Source: 2008

International Narcotics Control Strategy Report -- 2008

Released by the Bureau for International Narcotics and Law Enforcement Affairs

Indonesia

Drug Control

I. Summary

Indonesia—the fourth largest country in population in the world—has historically not been considered a major drug producing, consuming or transit country. However, in recent years Indonesia has experienced a major increase in the production, transshipment, trafficking and consumption of narcotics. The executive branch of the Indonesian government has made anti-corruption efforts a major policy initiative along with counterterrorism and counternarcotics. Since 2002, Indonesia has seen a significant increase in the number of large-scale clandestine MDMA and methamphetamine laboratories seized by Indonesian authorities.

MDMA (Ecstasy) and methamphetamine production syndicates exploit Indonesia’s lax precursor chemical controls and use corrupt means to operate with relative impunity. These clandestine laboratories are capable of producing multi-hundred kilogram quantities of amphetamine type substances (ATS). However, in August 2006, there was a highly successful police raid disrupting some illicit drug operations.

In addition, regional drug trafficking syndicates are exploiting Indonesia’s 1.2 million miles of coastline, lack of border and port security resources, etc., for the transshipment of heroin and ATS. Increases in narcotics production/trafficking have been mirrored in drug abuse rates. These rates—specifically intravenous drug use-combined with inadequate health care, rehabilitation and demand reduction programs has resulted in a significant increase in HIV/AIDS infection.

The Indonesian counter narcotics code is sufficiently inclusive to cover arrest, prosecution and adjudication of narcotics cases. Nevertheless corruption in Indonesia is an on-going challenge to the rule of law. Among the 161 countries ranked by Transparency International in their Corruption Index, Indonesia was ranked 130th. The level of political corruption in Indonesia seriously limits the effectiveness of all law enforcement, including narcotics law enforcement and poses the most significant threat to the country’s counter drug strategy. However, the current Indonesian National Police (INP) Chief Sutanto is committed to reducing corruption and illegal activities by members of the police. Sutanto has made significant progress in internal investigation reform, human rights and governance of the national police. In 2006 over 4000 officers were disciplined for violations of the Code of Ethics and Discipline Code with 230 officers being terminated for ethics violations alone.

The INP leadership has been consistently improving, with the integration of more modern law enforcement management systems and procedures including anti-corruption efforts. The INP participates in several international donor-initiated training programs and continues to commit increased resources to counter narcotics efforts. The INP has received both specialized investigative training and equipment, including vehicles, software, safety and tactical equipment to support its efforts against crime and drugs. The INP relies heavily on assistance from major international donors, including the U.S., for the skills and equipment it needs to carry out its mission. Indonesia is a party to the 1988 UN Drug Convention.

II. Status of Country

In 2006, Indonesian authorities continued to seize large-scale clandestine methamphetamine and MDMA laboratories, suggesting that Indonesia is quickly becoming a manufacturing site for narcotics. As recently as 2005, Indonesia has been listed as an important importer of pseudoephedrine . Lax and inadequate precursor chemical controls combined with porous borders and endemic levels of corruption continue to be a significant threat to Indonesia’s counter drug efforts. The diversion and unregulated importation of precursor chemicals remains one of the most significant problems facing Indonesia’s counter drug efforts. To date, Indonesian authorities have been unsuccessful in controlling the diversion of precursor chemicals and pharmaceuticals. Numerous large international pharmaceutical and chemical corporations have large operations throughout Indonesia.

The Indonesian National Narcotics Board (BNN) estimates that approximately 3.2 million people or, 1.5 percent of Indonesia’s total population are drug abusers. According to INP arrest data, in 2006, the INP conducted 14,105 narcotics investigations. All major groups of illegal drugs are readily available in Indonesia: amphetamine-type stimulants, especially, MDMA Ecstasy, as well as, heroin, marijuana and modest amounts of cocaine.

The large scale production of MDMA and methamphetamine is one of the most significant drug trafficking threats in Indonesia. Clandestine mega MDMA and methamphetamine laboratories are capable pf producing multi-thousand kilogram quantities. Indonesian/Chinese organized crime syndicates use familial connections in the People’s Republic of China (PRC) as a source for precursor chemicals and laboratory equipment. Furthermore, production syndicates rely upon chemists trained in the Netherlands for the production of MDMA, as well as Taiwanese chemists for the production of crystal methamphetamine.

