JAKARTA (JAKARTA POST/ASIA NEWS NETWORK) - The Indonesian military (TNI) is in the spotlight over a report that individuals linked to it have carried out a money transfer of around US$1.4 billion (S$1.9 billion) through multiple accounts managed by United Kingdom-based bank Standard Chartered.
Bloomberg first reported that regulators in Europe and Asia were investigating Standard Chartered over the role staff may have played in transferring US$1.4 billion of private bank client assets from Guernsey to Singapore before new tax transparency rules were introduced in 2015.
The assets - held in its Guernsey trust unit for mainly Indonesian clients, some of whom had links to the military - were moved in late-2015 before the Channel Island adopted the Common Reporting Standard, a global framework for the exchange of tax data, at the start of 2016, the people said. Standard Chartered shuttered its operations on the island last year.
The New York Times quoted a person with knowledge of the investigation who said that the links to the TNI also raised flags.
Contacted on Sunday (Oct 8), the Financial Transaction Report and Analysis Centre (PPATK) said that it was investigating the report.
"We are communicating with relevant agencies in our investigation into the case," PPATK chairman Kiagus Ahmad Badaruddin told The Jakarta Post.
Mr Kiagus also said the PPATK already had details of individuals involved in the reported transactions and that the agency had got a hold of records of the transactions in question.
"(We'll have to see) if, for example, the amount being transfered was also reflected in their tax forms. The directorate-general of taxation can surely track them down," Mr Kiagus said.
Mr Kiagus said the funds could have been saved overseas to avoid taxes, an activity that could be categorised as money laundering.
He also added that the ongoing investigations could also look into possibilities that the funds could be the result of corrupt activities.
Bloomberg's sources in Guernsey highlighted that there were disparities between the earnings of some customers and the balances in their accounts, with clients, in the most egregious cases, having a stated annual income of tens of thousands of dollars yet holding tens of millions in their accounts.
Employees of the trust in Guernsey and relationship bankers in Singapore flagged the US$1.4 billion of asset transfers, when they were first proposed in 2015, noting a sudden flurry of requests in what was previously a static series of accounts, people familiar with the timeline said. The transfers were approved by Standard Chartered's financial crime compliance team after a review, the employees said.
Those with links to the military were considered politically exposed persons and should have been subject to a higher level of scrutiny, one Guernsey employee said, as quoted by Bloomberg.
Mr Yustinus Prastowo, executive director of the Centre of Indonesia Taxation Analysis (CITA), said it was possible the funds in question were dirty money attained from corruption, given the huge amount of money kept in the account.
Mr Yustinus suspected that the discrepancy between the amount of funds in the account and the stated annual income of their owners could be an indication that it was an effort to avoid money generated from corruption being traced by law enforcement agencies.
"Normally, there are three reasons for funds being stashed in tax havens; government officials hiding money from corruption, businesspeople avoiding taxes and drug dealers keeping their money safe," Mr Yustinus said.
Even if the funds came from legal sources, transferring to overseas accounts could indicate their owners tried to dodge tax," Mr Yustinus added.
TNI spokesman, Major-General Wuryanto, did not return multiple phone calls made by The Jakarta Post on Sunday. Standard Chartered Indonesia external communications and public affairs head Mita Sampaguita Lamiran also declined to comment.