Bond Article Legislation Scandal

Article 50A of the Financial Sector Development and Strengthening Law can potentially legalize money laundering. It stands in contradiction with another law.

PRESIDENT Prabowo Subianto’s administration is using any and all means necessary to raise money. Government projects demand large amounts of budget, while tax revenues are declining due to the sluggish economy. One such means is revising the Financial Sector Development and Strengthening Law (P2SK).

Article 50A of the P2SK Law authorizes the Daya Anagata Nusantara Investment Management Agency (Danantara) to issue Patriot Bonds and Merah Putih Bonds. This article guarantees that the government will not pursue the origins of the funds used to purchase said bonds, through criminal or civil investigation, including for reasons related to tax violations. Therefore, if the money originated from crimes such as gambling, corruption, or tax evasion, the government will not have an issue over it. 

In other words, Article 50A legitimizes money laundering. The proceeds from criminal activities could be turned into legitimate funds by using them to purchase government bonds, which are then pocketed by Danantara, the super holding of state-owned companies, to finance strategic projects prioritized by the government. 

This clause clearly violates the standards of the Financial Action Task Force (FATF) followed by banks, countries, and international financial institutions. Indonesia became a member in October 2023, after years of waiting. The FATF requires a clean financial regime free from money laundering and terrorism financing. The presence of Article 50A in the PS2K Law will deter investors from purchasing Danantara bonds due to the very high risk. 

In addition to containing provisions that go against good and clean financial governance, Article 50A suddenly appeared out of nowhere once the draft revision of this law had been passed in the plenary session of the House of Representatives (DPR). From the time when the regulation was still an academic paper, to when it was discussed by the working committee, all the way to the commission, this article has never been brought up or discussed by House members.

The smuggling of this article is reminiscent of the sudden disappearance of the tobacco article in the Health Law in 2009. When submitted to the State Secretariat, paragraph 2 of Article 113, which specifically mentioned cigarettes as an addictive substance, was missing from the draft approved by the House. Consequently, the government must control their production, marketing, and consumption. 

The smuggling of Article 50A into the P2SK Law is further confirmed by the Draft Law on the Indonesian International Financial Center (PFII), which the House will soon deliberate. Article 49 of the bill explicitly states that PFII’s financial system is subject to transparency of beneficial ownership, access to financial information for tax purposes, and the exchange of information based on international treaties. 

This means that Article 50A of the P2SK Law contradicts Article 49 of the PFII Bill, whereas the two laws should complement each other in creating a clean, transparent, and accountable financial investment regime. The PFII Law is mandated by Article 248A of the P2SK Law. The existence of Article 50A, which has never been openly discussed in the House, is bound to make Indonesia even less credible in the eyes of investors. 

The international world will see that Indonesia is not serious about developing an investment ecosystem because of its contradictory regulations. Instead of securing large amounts of funds, Indonesia will end up becoming more isolated from the increasingly open and transparent global financial market.

Read the Complete Story in Tempo English Magazine

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