Southwest Asian Heroin. Despite Indonesia’s proximity to the “Golden Triangle” there remains no market base for Southeast Asian heroin in Indonesia. However, Southwest Asian heroin is trafficked through Indonesia by West Africans and Nepalese trafficking groups utilizing sources of supply in Afghanistan, Pakistan and Thailand. These trafficking groups utilize human couriers traveling via commercial air carrier, to smuggle drugs to Europe, Canada, and the United states.

Cocaine. While there is no known market base for cocaine in Indonesia, authorities in Indonesia have made several small cocaine seizures in Jakarta and Bali, based on information provided by the DEA. Cocaine is suspected of being transshipped through Indonesia, via commercial air carrier, en route to Australia and Japan, with small user amounts remaining in Indonesia for use by Western tourists.

III. Country Actions Against Drugs In 2007

Policy Initiatives. The Indonesian counter narcotics code is sufficiently inclusive to enable, police, prosecutors and judiciary to arrest, prosecute and adjudicate narcotics cases. Under Indonesian Laws No. 22/1997 on narcotics and 5/1997 on psychotropic substances, the Indonesian courts have sentenced approximately 57 drug traffickers to death. The continued lack of modern detection, enforcement and investigative methodologies and technology, and pervasive corruption, are the greatest obstacles to advancing Indonesia’s counternarcotics efforts.

According to the BNN, the GOI has established new policies and strategies, in a “goal oriented rolling Plan of Action”, consisting of stages covering 3 years for each stage. These stages will continue until Indonesia reaches a drug-free condition, hopefully by 2015. The mission of Indonesia’s National Drug Plan is: 1) To reduce illicit drug supply, trafficking and production; 2) To reduce drug use among Indonesian youth; and 3) To minimize the harmful effects of drugs and drug use in Indonesian society.

The primary policy goals of Indonesia’s National Drug Plan are to: 1) To minimize the level of illness, disease, injury and premature death associated with the use of illicit drugs; 2) To minimize the level and impact of drug-related crime and violence within the community; and 3) To minimize the loss of productivity and other economic costs associated with illicit drug use.

In March 2007, lawmakers from Indonesia’s House of Representatives Commission III and the BNN proposed a new regulation, to be attached to the national narcotics law which would allow for law enforcement agencies to confiscate convicted drug traffickers assets to fund Indonesia’s drug trafficking eradication program. Under the new regulation, assets seized by the GOI would be used to rehabilitate impoverished drug abusers and would serve to supplement the budget of the BNN. The BNN receives approximately $30 million per year from the state budget, far below $53 million the agency requests for its yearly budget.

Law Enforcement Efforts. The Indonesian National Police (INP) Narcotics and Organized Crime Directorate continues to improve its ability to investigate and dismantle international drug trafficking syndicates. The Narcotics Directorate has become increasingly active in regional targeting conferences designed to coordinate efforts against transnational drug organizations. The Indonesian National Police, Narcotics and organized Crime Directorate, has a good working relationship with its Thai and Australian counterparts and participates in joint investigations with DEA and other U.S. law enforcement agencies.

The Indonesian Narcotics Control Board (BNN) continues to strive to improve interagency cooperation in drug enforcement, interdiction, and precursor control. In 2005, under the auspices of BNN, the United States Government (USG)-sponsored PACOM JIATF West Joint Interagency Counter Drug Operations Center (JIACDOC) was opened in Jakarta, Indonesia. In 2006, the BNN had begun staffing and subsequently utilizing the JIACDOC’s facilities to improve coordination and information exchange between various Indonesian law enforcement agencies and supporting ongoing narcotics investigations.

The INP Narcotics and Organized Crime Directorate continues to improve in its ability to investigate and dismantle international drug trafficking syndicates, as well as cooperate with other international law enforcement agencies. The Narcotics Directorate has become increasingly active in the regional targeting conferences designed to coordinate efforts against transnational drug and crime organizations. In 2006, INP attended the Drug Enforcement Conference (IDEC) held in Montreal, Canada. INP’s Director for Narcotics and Organized Crime was subsequently appointed as the Chairman of the East Asia Regional IDEC Working Group.

Corruption. Indonesia has laws against official corruption and an effective anti-corruption commission; but despite these laws, corruption in Indonesia is endemic. 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 transactions.

