Can Indonesia's Digital Banks Combat PEPs and Financial Crimes?

Anang Riyan Ramadianto; Dharma Setiawan Negara; Chita Askarya; Larmi Kristiani

doi:10.18196/ijclc.v6i2.26038

Authors

Anang Riyan Ramadianto Universitas Brawijaya
Dharma Setiawan Negara Universitas Sunan Giri Surabaya
Chita Askarya SeaBank Indonesia
Larmi Kristiani Mahkamah Agung Republik Indonesia

DOI:

https://doi.org/10.18196/ijclc.v6i2.26038

Keywords:

Digital Banking, Due Diligence, Politically Exposed Persons PEPs

Abstract

This article examines the impact of advanced technologies on enhancing due diligence for Politically Exposed Persons (PEPs) within Indonesia's digital banking sector. With the rapid growth of digital banking, there is a pressing need to address the heightened risks associated with PEPs, including potential corruption and money laundering. The study explores the challenges posed by traditional due diligence methods in the face of evolving financial technologies like artificial intelligence (AI) and machine learning (ML), which offer innovative solutions to improve compliance and risk management. It emphasizes the importance of robust regulatory frameworks designed to safeguard the financial system, while also highlighting the operational realities faced by digital banks in adhering to these regulations. The research employs qualitative analysis to investigate how technology can streamline compliance processes, enhance customer due diligence (CDD), and facilitate the identification and monitoring of high-risk clients. Additionally, it discusses the implications of these technological advancements for both regulatory compliance and overall financial security in Indonesia. By focusing on the intersection of technology, regulation, and compliance challenges, this study underscores the critical role of digital banking in mitigating financial crime risks associated with PEPs in an increasingly complex financial landscape.

Author Biography

Dharma Setiawan Negara, Universitas Sunan Giri Surabaya

https://orcid.org/0009-0007-9595-8631

References

Altman, Erik, Jovan Blanuša, Béni Egressy, Andreea Anghel, and Kubilay Atasu. “Realistic Synthetic Financial Transactions for Anti-Money Laundering Models,” n.d.

Arifin, Muhammad Burhanudin, and Andrian Budi Prasetyo. “Factors Influencing in the Fraudulent Financial Reporting” 10, no. 2 (2018).

Arner, Douglas W., Janos Nathan Barberis, and Ross P. Buckley. “The Evolution of Fintech: A New Post-Crisis Paradigm?” SSRN Electronic Journal, 2015. https://doi.org/10.2139/ssrn.2676553.

Beatrice Oyinkansola Adelakun, Ebere Ruth Onwubuariri, Gbenga Adeniyi Adeniran, and Afari Ntiakoh. “Enhancing Fraud Detection in Accounting through AI: Techniques and Case Studies.” Finance & Accounting Research Journal 6, no. 6 (June 15, 2024): 978–99. https://doi.org/10.51594/farj.v6i6.1232.

Beck, Steven, Lotte Schou-Zibell, Can Sutken, and Catherine Estrada. “Financial Crimes Compliance: The Power of Partnership.” ADB Briefs. 0 ed. ADB Briefs. Manila, Philippines: Asian Development Bank, July 2021. https://doi.org/10.22617/BRF210250-2.

Bueno, Luiz Antonio, Tiago F.A.C. Sigahi, Izabela Simon Rampasso, Walter Leal Filho, and Rosley Anholon. “Impacts of Digitization on Operational Efficiency in the Banking Sector: Thematic Analysis and Research Agenda Proposal.” International Journal of Information Management Data Insights 4, no. 1 (April 2024): 100230. https://doi.org/10.1016/j.jjimei.2024.100230.

Chitimira, Howard, and Sharon Munedzi. “Overview International Best Practices on Customer Due Diligence and Related Anti-Money Laundering Measures.” Journal of Money Laundering Control 26, no. 7 (December 18, 2023): 53–62. https://doi.org/10.1108/JMLC-07-2022-0102.

