limits the effectiveness of all law enforcement, including narcotics law enforcement. As a matter of government policy and practice, the GOI does not encourage or facilitate the illicit production or distribution of drugs or the laundering of proceeds from illegal drug transactions.
Bilateral Cooperation. Indonesia and the United States maintain excellent law enforcement cooperation on narcotics cases. In 2003, the U.S. sent hundreds of INP officers to training on a mixture of transnational crime topics in the U.S., to the International Law Enforcement Academy (ILEA) in Bangkok, and to ICITAP and DEA-sponsored training in Indonesia. The INP continues to work closely with the DEA regional office in Singapore in narcotic investigations. DEA Singapore also conducted several training classes in Jakarta covering safety concerns when investigating clandestine laboratories, basic agent training, precursor chemical school and airport interdiction training.
The Road Ahead. The U.S. and Indonesia will continue to cooperate closely on narcotics control.
Although neither a regional financial center nor an offshore haven, Indonesia remains vulnerable to money laundering and terrorist financing due to the lack of a poorly regulated financial system, the lack of effective law enforcement and widespread corruption.
Most laundered money derives from nondrug criminal activity such as gambling, prostitution, bank fraud, or corruption. Indonesia also has a long history of smuggling, facilitated by thousands of miles of unpatrolled coastline and a law enforcement system riddled with corruption. The proceeds of these illicit activities are easily parked offshore and only repatriated as required for commercial and personal needs.
The Financial Action Task Force (FATF) included Indonesia on the list of noncooperating countries and territories (NCCT) at its June 2001 plenary. The designation was based on the following: Indonesia had no basic set of anti-money laundering provisions, money laundering was not a criminal offense, there was no reporting of suspicious transactions to a financial intelligence unit (FIU), and recently introduced customer identification requirements only applied to banks. The U.S. Treasury Department issued an advisory to all U.S. financial institutions instructing them to "give enhanced scrutiny" to all transactions involving Indonesia; the advisory is still in effect. Indonesia remained on the FATF NCCT list, as of December 2003.
Until recently, banks and other financial institutions did not routinely question the sources of funds or require identification of depositors or beneficial owners. Financial reporting requirements were put in place only in the wake of the financial crisis when the Government of Indonesia (GOI) became interested in controlling capital flight and recovering foreign assets of large-scale corporate debtors or alleged corrupt officials.
In April 2002, Indonesia passed Law No. 15 on Criminal Acts of Money Laundering, Indonesia's anti-money laundering (AML) law, which made money laundering a criminal offense. The law identifies 15 predicate offenses related to money laundering, including narcotics trafficking and most major crimes. The law provides for the establishment of a financial intelligence unit (FIU), the Center for Reporting and Analysis of Financial Transactions (PPATK), to develop policy and regulations to combat money laundering. The PPATK was established in December 2002 and became fully functional in October 2003.
The PPATK is an independent agency that receives, maintains, analyzes, and evaluates currency and suspicious financial transactions, provides advice and assistance to relevant authorities, and issues publications. As of September 2003, the PPATK has received 244 STRs from over 27 banks. 43 STRs have been referred to the police; four STRs has been referred to the Attorney General. However, no cases have progressed o the level of court hearings.
In September 2003, Parliament passed The Amending Law that amended its anti-money laundering legislation. The FATF publicly welcomed this law which addresses the key deficiencies previously identified by the FATF. As a result this substantial progress, Indonesia avoided additional countermeasures and was invited to submit an implementation plan.
The Amending Law provides a new definition of the crime of money laundering making it an offense for anyone to deal intentionally with assets known or reasonably suspected to constitute proceeds of crime with the purpose of disguising or concealing the origins of the assets, as seen in Articles 1(1) and 3. The Amending Law removes the threshold requirement for proceeds of crime and expands the definition of proceeds of crime to cover assets employed in terrorist activities. Article 1(7)(c) expands the definition of Suspicious Transaction Reports (STR) to include attempted or unfinished transactions. Article 12A introduces a scheme of administrative sanctions (in addition to criminal sanctions) for failure to make STRs. Article 13(2) shortens the time to file an STR to 3 days or less after the discovery of an indication of the suspicious transaction. Article 17A creates an offense of disclosing information about reported transactions to third parties, which carries a maximum of five years' imprisonment and a maximum of one billion rupiah (approximately $118,000). Articles 44 and 44A provide for mutual legal assistance, with the ability to provide assistance using the compulsory powers of the court. Article 44B imposes a mandatory obligation on the PPATK to implement provisions of international conventions or recommendations on the prevention and eradication of money laundering.
