Identification of Suspicious Financial Transactions and
Additional Reporting Parties Classified as Financial Services Providers
According to the Bulletin Statistic of Financial Transaction Reports and Analysis Centre (Pusat Pelaporan dan Analisis Transaksi Keuangan "PPATK”) in September 2021, there was an increase in the reports submitted to PPATK compared with August 2021. By September 2021, there was a total of 18,107,847 reports filed. One of the reports submitted to PPATK is the Suspicious Financial Transaction Report.
Furthermore, the government recently issued a new regulation in April 2021 that classifies additional reporting parties which obliged such parties to submit a Suspicious Financial Transaction Report to PPATK.
However, such matter raises the following questions: What are the types of transactions that must be reported to PPATK? What constitutes a suspicious financial transaction? How to determine or identify suspicious financial transactions? Who is required to report suspicious financial transactions? Finally, who are the additional reporting parties based on the recently issued regulation?
1. Types of Transactions that Must be Reported to PPATK
Based on Law No. 8 of 2010 on the Eradication of Money Laundering Crime (“Law 8/2010”), there are 3 (three) types of transactions that must be reported to PPATK, namely:
- Suspicious financial transactions;
- Cash Financial Transactions in the amount of at least IDR 500,000,000.00 (five hundred million Indonesian Rupiahs) or in foreign currencies of equivalent value, which are carried out either in one transaction or several times in 1 (one) business day; and/or
- The transfer of funds to and from abroad.
Further, PPATK is authorised to submit such reports to the investigators in regard to the crime of money laundering . According to Indonesian law, money laundering is defined as a crime that fulfills the elements of Law 8/2010.
With regards to “Suspicious Financial Transactions”, further question arises on whether there is a minimum threshold to suspicious financial transactions as well as how to determine if a transaction is suspicious.
2. What Constitutes Suspicious Financial Transactions and the Principle of Double Criminality in Money Laundering Crimes
According to the laws and regulations of Indonesia, there is no minimum threshold to classify a transaction as suspicious. However, the elements of a Suspicious Financial Transaction defined under Law 8/2010 are as follows:
- Financial transactions that deviate from the profile, characteristics, or habits of the transaction pattern of the relevant service user;
- Financial transactions by a service users which are reasonably suspected to be carried out with the aim of avoiding the reporting of the relevant transaction that must be carried out by the Reporting Party in accordance with the provisions of this Law;
- Financial transactions that are carried out and/or called off that use assets suspected of originating from the proceeds of criminal acts; or
- Financial transactions requested by PPATK to be reported by the Reporting Party as it involves assets which are suspected of originating from the proceeds of criminal acts.
Hence, there are 4 (four) elements that may be used to classify a transaction as being suspicious. If the transaction meets one of the four elements above, then the transaction shall be categorized as a Suspicious Financial Transaction.
2 (two) of the elements stipulate the “assets suspected of originating from the proceeds of a criminal act” which indicates that Law 8/2010 upholds the principle of double criminality, meaning that the crime of money laundering cannot stand alone and must be preceded by a predicate crime.
Law 8/2010 further stipulates that what constitutes as the aforementioned “proceeds of a criminal act” are assets obtained from the crimes of: (a) corruption; (b) bribery; (c) narcotics; (d) psychotropic; (e) labour smuggling; (f) migrant smuggling; (g) in the banking sector; (h) in the capital market sector; (i) in the field of insurance; (j) customs; (k) excise duty; (l) trafficking of persons; (m) illicit arms trade; (n) terrorism; (o) kidnapping; (p) theft; (q) embezzlement; (r) fraud; (s) counterfeiting money; (t) gambling; (u) prostitution; (v) in the field of taxation; (w) in the forestry sector; (x) in the environmental field; (y) in the marine and fishery sector; or (z) other crimes punishable by imprisonment of 4 (four) years or more.
3. Identifying Suspicious Financial Transactions
Other than the elements that contain “assets suspected of originating from the proceeds of a criminal act”, the element of “financial transactions that deviate from the profile, characteristics, or habits of the transaction pattern of the relevant service user” requires the Financial Service Providers to identify the transaction with an internal policy or procedure.
To identify the elements and characteristics of a suspicious financial transaction, financial service providers are required to carry out Suspicious Financial Transaction Identification in accordance with PPATK Regulation No. PER- 11/1.02/PPATK/06/2013 on Identification of Suspicious Financial Transaction for Financial Service Providers as amended with PPATK Regulation No. PER-04/1.02/PPATK/03/2014 by also referring to Suspicious Financial Transaction Indicators according to PPATK Circular Letter No. 03/1.02/PPATK/05/15 of 2015 on Suspicious Financial Transaction Indicator for Financial Service Providers.
Identification of suspicious financial transactions include: (i) monitoring of service user transactions; (ii) transaction analysis; and (iii) determination of transactions as suspicious.
4. Reporting Parties that are Obliged to Report Suspicious Financial Transactions to PPATK
Every party that is considered a Reporting Party under Law 8/2010 and its derivative regulations shall have the obligation to report suspicious transactions to PPATK. A Reporting Party is classified in the Financial Service Providers (Penyedia Jasa Keuangan) and Goods and/or Services Providers (Penyedia Barang dan/atau Jasa) as follows:
|Financial Service Providers (Penyedia Jasa Keuangan)
|Goods and/or Services Providers (Penyedia Barang dan/atau Jasa)
- finance company;
- insurance company and insurance broker company;
- financial institution pension fund;
- securities company;
- investment manager;
- postal service as the current account service provider;
- trader of foreign currency;
- card-basis payment device service provider;
- e-money and/ or e-wallet service provider;
- cooperation that performs activity of savings and loans;
- pawn shop;
- company that operates in commodity future trading; or
- remittance service provider.
- property company/ property agent;
- motor vehicle dealer;
- gems, jewelry, and precious metal dealer;
- antique and arts dealer; or
- auction house.
5. Additional Reporting Parties in the Scope of Financial Service Provider
With the recently issued Government Regulation No. 61 of 2021 on the Amendment of Government Regulation No. 43 of 2015 on Reporting Parties, there are additional Reporting Parties that are also classified as Financial Service Providers, namely:
- venture capital company;
- infrastructure financing company;
- microfinance institution;
- export financing institution;
- technology-based fund-lending service provider;
- crowdfunding through technology-based share offerings service provider; and
- technology-based Financial Transaction service provider.
Please note that the information contained in this document should be only used as a general guideline with respect to the subject hereof and may not contain legal advice for your specific cases. The information herein should not be used or relied upon regarding any particular facts or circumstances without seeking legal advice from us. We will not be liable nor be responsible for any consequences, damages or other similar forms which may be suffered by any party who had used or relied upon this document.
If you require further information on the new regulation, please do not hesitate to contact us.
Nurjadin Sumono Mulyadi & Partners
Khashina Utamimah Afiff