Corruption of Indonesia’s judiciary is pervasive and poses a significant threat to the country’s counter drug strategy. Indonesian prosecutors’ low wages encourage official corruption and explain a low level of motivation. The average salary of an Indonesian prosecutor with 30 years of seniority is approximately $400 a month. Furthermore, corrupt police and prosecutors abuse their authority in illegal searches, as Indonesian courts do not exclude evidence obtained without a warrant. Corrupt prosecutors are suspected of carrying out investigations to elicit bribes from suspects. Similarly, corrupt officers in narcotics cases are reported to request bribes for a reduction in charges with defense attorneys serving as facilitators.

Agreements and Treaties. Indonesia is a party to the 1988 UN Drug Convention, the 1971 UN Convention on Psychotropic Substances and the 1961 UN Single Convention as amended by its 1972 Protocol. Indonesia is a party to the UN Convention against Corruption and has signed but not yet ratified the UN Convention against Transnational Organized Crime.

Cultivation/Production. The large-scale production of MDMA and methamphetamine is one of the most significant drug trafficking threats in Indonesia. Indonesian/Chinese trafficking syndicates exploit Indonesia’s lax precursor chemical controls, weak law enforcement and political corruption to establish large-scale clandestine MDMA and methamphetamine laboratories capable of producing multi-hundred kilogram quantities. These syndicates secure precursor chemicals from the People’s Republic of China (PRC). Production syndicates rely upon chemists trained in the Netherlands for the production of MDMA (Ecstasy), as well as chemists form Taiwan and Hong Kong for the production of crystal methamphetamine.

Normally, the production of MDMA and crystal methamphetamine in Indonesia never occurs in the same laboratory. Separate production syndicates specialize in either MDMA or methamphetamine. However, in 2005, INP seized the world’s first combination clandestine MDMA/methamphetamine laboratory near Jakarta, Indonesia. This large-scale dual MDMA/methamphetamine laboratory was the third largest clandestine laboratory seized by law enforcement in the world and was capable of producing thousand-pound quantities of both illicit drugs. Subsequent investigation revealed that the construction of this clandestine laboratory was financed by an ethnic Chinese organized crime syndicate based in Hong Kong and mainland China. This syndicate utilized chemists from Taiwan for the production of methamphetamine and chemists from the Netherlands for the production of MDMA.

Marijuana is cultivated throughout Indonesia; the equatorial climate of Sumatra allows for year round growing and cultivation of marijuana. Large-scale (greater than 20 hectares) marijuana cultivation occurs in the remote and sparsely populated regions of the province, often in mountainous areas. Regional marijuana cultivation syndicates are believed to be exploiting INP’s limitations by locating cultivation sites in remote and high elevation areas where there is little law enforcement presence.

Drug Flow/Transit. The INP reports that the majority of heroin seized in Indonesia originates in Afghanistan. The heroin trade in Indonesia is predominantly controlled and directed by Nigerians. Heroin is smuggled by West African and Nepalese trafficking organizations utilizing sources of supply in Karachi, Pakistan and Kabul, Afghanistan. West African and Nepalese couriers travel utilizing commercial air carriers transiting Bangkok, Thailand, and India, en route to Jakarta, Indonesia. In addition to heroin being trafficked domestically in Indonesia, heroin is also transshipped from Indonesia by couriers traveling via commercial air carrier to Europe, Japan and Australia.

Historically, MDMA has been smuggled into Indonesia from sources of supply in the Netherlands. However, in recent years importation has been unnecessary as there has been large-scale MDMA and methamphetamine production in Indonesia itself. MDMA and methamphetamine produced in Indonesia is trafficked both domestically and internationally. In addition, MDMA and methamphetamine produced in the People’s Republic of China (PRC) is smuggled to Indonesia by Chinese organized crime syndicates based in Hong Kong. Specifically, Indonesian authorities point to two of the largest methamphetamine seizures of 2006, 200 kg (February 2006) and 956 kg (August 2006), which originated from the PRC and were smuggled via maritime cargo and fishing vessels.

INP reports that marijuana trafficking in Indonesia is controlled by Indonesian trafficking syndicates based out of Jakarta. The majority of marijuana cultivated in Indonesia is consumed domestically and typically is not trafficked to the international market. Although cocaine seizures continue to occur in major Indonesian airports, the market for cocaine in Indonesia is believed to be very small.

