By Stefanno Sulaiman
A coalition of Indonesian civil society groups has urged a global financial crime watchdog to review legal protections given to buyers of bonds issued by sovereign wealth fund Danantara, warning the measure may breach anti-money laundering standards.
A law passed last month enacted broad protections, including from potential criminal and tax-related prosecution, to buyers of the bonds that will raise capital for Danantara, which is executing a number of President Prabowo Subianto's ambitious policy plans.
Indonesia's government says the measure is intended to bring more funds into the formal financial system, but concerns have been raised that it will be used to launder illicit money.
Danantara Monitor, a coalition of six civil society groups, said in a letter sent to the Paris-based Financial Action Task Force (FATF), an anti-money laundering watchdog, on Wednesday that the protections for buyers of the bonds could weaken due diligence processes, limit authorities' access to evidence and create channels for illicit funds to enter the financial system.
"The new financial law not only weakens due diligence, but also potentially provides a legal channel for criminals to launder proceeds of crime," the coalition said in its letter, which was seen by Reuters.
Finance Minister Purbaya Yudhi Sadewa dismissed the coalition's concerns that the provision amounted to money laundering, saying other countries had already adopted similar measures.
"This is not money laundering, many other countries have been doing this long before us," Purbaya told reporters when asked about the letter to the FATF.
"The world is not black and white. We should not let ourselves be disadvantaged too much."
Danantara Monitor requested that the FATF escalate scrutiny of the provision, which has also drawn criticism from economists. Indonesia has been a full FATF member since 2023, according to the finance ministry's website.
"FATF requires its members to be able to detect, investigate and sanction money laundering practices, not merely have formal rules on paper," Danantara Monitor said in the letter.
In response to the coalition's letter, the FATF said on Thursday it had received the correspondence and would review the information provided in line with its usual processes.
The watchdog said countries' defences against financial crime are assessed through its peer-review mutual evaluation process, which allows input from civil society groups. It added that information about Indonesia's anti-money laundering and counter-terrorist financing framework would be considered as part of its next mutual evaluation, due to begin in 2028.
The protections on the bonds come as Prabowo's administration pushes ahead with huge spending plans aimed at lifting economic growth to 8% from 5% currently, while revenue collection remains a challenge.