Indonesia’s new letter of credit regulations for commodities will curb money laundering

Indonesia’s new letter of credit (L/C) regulations should act as an effective curb on widespread trade-based money laundering in the country’s commodities sector.

This was the view of several delegates at GTR’s recent Indonesia Trade and Commodity Finance conference in Jakarta.

New terms
Since April 2015, exporters of commodities including oil and gas, coal, palm oil, palm kernel oil, and minerals including tin must ship exports on L/C terms.

The government introduced the new regulations with the aim of curbing money laundering and tax evasion.

Economic benefits
Commodity trading director at PetroIndo Utma, Brahim Zerouki, told delegates that the new regulations would help curb illegal coal mining, which has drained millions of US dollars from the Indonesian economy in recent years.

But Zerouki warned that the new regulations may have negative impacts in terms of smaller producers and exporters meeting the additional costs and workload demanded in L/C transactions.

Bank benefits
Bankers have welcomed the new regulations, which should benefit banks.

Head of trade for Citi Indonesia, Rizman Firmnasyah, said the new regulations are “a gift” for financial institutions because they will save substantial sums of money in compliance.

Categories: Trade Based Financial crimes News

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