The Financial Action Task Force (FATF) has decided that Indonesia should remain on the list of non-co-operative countries and territories in the international campaign against money laundering.

If the authorities do not come up with measures to counter money laundering and the country fails in attempts to be removed from the list, sanctions could be imposed on Indonesia, one of which could be an international rejection of letters of credit (L/Cs) issued by local banks.

Money laundering measures

The 22 October decision of FATF, the agency established by 32 nations to crack down on money laundering, to keep Indonesia on the list of non-co-operative countries and territories pressures the government to adopt more measures to stamp out illicit funds flows.

The Paris-based agency has however agreed to send its envoys, possibly in January 2005, on a visit during which the Indonesian authorities might be able to convince FATF to remove the country from the non-co-operative country list by presenting a schedule of measures against money laundering.

Resistant to change

Indonesian business interests greeted the news that the country is to remain on the list by calling on the government not to adopt measures that would be harmful to local businesses and affect competitiveness in order to satisfy FATF's demands.

Indonesian Chamber of Commerce and Industry (Kadin) representative Thomas Darmawan said the government should listen to the views of the business community before adopting any anti-money laundering measures imposed by a multinational institution.

"The measures could mean more paperwork and confirmations, which would eventually result in extra costs for exporters and importers," Thomas told the Jakarta Post.

Sanctions threat

Indonesia risks several sanctions if it fails to satisfy FATF's demands, including higher risk premiums imposed on local firms making international transactions, the termination of correspondent banking arrangements between local banks and banks in FATF member countries and the rejection of L/Cs issued by local banks.

Indonesia has been on the list of non-cooperative countries since 2001.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.