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Directorate of Banking Research & Regulation BANK INDONESIA

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Presentation on theme: "Directorate of Banking Research & Regulation BANK INDONESIA"— Presentation transcript:

1 Directorate of Banking Research & Regulation BANK INDONESIA
BANK INDONESIA, ANTI MONEY LAUNDERING AND KNOW YOUR CUSTOMER PRINCIPLES Directorate of Banking Research & Regulation BANK INDONESIA

2 Background Act regarding Bank Indonesia:
Authority to formulate monetary policy. Authority to regulate & saveguard payment system. Authority to regulate and supervise bank As bank supervisor, BI is responsible for the supervision of implementation of AML, includes implementation of KYC. BI also authorized to supervise non-bank money changer and money remittance.

3 REFERENCE SOURCES 25 Core Principles for Effective Banking Supervision, 1997, Basel Committee on Banking Supervision, BIS A Bank has to implement KYC in order to prevent money laundering practices Customer Due Diligence for Banks, 2001, Basel Committee on Banking Supervision, BIS KYC Implementation includes customer acceptation policy, customer identification, customers’ monitoring transactions and risk management 40 FATF Recommendations on Money Laundering The financial institution has to perform customer due diligence and record keeping, reject any correspondence relation with shell banks and report any suspicious transaction The financial institution has to be regulated and supervised as well as implementing FATF recommendations effectively

4 REFERENCE SOURCES 8+1 FATF Recommendations on Terrorist Financing
The financial institution is obligated to report any suspicious transaction if it identifies any funds that is related to terrorist activities Those international standard rules are being described on Bank Indonesia Regulation (PBI) No. 3/10/PBI/2001 on 18 June 2001 regarding Know Your Customer (KYC) principles implementation UU No. 15 Tahun 2002 regarding Money Laundering Activities as been changed with UU No. 25 Tahun 2003 Financial service provider is obligated to ask for customer identification, do record keeping and report any suspicious activities to PPATK Financial service provider is obligated to do record keeping

5 KYC REGULATION & GUIDELINES FOR BANKING
PBI No. 3/10/PBI/2001 on 18 June 2001 regarding Know Your Customer (KYC) Principles Implementation for General Bank as been changed with PBI No. 2/23/PBI/2001 on 13 December 2001 and PBI No. 5/21/PBI/2003 on 17 October 2003 PBI No. 5/21/PBI/2003 on 23 October 2003 regarding Know Your Customer (KYC) Principles for Rural Bank (BPR) Circular Letter (SE) No. 2/23/DPNP on 13 December 2001 regarding Standard Guidelines of Know Your Customer (KYC) Principles Implementation as been changed with Circular Letter No. 5/32/DPNP on 4 December 2003 Circular Letter No. 6/37/DPNP on 10 September 2004 regarding Assessment and sanction imposition of Know Your Customer (KYC) Principles Implementation and Other Legal Responsibility related to the Regulation of Money Laundering Illegal Practices

6 Authority & Task in Banking Sector
Granting & revoking licenses of commercial bank, rural bank, islamic bank, & non bank money changer. Conducting F&P of candidates controlling shareholders & bank management. Prescribing prudential regulations for bank, including requirements to implement AML/KYC. Supervision & examination. Assisting PPATK (FIU) whenever requested to provide info & to conduct special examination.

7 SUPERVISION ORGANISATION
BI has five specialized inspection directorates for on site examination of banks. Examination and evaluation of KYC/ AML is conducted by using a standard template called the Assessment Working Paper.

8 Organization Structure & Statistic
Directorate Number of Supervisor Bank Number Total Asset (trillion) Directorate of Bank Superision 1 140 25 744.7 Directorate of Bank Superision 2 132 29 389.8 Directorate of Bank Superision 3 31 384.8 Directorate of Syariah Banking 20 133 30.2 Directorate of Rural Bank Supervision 80 1822 24.7 BI’s Branch Office 400 36

9 EXAMINATION AND SANCTION
In order to minimize a different perception among supervisors in conducting AML/CFT Examination, BI has issued examination guidance (No.VI/37/DPNP 2004) on AML/CFT. To persuade whether one bank have already comply with regulation on KYC and AML effectively and consistently, is needed to supervise and impose sanction for non compliant banks. Banks are rated on a scale of 1 to 5. The banks that are given rating 5 are subjected to administrative sanctions and downgrade in respect of their financial health

10 EXAMINATION AND SANCTION
During January through June 2007, BI conducted KYC/AML examinations on 85 out of 132 of commercial banks. Similarly, during January through April 2007, KYC/AML examinations on 964 out of 1822 of rural banks were conducted. BI conducted 2040 examinations during the period This resulted in monetary penalties in five cases and the issuing of 2512 supervisory letters to Rural Banks and 291 letters to Commercial Banks.

11 Sanctions & Penalties Statistic -Commercial Bank
Year PPATK Inspections BI Inspections Supervisory Letters Monetary Penalties 2004 130 2005 34 128 2 2006 24 85 2007 (April) 33 1 Total 91 428 5

12 Sanctions & Penalties Statistic -Rural Bank
Year PPATK Inspections BI Inspections Supervisory Letters Monetary Penalties 2004 2158 2005 2009 2006 1880 1180 2007 (June) 6 964 Total 7011

13 KYC Capacity Enhancement
Consist of internal & external training. Internal training since 2005 – present. Program Participants Location Date Workshop for BI’s staffs Supervisor & Examiners Jakarta September & December 2005 3 days Workshop KYC/AML Supervisor/Core Team KYC (in coordination with World Bank & FSVC) August 2007 1 day training for KYC/AML 240 bank supervisors Annually 4 days Workshop on AML/CFT Member of Core Team and FKK August 2008

14 COORDINATION AND COMMUNICATION
BI has established : AML/CFT Core Team since 2005 consisting of 114 members, representing nine directorates in head office and 34 branch offices. The aim of establishing the KYC/AML Core Team is to provide the same perception and perspective to all KYC/AML supervisors in conducting examinations. Communication Forum on AML/CFT (FKK) since Feb consisting of AML/CFT Core Team from Bank Indonesia and AML/CFT officers from all Commercial Banks (milist, workshop, and meeting)

15 PUBLIC CAMPAIGN Advertising through public media (TV, radio, talk show, paper) -> Socialization to senior public officer cooperating with KPK and PPATK using multimedia presentation (2008 – 2011) Leaflet, poster, comic, and souvenirs (pin, book mark, book note, mug, sticker, etc) since 2005

16 RATING PARTIAL COMPLIANT
MER Rating RATING PARTIAL COMPLIANT Number Content 5 Undertake Customer Due Dilligence (CDD) 11 Monitoring of Transaction 13 Report Suspicion to FIU 15 Financial institutions to have AML programs 17 Penalties for not complying with obligations 21 Beware others no applying FATF 25 establish guidelinses and give feedback 29 Ensure compliance 30 Provide adequate AML/CFT resources 32 Maintain statistic

17 MER Rating RATING NON COMPLIANT Number Content VII
Information to accompany wire transfer IV Report terror-related suspicious transaction 6 Extra diligence for Political Exposed Person (PEPs) 7 Extra diligence : Corresponden banking 9 FI may use intermediaries for CDD work 22 Apply AML to foreign affiliates

18 Next Agenda Amandement Bank Indonesia Regulation regarding KYC in line with 40+9 FATF Recommendations, which will be enacted on May 2009. Report the progress of APG Mutual Evaluation on Bank Indonesia in July 2009, Brisbane Australia

19 AKHIR PRESENTASI Thank You


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