Indonesia Watchdog Warns of Bureaucratic Mafia After Polls
Indonesia officials stepped up warnings of corruption ahead of elections this year, as the anti-money laundering watchdog said the country risks a “bureaucratic mafia” if dirty candidates get into parliament.
Suspicious money transfers in Indonesia could more than double this year, according to the Indonesian Financial Transaction Reports and Analysis Center, or PPATK. Reports of such transactions during the election years of 2004 and 2009 were 125 percent higher than in the years before and after, Agus Santoso, deputy chairman of the PPATK, said in Jakarta.
The flow of suspicious money -- transfers that deviate from normal patterns or are designed to avoid detection -- shows the struggle by agencies such as PPATK to combat corruption, with a new parliament and government set to take charge of Southeast Asia’s biggest economy for the next five years. Graft usually escalates around elections with officials taking advantage of their posts and candidates seeking to fund campaigns, Adnan Pandu Praja, vice chairman at the Corruption Eradication Commission or KPK, said in an interview Feb. 12.
“I’d like to warn people: do not vote for dirty candidates,” Santoso said in an interview Feb. 21. “Once they are elected, they will commit graft and build a bureaucratic mafia.”
He declined to specify the amounts of the suspicious transactions beyond saying it totaled billions of rupiah. “We see the flow of funds as unbelievable,” he said separately in a mobile phone message yesterday.
PPATK is tightening supervision of transactions ahead of the polls. In March financial institutions such as banks and insurance companies must for the first time report all accounts and services they provide to every customer, said Santoso, who previously worked at the central bank.
Heads of government administrations tend to avoid suspicious transfers themselves once in power, instead using family or staff members, Santoso said. Legislators are more likely to make transactions directly, involving the budget or marking up project values, he said.
Indonesia ranked 114th among 177 countries in a 2013 Transparency International survey on corruption perceptions. Of the 500 heads of local administrations, about 300 are implicated in various graft cases, Santoso said.
The first order impact of corruption is that money could have been put toward things like hospitals, said Wellian Wiranto, a Singapore-based economist at Oversea-Chinese Banking Corp. “No less importantly, however, is the second order impact,” he said by e-mail. “Because of the perception among the population that such problems remain endemic, it would make it that much harder for the government to broaden their tax base, which would have helped to reduce dependence on raising debt to cover deficits.”
The world’s fourth-most populous nation will hold legislative elections in April and a presidential vote in July. President Susilo Bambang Yudhoyono, re-elected in 2009 on a platform to fight graft, cannot stand for a third term.
Candidates are encouraged to list bank accounts used for campaigns and PPATK will publish the names of those who haven’t done so, Santoso said at his office, where visitors pass through high gates and vehicle checks before being escorted by a security guard to his room.
Reports of suspicious financial transactions in January rose 20 percent from a year earlier to 160,301, data from the PPATK’s website show. About 59 percent of these reports were filed by banks and about 43 percent originated from Jakarta, the data show.
The trend reflects the high cost of political campaigns in Indonesia, said Andrinof Chaniago, a political analyst at the University of Indonesia. Candidates withdraw savings to fund their campaigns, causing spikes in money transfers that deviate from normal patterns, he said.
“Our system forces people to spend huge amounts of funds to reach out to the public,” Chaniago said by phone, citing spending on television advertisements as an example. “What we need to be suspicious about is the source of all that money.”
The PPATK doesn’t have the legal ability to penalize those doing illicit transfers, forwarding its analysis to agencies such as the KPK and police, Santoso said. The KPK prosecuted 72 members of parliament, eight government ministers, six central bankers and dozens of CEOs, with a 100 percent conviction rate, in the decade since it was formed in 2003.
PPATK plans to add 50 staff as it gets more reports than it can handle, Santoso said. The Jakarta-based agency may set up an office in Batam, an island near Singapore, to better tap fund transfers linked to coal smuggling and illegal logging, he said.
While those above the age of 45 tend to buy property to hide illicit money, younger people often purchase insurance and financial market products, Santoso said.
Since January, banks must report funds going in and out of the country regardless of the amount, allowing PPATK to trace worker remittances and exporter earnings, he said.
To contact the editor responsible for this story: Rosalind Mathieson at email@example.com