Forbidden Funds – Indonesia's New Legislation for Countering the Financing of Terrorism
19 Pages Posted: 24 Jun 2014
Date Written: June 23, 2014
In March 2013 the Indonesian Parliament passed Law No 9 of 2013 on the Prevention and Eradication of Terrorism Financing. Enactment of the legislation ostensibly brought Indonesia into line with its commitments under international law as a signatory to the International Convention for the Suppression of Financing of Terrorism (1999) which Indonesia signed in September 2001 and ratified in 2006. While Indonesia’s existing, hastily-drafted anti-terrorism legislation (Law No 15 of 2003) contained a brief provision criminalising the funding of terrorism, this latest and much more significant statute is intended to shore up any gaps in the existing legislative regime. It also provides for a central governmental agency, the Centre for Financial Transactions and Reporting (PPATK – Pusat Pelaporan Analisis Transaksi Keuangan), to have both authority and responsibility for the monitoring of suspicious financial transactions. While the legislation establishes the legal basis for PPATK’s role in countering the financing of terrorism, it also places significant obligations on financial services providers (FSPs) to monitor and report any suspicious transactions to PPATK – as well as obligations to ‘know your customer’ – with significant penalty provisions for failure to do so. Despite the enactment of this latest legislation to counter the funding of terrorism, the Financial Action Task Force (FATF), an inter-governmental standard-setting agency under the auspices of the Organization for Economic Co-operation and Development (OECD), has kept Indonesia on its public list of ‘high risk and non-cooperative jurisdictions’. This paper examines the international law background to the new counter-terrorism financing legislation, the substantive sections of the Prevention and Eradication of Terrorism Financing Law, and the obligations it places on commercial financial services providers. It also considers the legislative regime’s deficiencies and criticisms.
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