PARTICIPANTSʼPAPERSEFFECTIVE MEASURES IN TRACING AND RECOVERINGPROCEEDS OF CORRUPTION USING CASH TRANSACTION MODESAND THIRD PARTY INVOLVEM ENTKiki Ahmad Yani

I. INTRODUCTIONCorruption in Indonesia is regulated under Law no.31 of 1999 on the Eradication of Corruption as
amended by Law no. 20 of 2001;corruption in Indonesia is classified as follows:
1) Corruption-related losses to the state;2) Corruption related to bribery;3) Corruption related to fraud in incumbency;
4) Corruption associated with the act of extortion;5) Corruption related to skullduggery/manipulation;6) Corruption related to conflicts of interest in procurement;7) Corruption associated with gratification;8) Other criminal acts related to corruption (for example hindering the investigation, giving false
testimony, etc.).
All countries have similar perceptions on corruption,and it is classified as an extraordinary crime
done by highly educated and intellectual people. The more a country increases its firmness in implementing its corruption provisions and punishes the perpetrators,the more the perpetrators will also
increase their level of sophistication to anticipate the governmentʼs efforts to combat corruption.The
unclear rules or even the absence of rules have become a legal loophole that perpetrators use to avoid
investigations and prosecutions. It forces the law enforcement agencies to utilize existing rules while
hoping the legislative branch will enhance the rules that are not clear, or even create a new, moreprogressive set of laws or regulations to optimize their performance.
The magnitude and danger of corruption and its consequences have encouraged many countries inthe world to create a concept of deterrence against corruption perpetrators where the perpetrators are
not punished enough with only imprisonment, but the corruption proceeds that have been enjoyed bythem also have to be forfeited and returned to the state to be used entirelyfor the general welfare. Thisis because what the criminals took was originally intended for the people, so it is only fair to beforfeited and returned to the people.And not only are the assets recovered,but fines are being imposed
upon the perpetrators, which is what Indonesia has done.
The passion to severely condemn corruption perpetrators and recover their stolen assets has lately
become a discourse that continues to be encouraged to be realized in our country. Utilizing todayʼsexisting regulations, we, at CEC, for the last two years have done investigation and charged indictments against money laundering for several cases with indications of concealment and disguised
proceeds of corruption.This was done in order to recover proceeds of crime that the perpetrators have
Investigator and Prosecutor at the Corruption Eradication Commission (CEC), Indonesia.

103

RESOURCE MATERIAL SERIES No. 95
received and enjoyed on behalf of the state. To achieve that goal, in Indonesia, we already havelegislation governing money laundering, and we are currently making draft laws related to thedeprivation of assets and proceeds of crime.

II. MAIN DISCUSSION
A. Perpetrators, Corruption Modes and the Proceeds of Corruption.
In Indonesia, corruption is committed by the Board of Legislative M embers, Executives (centralgovernment officials,regional heads at provincial and district levels),and law enforcers such as police
officers,prosecutors,judges and even court clerks can utilize their authorities to engage in corruption
to benefit from their positions.They engage in corruption because there are interested parties involved,
such as private companies, and in practice the corruption is jointly planned and agreed to.
Corruption in the legislature is done in various ways.Legitimate authority,such as the authority tomake laws, budgeting and provide government oversight, gives M embers of Parliament a chance topressure the government to fulfill their own desires.In Indonesia,members of the House of Representatives (HoR/Parliament) are usually affiliated with particular companies who are used to join theprocurement process/auctions for projects conducted by government agencies.Members of Parliament
begin the process of budgeting by providing corrections and additions to the budget and to proposed
projects submitted by government agencies.The budgeting process is used by M embers of Parliament
to direct the types of projects and the size of the budget that will be given to the agency after adjustingfor the wishes of M embers of Parliament who had plotted together with the companies affiliated withthem. When budgeting is completed and approved, the company is subsequently approached by theleaders and procurement officials of government agencies that will implement the project which has
been set by M embers of Parliament.That approach means that the company will win the procurement
process/auction in a way that appears as if the process of procurement is done properly and according
to proper procedures.These companies have even set up other companies which act as competitors in
the auction process. In fact, the competitor company has been paid off or is just a company on paper
where legally permissible,but actually the company has no offices,employees,and no business activity
and no financial statements. The companies are just established to manipulate the auction process.
After the company is awarded the project,the company provides a fee between 18% to 22% of thebudget of the project obtained by the company to be distributed to interested parties such as ministers,
procurement officials and Members of Parliament who have assisted in budgeting,so companies thathave projects with budget values in accordance with their wishes are entrusted to M embers ofParliament.Usually the fee for members of Parliament is allocated at around 5% into 7% ofthe projectbudget, even for the M embers of Parliament who have been paid before the auction begins and thebudget is approved. Otherwise, of course, the company also wants to have profit from the project.
Companies usually take profits of around 20%, so that the project budget is actually only about 58%
of the value of the overall project budget;42% has been used for fees given to Members of Parliament,
procurement officials and corporate profits.Consequently,the project is not carried out in accordancewith the specifications because the budget has been cut for fees to related parties.
Corruption in Indonesia is also committed by several regional leaders, the Governor and theRegents, for example, in procurements conducted by local government agencies with nearly the samemode as the mode of corruption as described above.Then there are some regional leaders who engage
in corruption by diverting central government grants, such as funds for the construction of roads,schools,ports,etc.The permitting process is also one of the ways that corruption is committed by theRegional Head,for example,licensing submitted by a company that will invest,such as companies thatwill develop an area for housing, cemeteries, shopping centers or for other purposes. The permit
applications will be granted if the companies have offered money to regional leaders or officials.
Several law enforcement officers are still tempted to engage in corruption, ranging from police,prosecutors, judges, and even court clerks are also entangled in corruption.Corruption committed bylaw enforcement officials is mostly done related to the handling of the case. Corruption by law
enforcement officers occurs through the intermediary of a lawyer who represents his clients with theaim of seeking penalties as low as possible or not linking the case with others.

