Tracking the financing behind Islamic extremists can be a painstaking task requiring crack investigators who are half accountant, half gumshoe. Not in Indonesia. A recent Jakarta newspaper ad announced that the Islamic Youth Movement seeks "heroes" to fight in Afghanistan. It invites sympathizers to donate to an account at Bank Muamalat. Are officials at the Jakarta Islamic bank perturbed? Not at all. "We can't monitor how and where every customer uses his money in our bank," says Mashchu Ushijah, the bank's head of public relations.
Such Indonesian insouciance is worrisome for Washington, which has asked all nations to block the finances of terror-linked groups. Officially, Treasury Secretary Paul H. O'Neill says he's encouraged by Indonesia's "positive" response. Privately, though, Administration officials complain that of all the nations in the Group of 20, a combination of the Group of Seven developed nations and the main emerging markets, Indonesia is the least cooperative.
PASSING THE BATON. For two months, Jakarta has dithered on Washington's demand that it trace and freeze Islamic extremists' assets. Since Sept. 23, when the U.S. published its first list of suspects, Jakarta has passed the baton from agency to agency. As far as U.S. officials can discern, little action had been taken as of Nov. 13 (table). Although Indonesia hasn't been identified as a major conduit for such funds, it has the largest Muslim population in the world--220 million--and its noisy anti-American fringe is quite capable of abetting Osama bin Laden.
The subject is so sensitive that the office of Megawati Sukarnoputri, Indonesia's President, refused to comment. A senior Foreign Ministry official blames Indonesia's dysfunctional institutions, not policy, for poor cooperation. "We have no political difficulty in tracing foreign capital," he says. "It's simply Indonesian bureaucracy."
To motivate Indonesia, the U.S. is turning to the International Monetary Fund and other multilateral institutions. "We want the IMF and World Bank to ask the countries they're involved with to have financial systems capable of detecting individual transactions and identifying the true owner or benefactor of every account," says O'Neill. So far, the IMF has resisted being drawn too deeply into the terrorist-asset search. "The IMF is not a global policeman," says an IMF official in Washington.
The U.S. and other governments are also applying pressure where it hurts--foreign aid. On the sidelines at meetings on Jakarta's debt Nov. 7-8, U.S., Japanese, and British diplomats harangued the Indonesians about their lethargy on terrorist financing. The group agreed to lend another $3 billion, but things might have gone differently if Indonesia hadn't shown some advance good will. On Nov. 5, Bank Indonesia finally ordered banks to scan their accounts for the 28 people and organizations the U.S. Treasury listed Sept. 23. But Washington officials say more needs to be done. For one thing, Treasury had issued two more lists by the time the Indonesians acted, which they ignored.
Diplomats say Bank Indonesia officials insisted at first that they couldn't cooperate unless ordered to by an Indonesian law enforcement agency. Finally, Megawati's aides advised the U.S. Embassy in Jakarta to contact Bambang Yudhoyono, Coordinating Minister for Defense & Security. Yudhoyono sent a request to the Attorney General's office, which on Oct. 24 told Bank Indonesia to act. On Nov. 5, Bank Indonesia sent a circular to the country's 100-plus banks asking them to search for the 28 names. But the circular, which bore no deadline, only told them to report suspicious findings to the Attorney General's office. The request apparently fell into a void. The chief financial officer of one large bank says no search has begun at any of his institution's hundreds of branches.
Indonesia's banks came under heavy suspicion for laundering billions of dollars for ex-dictator Suharto. The central bank's response on terrorism suggests confidence won't be restored any time soon. By Michael Shari in Singapore, with Rich Miller in Washington