BANK INDONESIA,BANK INDONESIA,ANTI MONEY LAUNDERING ANDANTI MONEY LAUNDERING AND

KNOW YOUR CUSTOMER KNOW YOUR CUSTOMER PRINCIPLESPRINCIPLES

Directorate of Banking Research & Directorate of Banking Research & RegulationRegulation

BANK INDONESIABANK INDONESIA

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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.

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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, BISKYC 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 transactionThe financial institution has to be regulated and supervised as well as implementing FATF recommendations effectively

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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 activitiesThose 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 PPATKFinancial service provider is obligated to do record keeping

REFERENCE SOURCES

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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

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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.

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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.

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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

140 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

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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

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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 2005-07. This resulted in monetary penalties in five cases and the issuing of 2512 supervisory letters to Rural Banks and 291 letters to Commercial Banks.

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Sanctions & Penalties Statistic -Commercial Bank

Year PPATK Inspections

BI Inspections

Supervisory Letters

Monetary Penalties

2004 130 130 0

2005 34 128 128 2

2006 24 85 85 2

2007 (April)

33 85 85 1

Total 91 428 428 5

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Sanctions & Penalties Statistic -Rural Bank

Year PPATK Inspections

BI Inspections

Supervisory Letters

Monetary Penalties

2004 2158 2158 0

2005 2009 2009 0

2006 1880 1180 0

2007 (June)

6 964 964 0

Total 6 7011 7011 0

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KYC Capacity Enhancement

a. Consist of internal & external training.b. 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)

Jakarta August 2007

1 day training for KYC/AML

240 bank supervisors

Jakarta Annually

4 days Workshop on AML/CFT

Member of Core Team and FKK

Jakarta August 2008

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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) ->2005 - 2006

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

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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

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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

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Next Agenda

a. Amandement Bank Indonesia Regulation regarding KYC in line with 40+9 FATF Recommendations, which will be enacted on May 2009.

b. Report the progress of APG Mutual Evaluation on Bank Indonesia in July 2009, Brisbane Australia

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AKHIR AKHIR PRESENTASIPRESENTASI

Thank YouThank You