Indonesian Government’s new money laundering laws can helps save Indonesia’s forests

(Bogor, Indonesia): The Center for International Forestry Research (CIFOR) welcomes yesterday’s decision by the Indonesian House of Representatives (DPR) to include crimes against forests and the environment, such as illegal logging, in new amendments to existing anti-money laundering laws. The new legislation sends a clear signal to the world and more importantly, to big-time illegal loggers, of the Government’s seriousness in dealing with forest crime.

CIFOR has played a significant role in providing the research and advice needed to convince the DPR to include forest crimes in its new legislation.

The rampant supply of Illegal timber from Indonesia to support the ever-expanding global timber trade remains the single greatest threat to Indonesia’s forests. As President Megawati said at CIFOR’s 10th Anniversary at the Bogor Presidential Palace on September 8, “the increase in demand of wood in the international market, the expansion of wood based furniture products and the extension of wood based industries, all trigger off illegal logging.”

According to Indonesia’s Minister for Forestry, Pak Muhammad Prakosa, Malaysia, Singapore and China are the countries that receive the biggest supply of illegal timber from Indonesia.

The illegal logging problem in Indonesia is highly complex and there is no one simple solution. However, CIFOR believes the Government of Indonesia’s decision to include forest crimes in its amended anti-money laundering laws is perhaps the most important measure yet taken to combat illegal logging.

CIFOR’s Director of Forests and Governance Program, Dr. Doris Capistrano, said there are many Indonesian and international companies and business people deriving enormous profit from illegal logging who launder this illegally gained money through Indonesian banks.

“Including forestry crimes under anti-money laundering laws is a significant step in fighting illegal logging. While it won’t provide an overnight cure to the problem, it will make it more difficult for large Indonesian and foreign businesses to engage in illegal logging. Since damage from illegal logging is overwhelmingly associated with big business and large-scale operations, it is good to see the government focusing on these areas,” Capistrano said.

Under the revised legislation, the onus is on banks to report to the Indonesian Financial Transaction Reporting and Analysis Center (PPATK) any transactions suspected of being connected with crimes against the forests and the environment, such as illegal logging. The fact the timber industry consumes some 70 percent more than the government’s annual allowable harvest of 6.8 million cubic meters suggests that many of their financial transactions must be regarded as suspicious.

“Banks and financial institutions are often implicated in funding illegal forestry activities by loaning money for investments in large-scale logging and timber processing facilities. This means banks have been supporting timber companies in getting over 50 million cubic meters of timber from undocumented, probably illegal sources. But now under the new legislation, banks will have to ensure their customers are not engaged in illegal activities before loaning them money,” Capistrano said.

CIFOR is particularly pleased with the role it has played in liaising with the regulators framing the legislation and alerting them to how money laundering laws might be used to combat illegal logging.

Central to this was the work of CIFOR’s Policy and Financial Analyst, Dr Bambang Setiono. Dr Setiono worked closely with the Head of PPATK, Yunus Husein and DPR member, Pak Sukowaluyo Mintorahrdjo, in developing the money laws to include forest crimes. Dr Setiono has also been very proactive in promoting awareness of the new regulations to the banking industry, timber companies, the World Bank and range of Indonesian and international government agenices.

“To the best of my knowledge, Indonesia is the first country in the world to include environmental and forest crimes in anti-money laundering legislation. This new legislation will help remove Indonesia from the OECD’s Financial Action Task Force’s list of uncoooperative countries in its global crack down on money laundering activities,” Setiono said.

“Until now Government initiatives to stamp out illegal logging have only netted the small fry caught red-handed illegally cutting down trees. These new money laundering regulations will help catch the “Mr Bigs” who work behind the scenes in supporting the illegal logging industry. If properly enforced, the new laws could save the Indonesian government any where between $1 billion to $3 billion dollars annually in lost taxation revenue. This revenue would be a significant boost to the Government’s budget and assist considerably in the nation’s economic development,” Setiono said.

More importantly, according to Setiono, putting a halt to illegal logging will help preserve Indonesia’s forests, an importance source of environmental services and livelihoods for millions of Indonesia’s rural poor.

“Indonesia’s forests provide materials for housing and clothing, animals and plants for sustenance, as well as traditional medicines and the compounds needed to develop new pharmaceuticals. They also provide essential environmental services such as ensuring clean water and helping to reduce global warming,” Setiono said. (ends).

Further information or interviews with Bambang Setiono or Doris Capistrano, please contact:

Yani Saloh 0811853462 or (251) 622622,
Rizka Taranita 08128279850 or (251) 622622,
Greg Clough 08128646613 or (251) 622622,