Indonesia, Switzerland Agree to Track Laundered Money

Indonesia and Switzerland have signed a mutual legal assistance agreement to seek to track money laundered out of the country and parked in Swiss banks, according to Antara, the Indonesian official news agency.

The agreement was signed by Indonesia's Law Minister, Yasonna Hamonangan Laoly, and Swiss Justice Minister Karin Keller-Sutter in Bern. It appears to have been formalized as long ago as February 4 according to Antara, but the final agreement wasn’t signed until this week – which could have been dictated by the political situation -- when Laoly traveled to Bern.

President Joko Widodo on May 22 was officially declared the winner of the April 17 presidential election with 55.5 percent of the vote, defeating Prabowo Subianto, who received 44.5 percent. Over the past few days, Jokowi, as the president is known, has faced a well-coordinated series of protests aimed at destabilizing his government. Police have cracked down with six deaths and 200 injuries recorded so far amid the violence, with continuing riots and rallies across the city.

According to Antara, the agreement is the 10th such pact signed by Indonesia with other governments including with ASEAN, Australia, Hong Kong, China, South Korea, India, Vietnam, the United Arab Emirates, and Iran.

So far as can be determined, Singapore, by far the biggest repository of stolen money, is not among them.

Nonetheless, “the Indonesians want to go after the proceeds of past crimes,” a Jakarta source told Asia Sentinel. “This agreement is quite something.” It is designed to aid the government in tracking wealth, determining the amount of stolen money and repatriating it.

The decision to sign the agreement with the Swiss government thus could possibly be regarded as a signal that the Widodo administration is about to become more aggressive in seeking to root out the endemic corruption that characterizes the country. Jokowi is due to shake up his cabinet sometime shortly after the end of Ramadan on June 4.

There is considerable agitation among the political classes over the possible direction of Jokowi’s new cabinet and deep hope among reformers that it will restart the reform that was expected of him when he was elected president in 2014. But so far, amid almost universal disappointment by political analysts and reform organizations, in their eyes the president has failed to live up to the considerable promise that he ignited by his governorship of Jakarta and mayoralty of a small city prior to his election as president.

Although he has poured as much as US$350 billion into infrastructure and social programs, including airports, roads, electricity, education, health and training, he has done little toward the institutional changes that the country needs if it is to move forward. The judiciary remains among the world’s most corrupt, along with the national police and the attorney general. The House of Representatives is so corrupt that pushing through meaningful legislation is problematical.

The president has been handicapped by his own largely corrupt political party, the Indonesian Democratic Party of Struggle, or PDI-P, whose leader, Megawati Sukarnoputri, humiliated him in 2015 during a Bali party convention when she forced him to sit in the audience while she lectured him on the fact that she was calling the shots. His original cabinet contained a handful of Suharto retreads as well as political placeholders as for other parties including Golkar in a strategy to keep contending parties on his side and strengthen his ability to govern.

Thus the composition of the cabinet is being watched with a critical eye by reformers.

One particular issue that has drawn attention is a proposal being considered by Bank Sentral Indonesia, the country’s central bank, to implement comprehensive new IT software that would allow the bank to track virtually every transaction made electronically in the country in real time. But according to sources in Jakarta, the implementation of the software has been greeted coolly by some banking officials, making it problematical whether it will ever be put into place.

The vested interests against reform accordingly are enormous. Singapore is said to be the home of as much as US$360 billion that is believed to have been parked, representing 40 percent of the country’s banking assets.

For decades, Indonesia has been in a halfhearted war to repatriate its money, much of it believed stolen by the Suharto family, whose patriarch, the late strongman, died in 2008 after leaving office in 1998 following 31 years in power. There have been other notable thefts, including events following the failure of Indonesia’s Bank Century in 2008, with an estimated US$1.5 billion believed to have been stolen by the bank’s then president, Robert Tantular. Much of that money is believed to have found its way into Swiss banks.

According to the Tax Justice Network, at least $331 billion remains overseas. The agreement with the Swiss government is an important signal that times may be changing.

“This is a really big deal,” said a source in Jakarta.