Indonesia to probe $23.3B in suspicious Finance Ministry transactions

Following a public furor, Indonesia on Monday announced it would set up a high-level task force to investigate one of the biggest corruption scandals in the country – U.S. $23.3 billion in allegedly suspicious transactions over the last 14 years within the Finance Ministry. 

The move came amid public outrage over the lavish lifestyles of some finance officials, whose wealth was exposed after an assault case involving the son of a senior taxman. The case raised questions about how civil servants could afford luxury cars, designer clothes and overseas trips on modest salaries.

The suspicious Finance Ministry transactions disclosed last month allegedly involved tax evasion, money laundering and smuggling, including $13 billion (194.4 trillion rupiah) linked to the alleged smuggling of gold, according to Mohammad Mahfud MD, the head of the National Coordination Committee for Money Laundering Prevention.

“The committee will soon form a joint task force that will supervise and follow up on all of the analysis reports and audit reports with a total value of than 349 trillion rupiah ($23.3 billion) by building cases from scratch,” Mahfud told reporters.

He said the task force would involve the Financial Transaction Reports and Analysis Center (PPATK) – Indonesia’s anti-money laundering agency, the tax and customs directorates, the police, the attorney general’s office, the financial services authority, the national intelligence agency and his own ministry.

Mahfud said the PPATK had issued 300 analysis and audit reports on transactions with a total value of more than 349 trillion rupiah since 2009. 

Of those transactions, 260.5 trillion rupiah ($17.4 billion) involved companies related to the customs authority, while 53.8 trillion rupiah ($3.6 billion) related to civil servants and other parties, Deputy Finance Minister Suahasil Nazara said late last month.

Finance Minister Sri Mulyani Indrawati, who has been credited with progress in her efforts to reform the tax system, increase revenue collection and improve fiscal management, has vowed to investigate the suspicious transactions. 

Meanwhile, one analyst said a non-governmental body should conduct a probe into the transactions.

Tauhid Ahmad, of the Institute for Development Economics and Finance (INDEF), argued that an independent party can provide independent views outside the government.

“They should not leak the results until they can be revealed to the public. They should be chosen to mediate conflicts among government agencies,” Tauhid, who is the executive director of the Jakarta-based INDEF, told BenarNews.

“If it is a systemic issue, then the internal oversight system must be revamped, while if it is a matter of individual misconduct, they must face sanctions commensurate with their wrongdoing.”

Tauhid said the discovery of repeated suspicious transactions in the finance ministry’s agencies would erode tax compliance and cause a huge economic loss.

“State revenue will shrink and foreign confidence will also wane. They will be reluctant to invest in Indonesia,” he said.

Alleged gold smuggling

Mahfud didn’t give many details on Monday about the probe process or its deadline, but said the task force would prioritize the audit reports with the highest value, starting with one involving 189.27 trillion rupiah ($13 billion) that was linked to an alleged gold import scheme.

In a hearing with a parliamentary commission last month, Mahfud said 15 companies were suspected of smuggling gold bars and not paying import fees or income tax on them, allegedly in collusion with customs officials.

The import documents stated raw gold bars were being brought in, but it was found to be refined gold, which meant that the importers avoided fees of 5% and income tax of 2.5%.

Mahfud said that PPATK had detected signs of money laundering since 2017 and reported them to the Finance Ministry. However, the reports never reached the minister, Mahfud said. 

In 2020, PPATK sent another letter, but the issue was unresolved, he added.

The Finance Ministry has come under public pressure after a recent assault case involving the son of a tax official exposed his lavish lifestyle – flaunting expensive cars and motorbikes – on social media. 

The official, Rafael Alun Trisambodo, was fired and has since been investigated by the country’s anti-corruption agency on suspicion of accepting bribes. 

Rafael’s son, Mario Dandy Satrio, is awaiting trial on charges of assaulting a 15-year-old boy, who is recovering in a hospital after being in a coma.

Amid public angst about these scandals, President Joko “Jokowi” Widodo has urged parliament to expedite the deliberation of a bill that would allow the government to seize assets linked to crimes such as corruption and money laundering. 

The bill was submitted by the executive branch to the House of Representatives in 2020 but has not been debated by lawmakers.

Indonesia ranks 110th out of 180 countries in Transparency International’s 2022 Corruption Perception Index. The country has struggled with longstanding corruption as government officials often allegedly ask for bribes to speed up projects and approve permits.

Jokowi has pledged to fight corruption and improve governance as part of his agenda to attract foreign investment and boost economic growth. 

However, critics have said that corruption remains endemic and systemic in Indonesia, and pointed to the weakening of the Corruption Eradication Commission under a controversial law passed in 2019, which reduced its powers and independence.