Using the Anti Money Laundering Law Catching the Intellectual Actors behind Illegal Logging

These intellectual actors are hard to reach with Forestry Law No. 41/1999 which law enforcers are using against illegal loggers. In implementing this law, law enforcers focus their investigations on detecting physical evidence of illegal timber, i.e. possession, handling, and transportation of logs and other forest products without the appropriate documentation. With the focus on physical evidence, the ones most commonly caught are field operatives such as truck drivers transporting timber without official documents. Law enforcers have difficulty proving any connection between the physical evidence transported by these drivers and the cukong and corruptors; the intellectual actors behind illegal logging (North Sumatra Chief of Police, 2004).


The Difficulties of Eradicating Illegal Logging
Despite a number of central government initiatives, including operations involving the police and the military, the problem of illegal logging keeps resurfacing.It is difficult to stamp out as it is supported by cukong who operate in style of organized crimes and involves forestry and law enforcement officers engaged in bribery and corruption. 1 These intellectual actors are hard to reach with Forestry Law No. 41/1999 which law enforcers are using against illegal loggers.In implementing this law, law enforcers focus their investigations on detecting physical evidence of illegal timber, i.e. possession, handling, and transportation of logs and other forest products without the appropriate documentation.With the focus on physical evidence, the ones most commonly caught are field operatives such as truck drivers transporting timber without official documents.Law enforcers have difficulty proving any connection between the physical evidence transported by these drivers and the cukong and corruptors; the intellectual actors behind illegal logging (North Sumatra Chief of Police, 2004).

Definition of Money Laundering
Money laundering is a criminal offence and involves efforts to hide or conceal the proceeds of a crime.Criminals do this by placing the proceeds of their crimes (in cash or other forms) through financial systems or by converting them into other assets through the processes of placement, layering or integration.'Placement' is an action whereby funds obtained from a crime are placed or deposited into a financial system, usually a bank.Placement involves the physical movement of money.
Examples of placement relating to forestry crime: • Cash or check proceeds from illegal logging or corruption are deposited in a district bank account.• Cash or check proceeds from illegal logging or corruption are used to purchase life insurance policies.
'Layering' is a modus where the owners of funds obtained from crimes conduct several transactions to disguise the ownership of the funds.Usually the beneficiary owners will instruct their banks or other financial service providers (FSP) to transfer funds to several accounts in other banks using their own names or nominees.'Layering' can also involve Governance Brief

Using the Anti Money Laundering Law
Catching the Intellectual Actors behind Illegal Logging

Bambang Setiono
Policy and Financial Analyst, Center for International Forestry Research (CIFOR) Examples of integration relating to forestry crime: • A legal timber industry uses assets from illegal logging (including illegal logs) to produce sawn timber, plywood, pulp or furniture.• Cash from illegal logging or corruption is invested in land acquisition to support the production of legal wood products.The proceeds of illegal logging and corruption can also be invested in equipment and vehicles for producing legal wood products.• Cash from illegal logging or corruption is invested in a legal transportation or oil palm business.

Punishment for Money Launderers
Individuals or organisations (including forestry industries) guilty of money laundering can be sentenced to between 5 and 10 years imprisonment and made to pay fines from Rp.100 million to Rp.15 billion.Those supporting money laundering, such as bank employees, are subject to the same punishment as those caught money laundering.Every individual that tries or conspires to launder money can face the same penalties.Any Indonesian national that aids, abets or provides information to money launderers is also subject to the same punishment.
In instances involving a manager or agent, such as a forestry company director or a bank director, where crimes are committed in a company name, then the manager, the agent and the company are subject to penalties.The main penalty applicable to a company is the maximum fine plus an additional one third of that amount.A company's operational license can also be revoked or the company can even be dissolved or liquidated for its involvement in money laundering. 2

Anti Money Laundering Approach
The anti money laundering approach covers six stages as shown below.
transforming proceeds of the crimes to different forms without banking facilities.'Layering' is a process of detaching the proceeds of a crime from the crime itself.
Examples of layering relating to forestry crime: • Transferring illegal timber or bribery and corruption payments to several overseas bank accounts • Cash from illegal logging or corruption is used to purchase financial instruments such as shares, bonds, foreign currency, and insurance for the purpose of selling them again later in efforts to obtain legal transaction basis.• Cash from illegal logging or corruption is invested in activities to support company operations through payments to shell companies in the forms of loans or business contracts.• Selling illegal timber using legal or legitimate SKSHH documents.
'Integration' is a money laundering method involving the amalgamation of the proceeds of crime with legitimate earnings from legal businesses.This usually involves proceeds of crimes that have already undergone placement or layering.