104

17TH UNAFEI UNCAC TRAINING PROGRAM ME
PARTICIPANTSʼPAPERS
In the field of taxation, some officials from the tax office commit corruption by asking for somemoney and facilities of the taxpayer with the purpose to minimize the taxes charged to the company
or to get reimbursement for excess taxes that have been paid, though that reimbursement should not
be granted because the financial statements have been manipulated bythe companyin cooperation withofficials from the tax office.
Perpetrators of corruption in Indonesia receive the proceeds of corruption by cash and through athird party.This mode is quite difficult for us as law enforcement officers to discover and to associate
the parties with the proceeds of corruption.Then,the proceeds of corruption are used by the perpetrators to buy assets such as cars,land and houses on behalf of a third party or his family.In our country,
the number of large cash transactions for the purchase of these assets is still possible because until now
there is no rule that expressly restricts cash transactions for the purchase of assets of a specificamount;however, it is currently being discussed to make such rules.
One of the latest modes is where the proceeds of corruption are saved in an insurance company.The
perpetrator asks a third party to purchase many insurance policies on behalf of a third party,but those
who enjoy the benefits of the insurance are the perpetrators and their families.The type of insurance
policies purchased consist of education insurance,life insurance and health insurance.Another recent
mode is where the perpetrators save the proceeds of corruption by paying the money toward his credit
card bills in an amount that exceeds the balance due,so the perpetrators can easily save and spend themoney deposited on several credit cards freely without the knowledge of law enforcement officers.
B. Identification and Recovering Proceeds of Corruption Concealed and Camouflaged through
Third Parties or Their Families by the Cash Transaction M ethod.
In 2006, Indonesia enacted the Law of the Republic of Indonesia Number 7 of 2006 on the Ratification of the United Nations Convention against Corruption, 2003. In general, the law explained thesignificance of this for the application of UNCAC in Indonesia, namely:―

The ratification of this Convention is a national commitment to improve the image of Indonesia in the international political arena.

―

Increasing international cooperation particularly in the tracing, freezing, confiscation andrecovery of assets and proceeds of corruption that are stationed overseas;―Improving international cooperation in realizing good governance;―

Improving international cooperation in the implementation of treaties on extradition,mutuallegal assistance, delivery of inmates, transfer of criminal proceedings, and law enforcement
cooperation;―

Encouraging the establishment of technical cooperation and exchange of information in theprevention and eradication of corruption, economic development cooperation and technicalassistance including bilateral, regional, and multilateral;and―Harmonization of national legislation in the prevention and eradication of corruption inaccordance with this Convention.