Cloud, Google. “Fighting Money Launderers with Artificial Intelligence at HSBC.” Google Cloud Blog FInancial Seervices 1, no. 1 (November 30, 2023): 1–3. https://cloud.google.com/blog/topics/financial-services/how-hsbc-fights-money-launderers-with-artificial-intelligence.

Darem, Abdulbasit A., Asma A. Alhashmi, Tareq M. Alkhaldi, Abdullah M. Alashjaee, Sultan M. Alanazi, and Shouki A. Ebad. “Cyber Threats Classifications and Countermeasures in Banking and Financial Sector.” IEEE Access 11 (2023): 125138–58. https://doi.org/10.1109/ACCESS.2023.3327016.

Greenberg, Theodore S. Politically Exposed Persons Preventive Measures For The Banking Sector. Washington: The International Bank for Reconstruction and Development / The World Bank, 2010. DOI: 10.1596/978-0-8213-8249-3.

Hashimzai, Irshad Ahmed, and Mohammad Zameer Ahmadzai. “Navigating the Integration of Blockchain Technology in Banking: Opportunities and Challenges.” International Journal Software Engineering and Computer Science (IJSECS) 4, no. 2 (August 10, 2024): 665–79. https://doi.org/10.35870/ijsecs.v4i2.2656.

Israhadi, Evita Isretno. “Review of Digital Bank Law in Indonesia: Challenges in the Digital Era,” n.d.

Jasa Keuangan, Otoritas. Indonesia Banking Booklet 2023. 10th ed. Jakarta, Indonesia: Otoritas Jasa Keuangan Department of Banking Licensing and Crisis Management, 2023.

Jorge, Guillermo. “Identification and Exchange of Information on Politically Exposed Persons in Central American Countries.” Inter-American Development Bank, August 3, 2018. https://doi.org/10.18235/0010714.

Klimenko, Alla. “Digital Transformation in Banking and Financial Services.” Mad Devs, September 24, 2024. https://maddevs.io/blog/digital-transformation-in-banking-and-financial-services/.

Kumar, Sumit. “Indonesia’s Fintech Industry Is Ready to Rise.” Indonesia, March 2023.

Laras, Arlina. “Top 7 Bank Digital Di Indonesia Kuartal I/2024: Seabank Teratas, Hibank Melesat,” 2024. https://finansial.bisnis.com/read/20240525/90/1768141/top-7-bank-digital-di-indonesia-kuartal-i20.

Lazuardy, Moch Syahren, Maya Rachmawati, Tina Marlina, and Jaenudin Umar. “Legal Framework for Protecting Bank Customers against Personal Data Leakage in the Digital Era: A Study of Indonesian Regulations.” Indonesian Journal of Multidisciplinary Science 3, no. 10 (July 25, 2024). https://doi.org/10.55324/ijoms.v3i10.907.

Lelono, Agus Joko, Mohamad Tohari, and Hono Sejati. “The Urgency of Legal Reform for the Legality of Digital Currency in Indonesia” 6, no. 4 (2024).

Mugarura, Norman. “Customer Due Diligence (CDD) Mandate and the Propensity of Its Application as a Global AML Paradigm.” Journal of Money Laundering Control 17, no. 1 (January 7, 2014): 76–95. https://doi.org/10.1108/JMLC-07-2013-0024.

Munachi Ijeoma Ononiwu, Obianuju Clement Onwuzulike, and Kazeem Shitu. “Comparative Analysis of Customer Due Diligence and Compliance: Balancing Efficiency with Regulatory Requirements in the Banking Sectors of the United States and Nigeria.” World Journal of Advanced Research and Reviews 23, no. 3 (September 30, 2024): 475–91. https://doi.org/10.30574/wjarr.2024.23.3.2707.

