Indonesia Country Summary

FATF Status

Indonesia was removed from the FATF List of Countries that have been identified as having strategic AML deficiencies on 26 June 2015.

Latest FATF Statement - 26 June 2015

The FATF welcomes Indonesia’s significant progress in improving its AML/CFT regime and notes that Indonesia has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in February 2010. Indonesia is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Indonesia will work with APG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Indonesia was undertaken in 2023. According to that Evaluation, Indonesia was deemed Compliant for 6 and Largely Compliant for 29 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 4 of the Effectiveness & Technical Compliance ratings.

Corruption remains a significant issue in Indonesia despite efforts by President Jokowi's administration to combat it through the National Anti-Corruption Strategy and the Corruption Eradication Commission (KPK). Recent changes to the KPK's charter have limited its independence and ability to investigate corruption, leading to a decline in prosecutions, although there was a notable increase in 2022 and 2023. Additionally, Indonesia's ranking in Transparency International's Corruption Perceptions Index has worsened, reflecting ongoing challenges in addressing corruption and the influence of state actors in criminal activities.

Indonesia boasts a USD 1.2 trillion economy supported by a population of 276 million and a growing middle class, making it an attractive destination for U.S. investors. Despite its abundant natural resources and stable economic environment, challenges such as bureaucratic inefficiencies, legal uncertainties, and corruption persist, complicating the investment landscape. Recent reforms, including the 2020 Omnibus Law on Job Creation, aim to enhance competitiveness by streamlining regulations and lowering corporate taxes, yet concerns over labor rights and local partnership requirements remain significant.

Indonesia's investment climate has seen improvements following the ratification of the 2023 Omnibus Law on Job Creation, which aims to enhance competitiveness by reducing corporate taxes and bureaucratic barriers. However, foreign investors still face challenges such as legal uncertainties, economic nationalism, and corruption, which complicate the investment landscape. Despite these obstacles, Indonesia remains an attractive destination for foreign direct investment, particularly in sectors like infrastructure and digital technology, with significant interest from countries like Singapore, China, and the United States.