Demand Reduction. The GOI views drug abuse and narcotics trafficking as a major long term threat to social, Islamic and political stability. Government agencies continue to promote counternarcotics abuse and HIV/AIDS awareness campaigns through various media outlets. The BNN is responsible for the development of Indonesia’s demand reduction programs. During 2006, BNN engaged in a large anti-narcotics campaign targeting a wide demographic of Indonesia’s citizenry. No statistics exist regarding the success of these counternarcotics abuse programs.

IV. U.S. Policy Initiatives and Programs

Bilateral Cooperation. Indonesia and the U. S. maintain excellent law enforcement cooperation in narcotics cases. During 2006, the United States sent hundreds of INP officers to training on a variety of transnational crime topics. Furthermore, 120 Indonesian law enforcement officers attended training at the International Law Enforcement Academy (ILEA) in Bangkok. Similarly, training and development initiatives by Department of State INL funded DOJ ICITAP Indonesia Program, DEA, and PACOM JIATF West has trained hundreds of law enforcement officers from a variety of Indonesian government agencies. In 2006, DEA provided training in the areas of drug intelligence analysis, precursor chemical control, basic drug investigations and airport narcotics interdiction. USCG provided maritime boarding officer training as well. INP and BNN maintain excellent relationships with the DEA regional office in Singapore and continue to work closely with DEA in narcotics investigations.

The Road Ahead. In 2008 the U.S. will assist the BNN and its member agencies further utilizing the resources and capabilities of the Counter Drug Operations Center and Network. The U.S. will further work with INP and BNN to standardize and computerize the reporting methods related to narcotics investigations and seizures, develop a drug intelligence database, and build an information network designed to connect to the major provinces of Indonesia. This will permit Indonesian law enforcement to contribute to and access the database for investigations. Similarly, the U.S. will work with INP and BNN to further expand the scope and impact of narcotics investigations targeting the large-scale production of methamphetamine and MDMA in Indonesia.

Chemical Controls

Since 2002, Indonesia has seen a significant increase in the number of large-scale clandestine MDMA and methamphetamine laboratories seized by Indonesian authorities. MDMA (Ecstasy) and methamphetamine-producing drug syndicates have been exploiting Indonesia’s lax precursor chemical controls and using corrupt means to operate with relative impunity, but Indonesian authorities are demonstrating additional commitment to increasing law enforcement pressure. Clandestine laboratories that have been discovered in Indonesia are capable of producing multi-hundred kilogram quantities of illegal synthetic drugs. In addition, regional drug syndicates are exploiting Indonesia’s 1.2 million miles of coastline and the overall lack of border and port security for the smuggling of ATS and precursor chemicals.

Methamphetamine is now the second most widely abused drug in Indonesia. Most seizures are in crystalline form. The syndicates producing this supply utilize precursor chemical sources and laboratory equipment from China, and rely upon chemists trained in the Netherlands for the production of MDMA. In some cases they also have used chemists from Taiwan and Hong Kong for the production of crystal methamphetamine.

The diversion and unregulated importation of precursor chemicals remains a significant problem facing Indonesia’s counternarcotics efforts. Numerous pharmaceutical and chemical corporations have large operations throughout Indonesia. In June 2006, the Indonesian National Police in cooperation with the Australian Federal Police (AFP) identified more than 380 kilograms of pseudoephedrine that had been diverted to Indonesia by a trafficking syndicate based in Jakarta and Sidney.

Money Laundering

Although neither a regional financial center nor an offshore financial haven, Indonesia is vulnerable to money laundering and terrorist financing due to a poorly regulated financial system, cash-based economy, the lack of effective law enforcement, and widespread corruption. Most money laundering in the country is connected to nondrug criminal activity such as gambling, prostitution, bank fraud, theft, credit card fraud, maritime piracy, sale of counterfeit of goods, illegal logging, and corruption. Indonesia also has a long history of smuggling, a practice facilitated by thousands of miles of un-patrolled coastline and law enforcement and customs infrastructure riddled with corruption. The proceeds of illicit activities are easily parked offshore and only repatriated as required for commercial and personal needs.

