Indonesia Steps Up War Against Terrorism Financing

A new pact highlights the attention Jakarta is paying to a key field in the battle against the Islamic State.

On April 12, state news agency ANTARA reported that Indonesia’s counterterrorism agency and anti-money laundering agency had inked an agreement to strengthen efforts to combat terrorism financing. The new pact highlights the attention that Indonesia is paying to the field amid the rising threat from the Islamic State.

Indonesia is no stranger to Islamic militancy, with the last wave of terrorism following the 9/11 attacks seeing Jemaah Islamiyah – loosely referred to as the Southeast Asian offshoot of al-Qaeda – carrying out a series of attacks, including the deadly Bali bombings in 2002 and twin bombings in 2009 targeting the J.W. Marriott and Ritz Carlton hotels. Attention has turned to the Islamic State in recent years, with hundreds of Indonesians believed to have gone abroad to join the group in the Middle East and the January 2016 Jakarta attacks indicating the seriousness of the threat (See: “Islamic State Attack in Indonesia? A Look at the 2016 Jakarta Bombings”).

While Indonesia’s counterterrorism response has been multifaceted – with varying degrees of success in areas ranging from security measures to rehabilitation – countering terrorism financing has also been a key prong. This is no surprise. Indonesian authorities have found that leading Islamic State-linked terrorist masterminds have been using online services like Paypal and Bitcoin as well as other forms of financial technology to send payments to Indonesia from other regional countries like Australia and Malaysia, making these transactions more difficult to detect. Indonesia has also traditionally had a poor record on money-laundering, which has left it at high risk for such activities.

The Financial Transactions Analysis and Reporting Center (PPATK) plays an important role in the war on terrorism financing. It has been cooperating with other ministries and agencies, including the National Agency for Countering Terrorism (BNPT) and Indonesian elite counterterrorism squad Densus 88 to trace the flow of funds, including digital-based transactions. It has also been working with other regional states, including Australia, with the Australian Transactions Report and Analysis Center (AUSTRAC) inking an agreement with PPATK in February to boost the latter’s capabilities (See: “Indonesia-Australia Defense Relations in the Spotlight”). In January, PPATK chief Kiagus Ahmad Badaruddin had also announced that the center would set up the Indonesian Financial Intelligence Institute (IFII) to serve as a center of education and training on anti-money laundering and terrorism financing in Southeast Asia.

The memorandum of understanding (MoU) signed on Wednesday between BNPT and PPATK is yet another sign of Indonesia’s focus on the fight against money laundering and terrorism financing. It effectively formalizes a partnership between two agencies that have already begun working together in recognition of the coordination challenge in this battle. The pact itself covers several areas, including information exchange, educational training, and the development of information technology. And assuming that its implementation goes smoothly, it will be yet another step in the right direction in addressing the wider challenge of Indonesia and Southeast Asia’s war against the Islamic State (See: “ASEAN’s Islamic State Conundrum”).