Indonesian President Joko Widodo has revealed that after several years of delay, Indonesia and Switzerland will soon ratify a Mutual Legal Assistance agreement. This is a positive development. As Widodo explained to his social-media followers, the MLA treaty will make it possible to trace illegal financial activities between Indonesian and Swiss financial institutions.
Recovering stolen assets has become a top priority on Indonesia’s anti-corruption agenda. Last year, Widodo issued Presidential Decree No 54, which details a national strategy to prevent corruption, and the Ministry of Law and Human Rights issued government regulation No 43, which encourages citizens to become anti-corruption whistleblowers. These legal frameworks represent a significant breakthrough for Indonesia’s fight against corruption.
In Indonesia, white-collar criminals usually hide their unlawfully obtained assets abroad in jurisdictions that are viewed as “safe havens.” Because of its bank secrecy laws, Switzerland has long been a popular safe haven in which to store or to disguise illicit funds. Indeed, Indonesian Corruption Watch (ICW) suspects the late president Suharto hid significant illicit assets in Switzerland that have not yet been identified and therefore remain untouchable.
However, other places such as Singapore, the British Virgin Islands, the Bahamas, and Panama also serve as safe havens for ill-gotten gains taken from Indonesia. The laws in such jurisdictions make it possible for criminals to conceal the sources of their wealth by using complex financial structures.
Indonesia is not alone in seeking to recover assets unlawfully moved abroad. Malaysia and Kenya are among countries that are also making an effort to return their assets from other countries through MLA agreements with Switzerland.
The Indonesia-Switzerland MLA will authorize Jakarta to pursue unlawful funds obtained through corruption, money-laundering, and other financial crimes. However, pursuing illicit funds through such a mechanism often can be difficult if government investigators are not able to find the connection between the assets discovered and the actual criminal activity. This can be especially challenging given that financial and technical resources to trace funds through complex financial systems are often limited.
To address this issue, Indonesia may wish to consider exploring an alternative mechanism, the “unexplained wealth order” (UWO), also known as known as Pembuktian Terbalik.
A UWO reverses the usual burden of proof. Rather than requiring an investigator to prove that the assets are illegally obtained, a UWO requires an individual or organization to prove that the source of its wealth is legitimate. If the owner cannot show that the assets were obtained legally, they can be considered to be the proceeds of criminal activity.
Use of a UWO has the potential to help governments reduce illicit financial flows and can help provide an effective option in the asset recovery effort.
Despite the potential advantages of the UWO, many countries are still reluctant to implement this method. Experts have criticized UWO on the grounds that it deprives individuals of the presumption of innocence. However, the executive secretary of the Presidential Advisory Committee Against Corruption, Professor Bolaji Owasanoye, has argued that the implementation of UWO is justifiable because it applies to property, not people.
Despite the reservations, the UWO mechanism has been implemented in several countries, including France and the United Kingdom.
In the UK, for example, the Anti-Graft Regulation requires individuals to provide a reasonable explanation for any spending over £50,000 in the country. The authorities recently applied this law to confiscate property worth about £22 million (US$28.25 million) that had been purchased by the wife of an Azeri banker even though she had a net income of only US$70,648 in 2008.
Indonesians should appreciate the commitment of the current administration to fighting corruption. Ratification of the Swiss MLA will a big leap forward in asset-recovery efforts considering Switzerland has been a very popular safe haven and tax haven for a long time.
However, the Indonesian government must do more. For a start, it should seek to enter MLA agreements with other safe havens. It also should consider legislation that will promote UWOs as a complementary mechanism for recovering assets.
Finally, Indonesia should take steps to reform asset-recovery legislation in accordance with the United Nations Convention Against Corruption (UNCAC) and to follow up the offer for assistance from the UN/World Bank Stolen Asset Recovery (StAR) Initiative in order to help law-enforcement authorities to develop the legal framework and institutional expertise to recover stolen assets.
With further diligent efforts, 2019 can be the year in which the Indonesian government finally begins to bring back home the vast sums of money obtained illegally and then concealed abroad.