FSP and KYC principles
Banks and other FSP should make sure that no criminals or suspected criminals put money from illegal businesses into the banking system.FSPs are required to understand the profile of their customers, including their timber customers, and the patterns of their transactions including their customers involved in forestry businesses by implementing the Know Your Customer (KYC) principles. 3This requirement is applicable to both existing as well as new customers.
Banks are required to conduct 'customer due diligence' (CDD) to maintain a profile of their customers, at least with information covering their identity, their employment or business, their normal incomes, other accounts they have, normal financial transactions, and the purpose for opening an account with the bank. 4

STR and CTR
When this system works well banks and other FSPs can identity suspicious transactions (STR) involving their customers.A suspicious transaction takes place when a customer conducts or cancels a financial transaction using assets reasonably suspected to have arisen from criminal proceeds or if the financial transaction deviates from the customer's usual pattern of transactions. 5he KYC principles require financial service providers having STR information to report to the Indonesia Financial Transaction Reports and Analysis Centre (PPATK).They are also required to report customers making cash transactions (CTR) of more than Rp.500 million in one day.
Sometimes banks and FSPs receive information from PPATK regarding their customers.The police that have already investigated many illegal logging cases and suspect a cukong of illegal logging can ask PPATK to provide financial intelligence analysis on the suspected cukong.The PPATK then creates an artificial STR by requesting banks or other FSPs to file STR reports on the suspected cukong of illegal logging.An artificial STR is an STR created by FSPs from information supplied by PPATK.A normal STR is one created by FSPs from information supplied by their internal KYC system.

PPATK
An STR must be reported within three working days of the bank becoming aware of the suspicious transaction taking place.A CTR must be reported not more than 14 working days after the transaction has taken place.After receiving a report, the PPATK investigates and analyzes financial intelligence to look for indications of money laundering.The outcome of this financial analysis is then submitted to money laundering investigators and the state prosecutors. 6According to the applicable law, the Indonesian police are the only authority charged with investigating money laundering cases in Indonesia.
In the context of investigating and indicting intellectual actors behind illegal logging, the PPATK has a very important role in identifying the flow of money invested in logging, the process of transporting timber from the forest to industries or the market place, and payment processes from timber buyers to timber owners.This information will be very important for money laundering investigators and prosecutors to gain evidence of the flow of laundered money.

New Approach to Law Enforcement and Justice
The anti money laundering law could be used to overcome weaknesses in enforcing the law on the intellectual actors behind illegal logging.The law provides the following breakthroughs: • Ease of access to the financial data of suspected money launderers.Bank or customer confidentiality no longer applies if the customer is reported by FSPs following their obligation under the anti money laundering law or suspected involved in money laundering crimes.Law enforcers and judges can request immediate access to financial data from financial service providers on reported, suspected or accused money launderers.

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• It is not necessary to wait for a court decision to open financial service provider data on a customer, or to freeze the account of a suspected or accused money launderer.Law enforcers are not required to prove any predicate offence as is the case with corruption or illegal logging. 8• Using more forms of evidence to prove a person's involvement in money laundering.
The money laundering law also accepts verbal or written information stored electronically as evidence including maps, designs, photos, letters, and signs or symbols. 9• Accused money launderers are obliged to prove in court that the funds in their possession are not the proceeds of crime (reverse burden of approval).

Conclusions and Policy Recommendations
This paper has explained the opportunities in using the anti money laundering law to catch intellectual actors behind illegal logging or timber theft.As we are well aware, illegal logging is an incredibly complex crime and hard to solve as it involves numerous stakeholders.Therefore, despite providing a weapon for overcoming the complex problem of illegal logging, the money laundering Foto oleh Kuswata Kartawinata CTR = Cash Transaction Report; FSP = Financial Service Providers; KYC = Know Your Customer; PPATK = Reporting and Financial Transaction Analysis Centre; STR = Suspicious Transaction Report.November 2005 Nomor 18 In October 2003 the Indonesian government amended Law No.15/2002 regarding money laundering with Law No.25/2003 which included forestry and environmental crime as predicate offences to money laundering.With this amendment, the Indonesian government has developed a new approach to combating forestry and other serious crimes.
Several media and NGO reports broached this situation, among them the Last Frontier published by Telapak and EIA in February 2005 2 Article 4 and 5, Law No.25/2003 3 See details explanation on the implementation of the KYC principles in Governance Brief No.20, Do Banks Apply the KYC principles effectively?The case of forestry related customers.