Are you aware of the growing threat of money laundering in the financial industry? Money laundering is a massive threat in Indonesia, with an estimated $800 billion to $2 trillion laundered annually. Recent major money laundering cases like the Harun Masiku scandal have highlighted how dirty money can infiltrate institutions. This illegal activity fuels crime, harms businesses, and harms Indonesia’s global reputation. Companies must make anti-money laundering (AML) compliance a top priority. Join us to explore how E-KYC with Biometric Verification may help us in the battle against money laundering in finance.
Assessing Indonesia’s Money Laundering Score
The 2022 Money Laundering and Terrorist Funding (ML/TF) Risk Score Index ranks Indonesia as the second lowest country in Southeast Asia for money laundering and terrorist funding risk, with a score of 5,19. The number is an improvement from previous years, but the risk score of Indonesia is still significantly higher than that of countries like the United States and the United Kingdom.
This phenomenon could happen to legitimate businesses or financial institutions, and the origins of the funds or the criminals involved are difficult to trace. Therefore, money laundering is often used to support numerous illegal activities such as drug smuggling, human trafficking, and even terrorism. With this high risk, financial institutions must implement anti-money laundering (AML) policies to help combat this crime. AML policies play a fundamental role in identifying and preventing suspicious activities, safeguarding financial institutions from reputational harm, and minimizing financial losses.
Understanding AML Laws in Indonesia
Indonesia has instituted strict AML laws, such as Law No.8/2010 about Countermeasures and Eradication of Money Laundering. This law prohibits disguising assets connected to criminal activity and harsh penalties for non-compliance.
According to the bill, money laundering includes activities such as:
- Placing, transferring, diverting spending, paying, granting, entrusting, bringing abroad, changing the form, exchanging with currency or securities, or other actions on assets that he knows or reasonably suspects are the proceeds of a criminal offense to hide or disguise the origin of the assets.
- Hiding or disguising the origin, source, location, allocation, transfer of rights, or actual ownership of assets that he knows or reasonably suspects are the proceeds of a criminal offense.
- Receiving, controlling the placement, transfer, payment, grant, donation, custody, exchange, or use of assets they know or reasonably suspect are the proceeds of a criminal offense.
In 2022, Indonesia expanded reporting requirements for financial institutions under new regulations from the Financial Services Authority (OJK). Non-compliance with AML laws can lead to harsh penalties for companies, such as fines of up to IDR 1 billion or suspension of their license to operate by Indonesian regulators.
Implementing AML Compliance in Indonesia
The key practice to comply with AML regulations in Indonesia includes:
- Conducting customer due diligence – verifying client identities and continuously monitoring suspicious activity.
- Ongoing transaction monitoring to identify irregular transactions that may indicate money laundering.
- Filing suspicious activity reports to the Financial Transaction Reports and Analysis Center (PPATK) when warranted.
- Maintaining transaction records for at least five years as mandated by law.
Many Indonesian financial services providers use third-party screening and database checks to identify high-risk individuals. However, outdated legacy systems can make compliance difficult for some traditional institutions.
The Role of E-KYC with Biometric Verification in Modern AML Strategies
AML policies are required to prevent money laundering in financial institutions to protect the financial system from money laundering, a crime that may impact society negatively. This way, financial institutions can ensure that whoever registers for an account is who they say they are. This process helps flag the use of stolen, fraudulent, or suspicious identities to launder money. As more and more financial institutions start to digitize, physical forms of KYC that involve physical interactions are no longer practical in the current digital climate. E-KYC with Biometric Verification, or electronic KYC, is a digital alternative to traditional KYC. It works just like its traditional counterpart but gives better accuracy and minimizes human error. It also plays a massive role in preventing instances of money laundering.
Get to Know ASLI RI’s E-KYC with Biometric Verification System
E-KYC with Biometric Verification is a process to verify user identity using biometrics and document verification. E-KYC with Biometric Verification employs several methods, including:
The Benefits of Using E-KYC with Biometric Verification are As Follows:
- Convenience and speed. E-KYC with Biometric Verification can be done anywhere and anytime without going to a physical branch. The automated nature of E-KYC with Biometric Verification can help speed up the time used to do the process.
- Accuracy and security. As this system uses artificial intelligence, it is much harder to spoof.
These benefits make the process more secure. By establishing a quick and seamless KYC process, E-KYC with Biometric Verification can also help increase customer experience.
Over 50% of Indonesian financial companies already use E-KYC for client onboarding, with adoption expected to rise further. Biometric systems like face matching and liveness detection are also gaining popularity. Regulators like OJK actively advocate digital identity verification to strengthen AML efforts.
Take Part in The Fight Against Money Laundering Now!
With heavy penalties and high stakes, AML compliance should be top-of-mind for Indonesian businesses. By implementing robust know-your-customer processes, companies can avoid becoming unwitting accomplices and protect their reputations. Modern solutions like E-KYC with Biometric Verification can transform AML effectiveness, but companies must evaluate their own risk exposure and regulatory readiness first. Get in touch with us today to discuss an AML system tailored to your needs.
aml kyc anti money laundering digital solutions eKYC fraud prevention
Last modified: December 8, 2023