In June 2001, the Financial Action Task Force (FATF) added Indonesia to its list of Non-Cooperative Countries and Territories (NCCT). This designation was due to a number of serious deficiencies in Indonesia’s Anti-Money Laundering (AML) framework including the lack of a basic set of AML provisions and the failure to criminalize money laundering. As a result of Indonesia’s enactment of relevant AML legislation and its ongoing efforts to implement reforms to its AML regime, the FATF removed Indonesia from its NCCT list on February 11, 2005.

In April 2002, Indonesia passed Law No. 15/2002 Concerning the Crime of Money Laundering, making money laundering a criminal offense. The law identifies 15 predicate offenses related to money laundering, including narcotics trafficking and most major crimes. Law No. 15/2002 established the Financial Transactions Reports and Analysis Centre (PPATK), Indonesia’s financial intelligence unit (FIU) to develop policy and regulations to combat money laundering and terrorist financing.

Law No. 15/2002 stipulated important provisions to enhance Indonesia’s anti-money laundering regime, such as: obligating financial service providers to submit suspicious transactions reports and cash transaction reports; exempting reporting, investigation and prosecution of criminal offenses of money laundering from the provisions of bank secrecy that are stipulated in Indonesia’s banking law; placing the burden of proof on the defendant; establishing the PPATK as an independent agency with the duty and the authority to prevent and eradicate money laundering; and establishing a clear legal basis for freezing and confiscating the proceeds of crime.

In September 2003, Parliament passed Law No. 25/2003, amending Law No. 15/2002, to further address FATF’s concerns. Law No. 25/2003 provides a new definition for 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 origin of the assets. The amendment removes the threshold requirement for proceeds of crime. The amendment further expands the scope of regulations by expanding the definition of reportable suspicious transactions to include attempted or unfinished transactions. The amendment also shortens the time to file an STR to three days or less after the discovery of an indication of a suspicious transaction. However, there is no clear legal obligation to report STRs related to terrorist financing. The amendment makes it an offense to disclose information about the reported transactions to third parties, which carries a penalty of imprisonment for a maximum of five years and a maximum fine of one billion rupiah (approximately U.S. $105,000).

Additionally, Articles 44 and 44A of Law 25/2003 provide for mutual legal assistance with respect to money laundering cases, 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 international recommendations on the prevention and eradication of money laundering. In March 2006, the GOI expanded Indonesia’s ability to provide mutual legal assistance by enacting the first Mutual Legal Assistance (MLA) Law (No. 1/2006), which establishes formal, binding procedures to facilitate MLA with other states.

A proposed second amendment to the AML law was submitted to the parliament in October 2006. If passed, it would require nonfinancial service businesses and professionals who potentially could be involved in money laundering, such as car dealers, real estate companies, jewelry traders, notaries and public accountants, to report suspicious transactions. The amendments also would include civil asset forfeiture and give more investigative powers to the PPATK, as well as the authority to block financial transactions suspected of being related to money laundering. Despite these provisions, the draft amendments appear to have remaining gaps when measured against current AML/CTF international standards.

Indonesia’s FIU, PPATK, established in April 2002, became operational in October 2003 and continues to make progress in developing its human and institutional capacity. The PPATK is an independent agency that receives, analyzes, and evaluates currency and suspicious financial transaction reports, provides advice and assistance to relevant authorities, and issues publications. As of November 2007 the PPATK had received approximately 12,000 suspicious transactions reports (STRs) from 112 banks, seven rural banks, and 82 nonbank financial institutions. Approximately 5,000 of these STRs were received during 2007. The agency also reported that it had received a total of over four million cash transaction reports (CTRs) from 132 banks, 48 moneychangers, 35 rural banks, five insurance companies, and two securities companies. PPATK have submitted a total of 521 cases to various law enforcement agencies based on their analysis of 882 STRs.

The PPATK actively pursues broader cooperation with relevant GOI agencies. The PPATK has signed a total of 16 domestic memoranda of understanding (MOUs) to assist in financial intelligence information exchange with the following entities: Attorney General’s Office (AGO), Bank Indonesia (BI), the Capital Market Supervisory Agency (BAPEPAM), the Ministry of Finance Directorate General of Financial Institutions, the Directorate General of Taxation, Director General for Customs and Excise, the Ministry of Forestry Center for International Forestry Research, the Indonesian National Police, the Supreme Audit Board (BPK), the Corruption Eradication Committee, the Judicial Commission, the Directorate General of Immigration, the State Auditor, the Directorate General of the Administrative Legal Affairs Department of Law and Human Rights, the Anti-Narcotics National Board, and the Province of Aceh.

