Presentation on theme: "BANK INDONESIA, ANTI MONEY LAUNDERING AND KNOW YOUR CUSTOMER PRINCIPLES Directorate of Banking Research & Regulation BANK INDONESIA."— Presentation transcript:
BANK INDONESIA, ANTI MONEY LAUNDERING AND KNOW YOUR CUSTOMER PRINCIPLES Directorate of Banking Research & Regulation BANK INDONESIA
2 Background a. Act regarding Bank Indonesia: Authority to formulate monetary policy. Authority to regulate & saveguard payment system. Authority to regulate and supervise bank b. As bank supervisor, BI is responsible for the supervision of implementation of AML, includes implementation of KYC. c. 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 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 REFERENCE SOURCES
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 a. Granting & revoking licenses of commercial bank, rural bank, islamic bank, & non bank money changer. b. Conducting F&P of candidates controlling shareholders & bank management. c. Prescribing prudential regulations for bank, including requirements to implement AML/KYC. d. Supervision & examination. e. 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 DirectorateNumber of Supervisor Bank NumberTotal Asset (trillion) Directorate of Bank Superision Directorate of Bank Superision Directorate of Bank Superision Directorate of Syariah Banking Directorate of Rural Bank Supervision BIs Branch Office40036
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 YearPPATK Inspections BI Inspections Supervisory Letters Monetary Penalties (April) Total
12 Sanctions & Penalties Statistic - Rural Bank YearPPATK Inspections BI Inspections Supervisory Letters Monetary Penalties (June) Total
13 KYC Capacity Enhancement a. Consist of internal & external training. b. Internal training since 2005 – present. ProgramParticipantsLocationDate Workshop for BIs staffs Supervisor & Examiners JakartaSeptember & December days Workshop KYC/AML Supervisor/Core Team KYC (in coordination with World Bank & FSVC) JakartaAugust day training for KYC/AML 240 bank supervisorsJakartaAnnually 4 days Workshop on AML/CFT Member of Core Team and FKK JakartaAugust 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 2008 consisting of AML/CFT Core Team from Bank Indonesia and AML/CFT officers from all Commercial Banks (milist, workshop, and meeting)
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
16 MER Rating RATING PARTIAL COMPLIANT NumberContent 5Undertake Customer Due Dilligence (CDD) 11Monitoring of Transaction 13Report Suspicion to FIU 15Financial institutions to have AML programs 17Penalties for not complying with obligations 21Beware others no applying FATF 25establish guidelinses and give feedback 29Ensure compliance 30Provide adequate AML/CFT resources 32Maintain statistic
17 MER Rating RATING NON COMPLIANT NumberContent VIIInformation to accompany wire transfer IVReport terror-related suspicious transaction 6Extra diligence for Political Exposed Person (PEPs) 7Extra diligence : Corresponden banking 9FI may use intermediaries for CDD work 22Apply AML to foreign affiliates
18 Next Agenda a. Amandement Bank Indonesia Regulation regarding KYC in line with 40+9 FATF Recommendations, which will be enacted on May b. Report the progress of APG Mutual Evaluation on Bank Indonesia in July 2009, Brisbane Australia