PROGRESS TOWARD A TERRORISM FINANCING LAW

UNCLAS SECTION 01 OF 02 JAKARTA 001995 SENSITIVE SIPDIS DEPT FOR EAP, EAP/MTS, EAP/RSP, INR/EAP, S/CT FOR MAHANTY, INL FOR CARLON/BLOOMQUIST, EEB/ESC/TFS DOJ FOR AAG SWARTZ, OPDAT FOR ALEXANDRE/BERMAN/HAKIM NCTC NSC FOR J.BADER, D.WALTON KUALA LUMPUR FOR G.CHAPMAN TREASURY FOR IA, TFFC, OIA AND FINCEN SINGAPORE FOR S.BLEIWEIS E.O. 12958: N/A TAGS: PGOV PREL PTER KCRM KJUS KTFN EFIN SNAR PHUM ASEC ID SUBJECT: PROGRESS TOWARD A TERRORISM FINANCING LAW ¶1. (SBU) Summary: On November 18, 2009, an Indonesian inter-agency drafting team and experts from the National Security Division of the US Department of Justice (U.S. DOJ),the FBI, U.S. Treasury, the UNODC and DOJ OPDAT met in Jakarta to continue work on a terrorism financing law. The current draft law represents a significant improvement over Indonesia's 2003 terrorism financing law. It widens criminal liability for terrorism financing activities, imposes reporting requirements upon a broad array of financial service providers, and establishes a procedure to freeze terrorist assets pursuant to UNSCRs 1267 and 1373. Non-profit organizations (NPOs) will be subject to the terrorism financing law, but will be regulated by a different, yet to be determined government agency. Although further editing remains to be done, the drafting team plans to submit the legislation to parliament for inclusion in the 2009-2010 legislative agenda. This is the second major piece of criminal legislation drafted in Indonesia this fall with INL funding. End Summary. ¶2. (SBU) In response to international criticism of Indonesia's terrorism law, the Indonesian Financial Intelligence Unit (PPATK) requested DOJ OPDAT to assist in drafting a new terrorism financing statute. PPATK assembled an inter-agency drafting team that included representatives from the Indonesian National Police, the Attorney General's Task Force on Terrorism and Transnational Crime (SATGAS),Bank Indonesia, the Ministry of Law and Human Rights and the Ministry of Foreign Affairs. In September 2009, DOJ OPDAT sponsored a three-day drafting conference that produced the initial draft of a terrorism financing statute. At the conclusion of the drafting session, the team asked U.S.DOJ and UNODC to review the law for conformance with international conventions and FATF standards. ¶3. (U) On November 18, 2009, experts from U.S. DOJ (Karl Sandoval, National Security Division),the FBI (David Jensen, Office of General Counsel and Special Agent Alvie Price, Terrorist Financing Operations Section),U.S. Treasury (Derek Politzer, Office of Terrorism and Financial Intelligence),Vipon Kititasnasorchai of the Terrorism Prevention Branch, UNODC Bangkok and Embassy RLA met with the inter-agency drafting team in Jakarta to critique and edit the September draft of the terrorism financing law. The Canadian Department of Justice also reviewed the draft statute and supplied written comments. NON PROFIT ORGANIZATIONS -------------- ¶4. (SBU) The experts primary criticism at the second drafting conference was the bill's failure to explicitly address and regulate the use of NPOs to finance terror. The 2008 FATF review of Indonesia by the Asian Pacific Group on Money Laundering had cautioned that the lack of regulation and oversight made NPOs particularly vulnerable to misuse for money laundering and terrorism financing. Citing political and religious sensitivities, the drafting team responded that it was politically unfeasible to explicitly incorporate NPOs in a terrorism financing bill. However, Muhammad Yusuf, Deputy Chief, PPATK, stated that NPOs would be subject to the terrorism financing law, would be required to file suspicious transaction reports and could be prosecuted for terrorism financing activities under the statute. Another PPATK interlocutor stated that PPATK understood that the lack of NPO regulation posed a serious threat and explained that the Government of Indonesia was completing a NPO census as a first step to determine how to better regulate and monitor NPO activities. FREEZING TERRORIST ASSETS -------------- ¶5. (SBU) Indonesia currently lacks an effective mechanism to freeze terrorist assets in conformance with UNSCRs 1267 and 1373. The draft bill sets forth a two-step freezing process consisting of an initial restraint by a financial service provider followed by the issuance of a freeze order by the PPATK. This is a cumbersome procedure which requires prompt, coordinated action by banking officials and government agencies within a three-day period provided in the draft law. The provision places too much responsibility and affords too much discretion to financial service providers who, in some instances, must determine what to do with the restrained assets in the absence of timely direction from PPATK. Further, in some instances, it is unlikely that three days will be enough time to determine whether to issue a freeze order. Nonetheless, the statute JAKARTA 00001995 002 OF 002 ostensibly complies with UNSCR 1267 and 1373. How the Government of Indonesia implements these provisions will determine their effectiveness. CONCLUSION -------------- ¶6. (SBU) Work remains to be done upon the draft law. A third drafting session is set for the middle of December to review an additional 20 articles. Nevertheless, the draft is an important step forward. It widens criminal liability for terrorist financing acts, provides a mechanism to freeze terrorist assets, and applies to NPOs. Whether the law will survive parliamentary review intact and whether there is political will to freeze assets and apply the law to NPOs remains to be seen. HUME