Article 31 of UNCAC has been determined regarding freezing, seizure, and confiscation which
explicitly states that “Each State Party shall take, to the greatest extent possible within its domestic
legal system, such measures as may be necessary to enable confiscation of proceeds of corruption.”Long before the existence of UNCAC, in 1999 the State of Indonesia enacted Law no. 31, 1999.
Article 37, paragraph (3) provides that “
the defendant is obliged to provide information about all of
their possessions and belongings wife or husband, children, and property of any person or corporation
who allegedly had links with the case.”Further Article 37,paragraph (4)states:“In case the defendant
can not［ sic］prove about wealth disproportionate to his income or source of additional wealth, then theinformation can be used to strengthen existing evidence that the defendant has committed the crime of105

RESOURCE MATERIAL SERIES No. 95
corruption”.
In Law no.20 of 2001 on the amendment of Law no.31 of 1999 on eradication of corruption,Article
38 B requires persons accused of corruption to prove the contrary for his assets which has not been
charged but are also thought to have come from corruption. If the person suspected of corruption
cannot prove that his or her wealth was legitimately acquired, then the assets are deemed to beproceeds of corruption and the judge can decide to seize the property for the state. A claim for
confiscation of assets is filed bythe prosecutor when the prosecutor reads the criminal charges in court;
the defendant is subsequently given the opportunity to defend,and then the judge must decide the statusof those assets that the prosecutors seek to confiscate. Article 38 B states that if, after the judgeʼsdecision becomes binding, there are still unknown assets believed to have also come from corruptionthat have not been confiscated,then the state can perform a civil lawsuit against the convicted and or
their heirs.
In Indonesia,state officials are required to report their wealth to the CEC periodically or when they
get a promotion.State officials are the officials who perform the functions of the executive,legislative,and judicial branches, etc. Perpetrators of corruption in Indonesia are mostly state officials, and thereports of the perpetrator wealth are used for the early identification and tracing of proceeds ofcorruption. This is done by examining the reported assets and comparing them to the suspectʼs actualassets because they will not report their assets obtained from illicit activities. Starting from here theasset tracing team in our office works closely with investigators and prosecutors to uncover theproceeds of corruption.
Then a search of the perpetratorʼ
s house and other places suspected of being used to hide documents
related to his assets will be key to the success of identifying, tracing and confiscation of proceeds ofcorruption.Although the assets of the perpetrators may be held by or in the name of a third party,theperpetrators usually still keep the documents related to their assets. After the documents are found,then the investigator analyses to seek association with the perpetrator to prove that the asset belongs
to the perpetrator and is the proceeds of corruption.
In Indonesia, money laundering has been regulated since 2002 and was last updated and refined in
Law no. 8 of 2010 on AM L. Currently, Indonesia is also making a draft law on deprivation of assets
derived from criminal acts.The general explanation for the draft law is that the State needs the power
to deprive assets for the development of the legal system because of the increasing sophistication of theperpetrators who conceal and disguise the proceeds of crime.The legal system developed both throughlitigation and non-litigation as an effort to seize all proceeds of crime. Seizure and confiscation ofproceeds of crime is carried out by criminal law enforcement procedure, but in line with the enforcement of the anti-money-laundering regime, which has been widely applied in various countries by asystem of deprivation through the procedures of a civil suit against the object (forfeiture in rem), as
well as through appropriation system administration procedures (administrative forfeiture). Based on
the facts of the cases that we have handled,efforts to conceal and disguise the proceeds of corruption
are becoming more sophisticated and difficult,so that deprivation of assets and proceeds of corruption
is not complete.Another effort in our country is a plan to place restrictions on cash transactions,withthe aim that certain transactions must be through financial institutions,and thus are recorded and easy
to trace, although the transaction was made in cash and by third parties.

III. CONCLUSION
A. Perpetrators of corruption can be derived from legislative, executive and judicial officials.
Currently, perpetrators of corruption have a variety of ways to conceal and disguise the proceeds ofcrime by purchase of their assets in cash and on behalf of third parties. Other modes used byperpetrators to hide the proceeds of corruption,include purchasing a number of insurance policies onbehalf of a third party, where the perpetrator and their families are the ones who enjoy the benefits.
There are also perpetrators who keep the proceeds of corruption by overpaying credit card bills;they
accumulate money on the credit card account, and subsequent perpetrators spend the saved money
without being known by the financial supervisory authority and law enforcement officers.

106

17TH UNAFEI UNCAC TRAINING PROGRAM ME
PARTICIPANTSʼPAPERS
B.The early identification of asset tracing is done by examining and analysing the wealth reportsof the perpetrators, i.e., the reported assets compared to actual assets. This is because they will notreport their assets obtained from the illicit income.Then a search of the perpetratorʼ
s house and otherplaces suspected of being used to hide documents or assets becomes an effective step to trace theproceeds of corruption. Furthermore, regulations on confiscation of assets and restrictions on cashtransactions should be made to maximize the recovery of the proceeds of corruption.

107