Cablegate: Indonesian Fiu Fears Fatf Sanctions

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OO RUEHDT RUEHPB
DE RUEHJA #0136/01 0320656
ZNR UUUUU ZZH
O 010656Z FEB 10
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4401
INFO RUEAWJB/DEPT OF JUSTICE WASHDC PRIORITY
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUEILB/NCTC WASHINGTON DC
RUEHGP/AMEMBASSY SINGAPORE 6698

UNCLAS SECTION 01 OF 02 JAKARTA 000136

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DEPT FOR EAP, EAP/MTS, EAP/RSP, INR/EAP, S/CT FOR LONG,
INL FOR CARLON/BLOOMQUIST, EEB/ESC/TFS
DOJ FOR AAG SWARTZ, OPDAT FOR ALEXANDRE/BERMAN/HAKIM
NSC FOR J.BADER, D.WALTON
KUALA LUMPUR FOR G.CHAPMAN
TREASURY FOR IA, TFFC, OIA AND FINCEN
SINGAPORE FOR S.BLEIWEIS

E.O. 12958: N/A
TAGS: PGOV PREL PTER KCRM KJUS KTFN EFIN SNAR PHUM ASEC
ID
SUBJECT: INDONESIAN FIU FEARS FATF SANCTIONS

1. (SBU) Summary: On January 21, Embassy RLA met with
representatives of the Indonesian Financial Intelligence Unit
(PPATK) to discuss concerns about a recent FATF review of the GOI
anti-money laundering/counter terrorist financing (AML/CFT) regime.
The PPATK interlocutors expressed concern that the review could lead
to the imposition of sanctions at FATF's February meeting in Paris.
Stressing that Indonesia had made and was continuing to make
significant progress on deficiencies identified in the last FATF
evaluation, the PPATK interlocutors requested Embassy RLA
communicate this progress to Daniel Glaser, Deputy Assistant
Secretary for Terrorism Financing and Financial Crimes, Co-Chair of
FATF's International Cooperation Review Group (ICRG). They
specifically pointed out that new anti-money laundering legislation
had recently been redrafted to broaden the list of predicate
offenses and that an interagency working group had rewritten
Indonesia's terrorism financing law to address serious FATF
concerns. End Summary.

2. (SBU) In July 2009, FATF advised Finance Minister Sri Mulyani
Indrawati that Indonesia had been selected for a "targeted" ICRG
review of its anti-money laundering/counter terrorist financing
regime. The basis for FATF's decision was the GOI's failure to
meaningfully address FATF's 16 core and key recommendations relating
to the criminalization of money laundering and terrorism financing,
customer identification and record keeping, and suspicious
transaction reporting. A 2008 Mutual Evaluation Review of Indonesia
conducted by the Asia Pacific Group resulted in findings of
non-compliant or partially compliant on twelve of sixteen key and
core FATF recommendations.

3. (SBU) In October 2009, an ICRG regional review group headed by
Australia and Malaysia conducted an intensive review of the GOI's
AML/CFT regime. The detailed report, issued on January 10, 2010,
noted significant deficiencies continue to exist concerning key and
core FATF recommendations, including the lack of an efficient
mechanism to freeze terrorist assets, and vulnerabilities in the
monitoring and regulation of the non-profit sector. The report
criticized the lack of terrorism financing prosecutions, noting a
lack of capacity among police and prosecutors to investigate and
prosecute terrorism financing offenses. But the report also noted
that since the MER, Indonesia had drafted new AML and Terrorism
financing legislation to address FATF concerns and made other
improvements relating to key and core FATF recommendations which had
previously been rated non-compliant or partially compliant.

4. (SBU) Djoko Kurnijanto, PPATK Directorate of Inter-Agency
Cooperation, Fithriadi Muslim, PPATK Directorate of Law and
Regulation, and Said Imran, PPATK International Relations Officer
asked Embassy RLA to advise Glaser, IRCG Co-Chair, that the GOI has
taken urgent action to address the deficiencies identified in the
2008 MER review. Djoko stated that an inter-agency drafting team
headed by PPATK had drafted a new terrorism financing bill to
address FATF critiques of Indonesia's 2003 anti-terrorism law. This
draft legislation, he noted, will soon go to the Ministry for Law
and Human Rights and then to Parliament.

5. (SBU) Djoko also explained that the 2006 draft AML legislation
had recently been withdrawn from Parliament and amended to further
address FATF concerns. Specifically, the number of predicate
offenses for money laundering has been increased to include all
offenses punishable by more than one year in prison. Djoko
anticipates the President will sign the draft legislation and return
it to Parliament within the next three weeks. This new AML
legislation is a priority and PPATK anticipates that it will be
promulgated by the end of 2010. Djoko stated that government had
nearly completed its survey of the NPO sector and is working with
the U.K. Charity Commission on NPO regulation. He pointed out that
additional efforts were underway to address deficiencies identified
by FATF in wire transfers, alternate remittance methods and cross
border cash and negotiable instrument couriers. Djoko concluded
with a plea that Embassy RLA communicate these efforts to Glaser
before the next FATF meeting in Paris in February.

7. (SBU) Comment: THE ICRG review is valuable in identifying
continued deficiencies in its AML/CFT regime which Indonesia must
address. The review should also accurately reflect the substantial

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efforts the GOI is undertaking to meet FATF standards. It is
crucial that the GOI expedite the passage of the amended AML and the
new CFT legislation. The threat of imposition of sanctions, however,
is likely to undermine those in the GOI driving the effort to meet
FATF standards. End Comment.

HUME

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