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. BI has issued an Internal Circular Letter No. 6/50/INTERN, dated September 10, 2004 concerning Guidelines for the Supervision and Examination of the Implementation of KYC and AML by Commercial Banks. In addition, BI also issued a Circular Letter to Commercial Banks No. 6/37/DPNP dated September 10, 2004 concerning the Assessment and Imposition of Sanctions on the Implementation of KYC and other Obligations Related to Law on Money Laundering Crimes. BI is also preparing Guidelines for Money Changers on Record Keeping and Reporting Procedures, and Money Changer Examinations to be given by BI examiners. Currently, banks must report all foreign exchange transactions and foreign obligations to BI.

With respect to the physical movement of currency, Article 16 of Law No. 15/2002 contains a reporting requirement for any person taking cash into or out of Indonesia in the amount of 100 million Rupiah or more, or the equivalent in another currency, which must be reported to the Director General of Customs and Excise. These reports must be given to the PPATK in no later than five business days and contain details of the identity of the person. Indonesia Central Bank regulation 3/18/PBI/2001 and the Directorate General of Customs and Excise Decree No.01/BC/2005 contain the requirements and procedures of inspection, prohibition, and deposit of Indonesia Rupiah into or out of Indonesia.

The Decree provides implementing guidance for Ministry of Finance Regulation No.624/PMK. 2004 of December 31, 2004, and requires individuals who import or export more 100 million Rupiah in cash (approximately U.S. $10,500) to declare such transactions to Customs. This information is to be declared on the Indonesian Customs Declaration (BC3.2). The cash declaration requirements do no cover bearer negotiable instruments as required by FATF’s Special Recommendation IX. In addition, cash can only be restrained if the passenger fails to disclose or a false declaration is made. In most cases, the cash is returned to the traveler after a small administrative penalty is applied. There is no clear authority to stop, restrain or seize money that is suspected of promoting terrorism or crime or constitutes the proceeds of crime. As of December 2007, the PPATK has received more than 2,137 reports from Customs on cross border cash carrying issues. The reports were derived from two airports, Jakarta Cengkarang and Denpasar, the seaports of Batam and Tanjung Balai Karimun, Bandung, Batam and Denpasar. As of July 2007, the Indonesian National Police have conducted 20 investigations based on cross-border currency reports. Despite these investigations, detection capacity is very weak and criminal penalties are limited and are not being applied.

Indonesia’s bank secrecy law covers information on bank depositors and their accounts. Such information is generally kept confidential and can only be accessed by the authorities in limited circumstances. However, Article 27(4) of the Law No. 15/2002 expressly exempts the PPATK 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 Law No. 15/2002 exempts providers of financial services from bank secrecy provisions when carrying out their reporting obligations. Providers of financial services, their officials, and employees are given protection from civil or criminal action for making required disclosures under Article 15 of the anti-money laundering legislation.

There is a mechanism to obtain access to confidential information from financial institutions through BI regulation number 2/19/PBI/2000. PPATK has the authority to conduct supervision and monitoring compliance of providers of financial services. PPATK may also advise and assist relevant authorities regarding information obtained by the PPATK in accordance with the provisions of this Law No. 15/2002.

The GOI has limited formal instruments to trace and forfeit illicit assets. Under the Indonesian legal system, confiscation against all types of assets must be effected through criminal justice proceedings and be based on a court order. The GOI has no clear legal mechanism to trace and freeze assets of individuals or entities on the UNSCR 1267 Sanctions Committee’s consolidated list, and there is no clear administrative or judicial process to implement this resolution and UNSCR 1373. While the BI circulates the consolidated list to all banks operating in Indonesia, this interagency process is too complex and inefficient to send out asset-freezing instructions in a timely manner. In addition, no clear instructions are provided to financial institutions as to what will happen when assets are discovered. Banks also note that without very specific information, the preponderance of similar names and inexact addresses, along with lack of a unique identifier in Indonesia, make identifying the accounts very difficult. Attempts to use a criminal process are confusing and ad hoc at best, and rely on lengthy investigation processes before consideration can be given to freezing or forfeiting assets.

