A/S O'BRIEN'S VISIT TO JAKARTA

C O N F I D E N T I A L SECTION 01 OF 02 JAKARTA 000618



SIPDIS



SIPDIS



TREASURY FOR A/S O'BRIEN

STATE FOR EAP/MTS, EAP/RSP AND EEB/ESCITFS



E.O. 12958: DECL: 03/27/2018

TAGS: KTFN, PREL, PTER, EFIN, ECON, ID

SUBJECT: A/S O'BRIEN'S VISIT TO JAKARTA



Classified By: Acting Economic Counselor Ruth M. Hall, Reasons 1.4 b,c,

d,e,g.



1. (U) Post welcomes A/S O,Brien,s April 1-3 visit to

Indonesia and looks forward to assistance in two vital policy

areas, counter-terrorism financing and Middle East (Iran)

influences in Indonesia. We recommend that in all his

meetings he pushes for greater bilateral and multilateral

cooperation here on counter-terrorism finance.



Counter-Terrorism Progress

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2. (C) Indonesia has made progress against terrorism with

hundreds of terrorists taken off the street and no terrorist

attacks in more than two years. The UN Climate Change

conference in December last year in Bali, with thousands of

international participants, including presidents and prime

ministers, went off without a security incident. Indonesian

law enforcement has made progress both in investigation and

prosecution of terrorists. The Attorney General and National

Police have specially trained task forces dedicated to

fighting terrorism, which have received training from the

U.S. and other western governments and have proven effective

in seriously curtailing terrorism in the county.



Counter-terrorism Financing, Less Successful

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3. (C) Indonesia still suffers from widespread corruption, a

massive porous coastline, and a long history of smuggling.

Money laundering generally involves crimes such as gambling,

prostitution, piracy, trafficking in rare wildlife and

illegal logging. Illegal narcotics are less prominent. But

since enacting its first serious money laundering law in

2002, Indonesia has made some progress in its anti-money

laundering (AML) efforts. Indonesia was removed from the

Financial Action Task Force's (FATF) Non-Cooperating

Countries and Territories List in 2005 and its Financial

Crimes Transaction and Analysis Centre (PPATK) has improved

its performance over the past 3-4 years. PPATK went from

processing ten suspicious transaction reports (STRs) per

month in 2002 to an average of 483 per month in 2007. PPATK

has also benefited from a multi-year program of assistance

from USAID. You will meet the head of PPATK, Yunus Husein,

who has displayed real leadership on reducing illicit money

flows.



4. (C) Counter-terrorism financing (CTF),however, especially

asset freezing has been less successful, due to its overly

bureaucratic process, lack of capacity among implementing

agencies and questionable political will. Indonesia has a

complex alphabet soup of ministries and agencies, sometimes

with overlapping or competing mandates. According to the

procedure as we understand it, after the Foreign Ministry

receives word from its UN Mission about UN sanctions, it

sends a letter to the Attorney General's Office (AGO) as the

chief law enforcement agency. The AGO in turn sends a notice

to Bank Indonesia (as the bank supervisory agency),which in

turn is supposed to notify the banks to freeze assets. This

procedure rarely, if ever, functions and we have yet to hear

from a private bank that has received such an asset freeze

notice. The Foreign Ministry told us that it hosts a

committee to reviews asset-freezing designations for

political sensitivity. (Even if an asset-freezing order is

issued, there are often multi-week delays between agencies,

making the process ineffective as any assets will have long

fled.)



5. (C) Bank compliance officers tell us that they have never

received an asset freezing order from BI, but instead get

general word from their headquarters about high-risk names.

In addition, even trying to locate and freeze assets among

the universe of "a.k.a identities" is problematic for even

the best banks. Indonesia's lack of a unique identifier

(such as the U.S. social security number) is another

complicating factor: many names and addresses are similar.

You will be able to discuss bank risk management during your

meetings with Bank Mandiri and Muamalat as well as at the

central bank Bank Indonesia, which supervises and regulates

banks. Interestingly enough, even though PPATK is not one of

the direct line agencies involved in CTF, Yunus Husein has

taken an active role in trying to get his colleagues to

streamline a procedure for asset freezing. You may want to

ask him for further details at your meeting.

Iran

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6. (C) Iran-Indonesia relations are politically complex.

There is relatively little real depth to their bilateral

ties. The countries have relatively few trade and investment

ties while military-military links are nonexistent. Despite

this, the Indonesian Parliament (DPR) and public tend to

sympathize with Iran. This position stems in part from

feelings of Islamic solidarity, especially among the

Indonesian public. It also stems from the Non-Aligned

Movement (NAM) ideology that shapes many Indonesians' world

views. The Indonesian Government generally shares our

concerns regarding Iran's nuclear program, although it was

the sole UNSC member to abstain on the recent Iran sanctions

resolution. In private, Indonesian officials tell us their

actions on Iran's nuclear program are shaped by domestic

politics, not by any support for Iran's nuclear ambitions.

President Yudhoyono's March 10-12 trip to Iran resulted in

several agreements, most of which we view as non-substantive

and may never be implemented. You will meet with Indonesia's

Special Middle East Envoy (and former FM) Alwi Shihab, who

accompanied the President on his trip to Iran.



Charities, NGOs, CSOs

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7. (C) Charities, foundations, and non-governmental

organizations (NGOs) under former President Soeharto were

regulated by Presidential decree, and were often used as

vehicles for corruption. Since 1998, there has been an

explosion of these organizations with little to no effective

regulation. There is no GOI agency responsible for oversight

of charities and NGOs. Several notable organizations have

tax exempt status, established charters and transparent

accounting but most (and there are thousands) do not. There

remains some distrust between the GOI and these

organizations, making consultation difficult. In addition,

the GOI has obvious political sensitivity relating to Islamic

and Middle-East-based or funded charities, which increases

GOI reluctance to monitor and control. We saw this GOI

reluctance first hand when the UN listed the IIRO as a

terrorist organization, subject to asset controls.

Legislation to regulate charities has yet to be submitted to

the Parliament. The GOI is suspicious of western involvement

in this sector and donors, such as the U.K. Charities

Commission, are treading carefully to ensure the process is

GOI-driven to avoid a backlash from Islamic political parties

and organizations. The UK and other donors hope to assist

the GOI in creating a regulatory body for charities by 2011.



How Your Visit Can Help:

Briefing at Foreign Ministry

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8. (C) One of the most important appointments during your

visit will be the roundtable meeting hosted by the Foreign

Ministry (DEPLU). This meeting will gather the key agencies

and Ministries involved in counter-terrorism financing and

asset freezing. By sharing information about USG challenges

and procedures in freezing assets, A/S O,Brien can help

Indonesian agencies understand the importance of having a

standard operating procedure for asset freezing, even if

assets are not found. Simply having a functioning and

credible process can be a deterrent. After many months of

resistance, Indonesia may be on the cusp of streamlining and

regularizing its UN sanctions implementation and asset

freezing process. Your visit comes at an excellent time to

give it a nudge in the right direction.



9. (U) Mission looks forward to A/S O,Brien,s visit.

HUME