Mushtaq, Ahmad. “Compliance Challenges and Tech-Driven Solutions in Combating Financial Crime Within the Fintech Ecosystem.” Lovely Professional University 4, no. 1 (May 2024): 62–80. https://doi.org/DOI:10.4018/979-8-3693-3633-5.ch005.

Negara Malaysia, Bank. “Anti-Money Laundering, Countering Financing of Terrorism, Countering Proliferation Financing and Targeted Financial Sanctions for Financial Institutions (AML/CFT/CPF and TFS for FIs).” Central Bank of Malaysia, February 5, 2024, 1–175.

Partners, Assegaf Hamzah. “OJK Embraces Digital Bank with New Regulations.” Rajah & Tann Asia Lawyers Who Know Asia 1, no. 1 (November 2021): 1–6. https://www.ahp.id/clientalert/AHPClientUpdate-4November2021.pdf.

Patience Okpeke Paul and Toluwalase Vanessa Iyelolu. “Anti-Money Laundering Compliance and Financial Inclusion: A Technical Analysis of Sub-Saharan Africa.” GSC Advanced Research and Reviews 19, no. 3 (June 30, 2024): 336–43. https://doi.org/10.30574/gscarr.2024.19.3.0235.

Rithmaya, Chitra Laksmi, Herwin Ardianto, and Evi Sistiyarini. “GEN Z AND THE FUTURE OF BANKING: AN ANALYSIS OF DIGITAL BANKING ADOPTION.” Jurnal Manajemen Dan Kewirausahaan 26, no. 1 (March 1, 2024): 64–78. https://doi.org/10.9744/jmk.26.1.64-78.

Rusdiana, Shelvi. “Rethinking Indonesian Anti-Money Laundering Laws in the Age of Online Gaming Economies.” NURANI: JURNAL KAJIAN SYARI’AH DAN MASYARAKAT 24, no. 2 (October 23, 2024): 360–74. https://doi.org/10.1910 9/nurani.v24i2.24422.

Rusli, Ganda Raharja, and Anestia Hayubriandini Fermay. “Digital Financial Services Effort in Enforcing Anti-Money Laundering through Open Banking Optimization.” AML/CFT Journal The Journal of Anti Money Laundering and Countering the Financing of Terrorism 2, no. 2 (June 1, 2024): 159–74. https://doi.org/10.59593/amlcft.2024.v2i2.158.

Sugianto, Fajar, and Joshua Evandeo Irawan. “Urgensi Menjadikan Hasil Analisis (HA)/Hasil Pemeriksaan (HP) PPATK Sebagai Alat Bukti Dalam Perkara TPPU Dan TPPT Di Indonesia.” AML/CFT Journal The Journal of Anti Money Laundering and Countering the Financing of Terrorism 2, no. 2 (June 1, 2024): 147–58. https://doi.org/10.59593/amlcft.2024.v2i2.153.

UNCTAD, ed. Tackling Illicit Financial Flows for Sustainable Development in Africa. Economic Development in Africa Report 2020. Geneva: United Nations, 2020.

Wimbah, Santoso. “Financial Services Authority to Improve Digitalization of Financial Sector.” Cabinet Secretariat of The Republic of Indonesia 1, no. 1 (2021): 1–2. https://setkab.go.id/en/financial-services-authority-to-improve-digitalization-of-financial-sector/.

Wiwoho, Jamal, Dona Budi Kharisma, and Dwi Tjahja K. Wardhono. “Financial Crime In Digital Payments.” Journal of Central Banking Law and Institutions 1, no. 1 (December 28, 2021): 47–70. https://doi.org/10.21098/jcli.v1i1.7.

Yuspin, Wardah, Kelik Wardiono, Aditya Nurrahman, and Arief Budiono. “Personal Data Protection Law in Digital Banking Governance in Indonesia.” Studia Iuridica Lublinensia 32, no. 1 (March 28, 2023): 99–130. https://doi.org/10.17951/sil.2023.32.1.99-130.