Article 32 of Law No. 15/2002, as amended by Law No. 25/2003, provides that investigators, public prosecutors and judges are authorized to freeze any assets that are reasonably suspected to be the proceeds of crime. Article 34 stipulates that if sufficient evidence is obtained during the examination of the defendant in court, the judge may order the sequestration of assets known or reasonably suspected to be the proceeds of crime. In addition, Article 37 provides for a confiscation mechanism if the defendant dies prior to the rendition of judgment.

In August, 2006, the GOI enacted Indonesia’s first Witness and Victim Protection Law (No. 13/2006). Indonesia’s AML Law and Government Implementing Regulation No. 57/2003 also provide protection to whistleblowers and witnesses.

The October 18, 2002 emergency counter-terrorism regulation, the Government Regulation in Lieu of Law of the Republic of Indonesia (Perpu), No. 1 of 2002 on Eradication of Terrorism, criminalizes terrorism and provides 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 that are knowingly used in part or in whole for acts of terrorism. However, the terrorist financing regulation appears to suffer from a number of deficiencies. For example, the terrorist financing offense must be linked to a specific act of terrorism and the prosecution must prove that the offender specifically intended that the funds be used 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 often unclear to what extent terrorism generates proceeds. Terrorist financing is therefore not fully included as a predicate for the money laundering offence. In October 2004, an Indonesian court convicted and sentenced one Indonesian to four years in prison on terrorism charges connected to his role in the financing of the August 2003 bombing of the Jakarta Marriott Hotel.

The GOI has begun to take into account alternative remittance systems and charitable and nonprofit entities in its strategy to combat terrorist financing and money laundering. The PPATK has issued guidelines for nonbank financial service providers and money remittance agents on the prevention and eradication of money laundering and the identification and reporting of suspicious and other cash transactions. The GOI has initiated a dialogue with charities and nonprofit entities to enhance regulation and oversight of those sectors.

Indonesia is an active member of the Asia/Pacific Group on Money Laundering (APG), and currently serves as the co-chair. The APG conducted its second mutual evaluation of Indonesia in November 2007 and the report will be discussed and adopted at the APG Annual Meeting in July 2008. In June 2004, PPATK became a member of the Egmont Group. The PPATK has pursued broader cooperation through the MOU process and has concluded 23 MOUs with other Egmont FIUs. The PPATK has also entered into an Exchange of Letters enabling international exchange with Hong Kong. Indonesia has signed Mutual Legal Assistance Treaties with Australia, China and South Korea. Indonesia joined other ASEAN nations in signing the ASEAN Treaty on Mutual Legal Assistance in Criminal Matters on November 29, 2004, though the GOI has not yet ratified the treaty. The Indonesian Regional Law Enforcement Cooperation Centre was formally opened in 2005 and was created to develop the operational law enforcement capacity needed to fight transnational crimes.

The GOI has enacted Law No. 7/2007 to implement the 1988 UN Drug Convention, to which it is a party. The GOI also has enacted Law No. 22/1997 Concerning Drugs and Psychotropic Substances, which makes the possession, purchase or cultivation of narcotic drugs or psychotropic substances for personal consumption a criminal offense. The GOI is a party to the UN International Convention for the Suppression of the Financing of Terrorism and a party to the UN Convention against Corruption. The GOI has signed but has yet to ratify the UN Convention against Transnational Organized Crime. Indonesia is ranked 143 of 180 countries ranked in Transparency International’s 2007 Corruption Perception Index.

While The Government of Indonesia has made progress in constructing an AML regime, efforts to combat terrorist financing have been weak. Sustained public awareness campaigns, new bank and financial institution disclosure requirements, and the PPATK’s support for Indonesia’s first credible anti-corruption drive has led to increased public awareness about money laundering and, to a lesser degree, terrorist financing. However, weak human and technical capacity, poor interagency cooperation, and rampant corruption in business and government remain significant impediments to the continuing development of an effective anti-money laundering regime. The highest levels of GOI leadership should continue to demonstrate strong support for strengthening Indonesia’s anti-money laundering regime. In particular, the GOI must continue to improve capacity and interagency cooperation in analyzing suspicious and cash transactions, investigating and prosecuting cases, and achieving deterrent levels of convictions. As part of this effort, Indonesia should review and streamline its process for reviewing UN designations and identifying, freezing and seizing terrorist assets, and become a party to the UN Convention against Transnational Organized Crime.

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