Bank Indonesia (BI), the Indonesian Central Bank, issued Regulation No. 3/10/PBI/2001, "The Application of Know Your Customer Principles," on June 18, 2001. This regulation requires banks to obtain information on prospective customers, including third party beneficial owners, and to verify the identity of all owners, with personal interviews if necessary. The regulation also requires banks to establish special monitoring units and appoint compliance officers responsible for implementation of the new rules and to maintain adequate information systems to comply with the law. Finally, the regulation requires banks to analyze and monitor customer transactions and report to BI within seven days any "suspicious transactions" in excess of Rp 100 million (approximately $11,800). The regulation defines suspicious transactions according to a 39-point matrix that includes key indicators such as unusual cash transactions, unusual ownership patterns, or unexplained changes in transactional behavior. BI specifically requires banks to treat as suspicious any transactions to or from countries "connected with the production, processing and/or market for drugs or terrorism."
Separately, banks must report all foreign exchange transactions and foreign obligations to BI. Individuals who import or export more than Rp 100 million in cash must report such transactions to Customs. The PPATK is currently drafting presidential decrees that would protect reporting individuals and witnesses who cooperate with law enforcement entities on money laundering cases.
Indonesia has bank secrecy laws concerning information regarding a depositor and his accounts. Such information is generally kept confidential and can only be accessed by the authorities in limited circumstances. However, Article 27(4) of the ML Law now expressly exempts the PPTAK from "the provisions of other laws related to bank secrecy and the secrecy of other financial transactions" in relation to its functions in receiving and requesting reports and conducting audits of providers of financial services. In addition, Article 14 of the ML exempts providers of financial services from bank secrecy provisions when carrying out their reporting obligations, and Article 15 of the Law gives providers of financial services, their official and employees protection from civil or criminal action in making such disclosures.
Indonesia's laws provide only limited authority to block or seize assets. Under BI regulations 2/19/PBI/2000, police, prosecutors, or judges may order the seizure of assets of individuals or entities that have been either declared suspects, or indicted for a crime. This does not require the permission of BI, but, in practice, for law enforcement agencies to identify such assets held in Indonesian banks, BI's permission would be required. In the case of money laundering as the suspected crime, however, bank secrecy laws would not apply, according to the anti-money laundering law.
The October 18, 2002, emergency antiterrorism regulations, the Government Regulations in Lieu of Law of the Republic of Indonesia No. 1 of 2002 on Eradication of Terrorism (Perpu), criminalize terrorism and provide the legal basis for the GOI to act against terrorists, including the tracking and freezing of assets. The Perpu provides a minimum of three years and a maximum of 15 years imprisonment for anyone who is convicted of intentionally providing or collecting funds which are known to be used partly or wholly for acts of terrorism. This regulation is necessary because Indonesia's anti-money laundering law criminalizes the laundering of proceeds of crimes, but it is unclear to what extent terrorism generates proceeds. Policy makers are currently drafting clarifying amendments.
The GOI has the authority to trace and freeze assets of individuals or entities designated by the UNSCR 1267 Sanctions Committee, and has circulated the UN 1267 Sanctions Committee's consolidated list to all banks operating in Indonesia, with instructions to freeze any such accounts. The interagency process to issue freeze orders, which includes the Foreign Ministry, Attorney General, and BI, takes several weeks from UN designation to bank notification. The GOI, to date, reports that it has not found any terrorist assets.
The GOI has not taken into account alternative remittance systems or charitable or nonprofit entities in its strategy to combat terrorist finance and money laundering. The PPATK, however, is working on draft regulations under the AML Law to cover the securities and insurance markets.
Indonesia is a member of the Asia/Pacific Group on Money Laundering and the Bank for International Settlements. This implies endorsement of the Basel Committee's "Core Principles for Effective Banking Supervision," that BI claims it follows voluntarily. The GOI is a party to the 1988 UN Drug Convention, and has signed, but not yet ratified, the UN Convention against Transnational Organized Crime. Indonesia has signed, but not yet become a party to, the UN International Convention for the Suppression of the Financing of Terrorism.
Indonesia does not have any bilateral agreements allowing for on-site examinations of foreign banks by home country supervisors, nor does it have specific agreements for international exchange of information on non-money laundering cases. However, BI asserts that, in principle, it would not object to on-site supervision by host country authorities and would deal with requests for exchange of information on money laundering cases on an ad hoc basis, in accordance with existing criminal law. The AML Law contains a specific provisions (Article 44 and 44 A) with provide for mutual legal assistance with respect to money laundering cases. The Government of the Republic of Indonesia should continue to implement its money laundering legislation. In particular, the GOI must effectively implement the laws and procedures it has put in place and should streamline its asset seizure and forfeiture procedures. Indonesia should review the adequacy of the Code for Criminal Procedure and the Rules of Evidence and enact legislation to allow the use of intelligence for investigations and the use of modern techniques to enter evidence in court proceedings. The Republic of Indonesia should become a party to the UN International Convention for the Suppression of the Financing of Terrorism.