BETWEEN KEEPING BANK SECRECY AND REPORTING SUSPICIOUS TRANSACTION IN THE FIGHT AGAINST MONEY LAUNDERING

Transcription

1 BETWEEN KEEPING BANK SECRECY AND REPORTING SUSPICIOUS TRANSACTION IN THE FIGHT AGAINST MONEY LAUNDERING Review from the Perspective of Law Number 8 of 2010 Ferdinand T. Andi Lolo Kejaksaan Agung RI ferdinand.andilolo@gmail.com Abstrak Bisnis perbankan adalah bisnis kepercayaan. Ketika bank kehilangan kepercayaan nasabahnya maka ia sedang berjalan menuju keruntuhan. Tidak heran di masa lalu bank sangat menjaga ketat kerahasiaan informasi terkait nasabahnya dengan menutup akses baik terhadap pihak ketiga pada umumnya maupun dari aparat hukum pada khususnya dengan menggunakan kerahasiaan bank sebagai alasan utama. Namun demikian masih ada celah bagi bank untuk mengenyampingkan kerahasiaan bank ini sehingga informasi nasabah mereka dapat diakses oleh pihak ketiga yang terkait, termasuk juga para penegak hukum. Hukum perbankan Indonesia mengatur tentang kerahasiaan bank dengan beberapa perkecualian. Dengan diberlakukannya Undang-undang Nomor 8 tentang Pencegahan dan Pemberantasan Tindak Pidana Pencucian Uang, beberapa perkecualian umum yang dimuat dalam undang-undang perbankan menjadi lebih spesifik dalam undang-undang anti pencucian uang. Berdasarkan undang-undang ini prinsip kerahasiaan bank dikesampingkan dalam hal tindak pidana yang terkait dengan pencucian uang. Bank sebagai pihak pelapor adanya transaksi yang mencurigakan kepada PPATK, selaku otoritas dalam pencucian uang, mendapat imunitas ganda namun imunitas tersebut hanya berlaku dalam keadaan tertentu, yaitu bila pihak pelapor menjalankan kewajibannya berlandaskan itikad baik (good faith) dan tidak ada pelampauan wewenang (ultra vires) dalam proses pelaporan tersebut. Kata Kunci: Kerahasiaan bank, pencucian uang, imunitas ganda 75

2 Ferdinand T. Andi Lolo: Between Keeping Bank Secrecy and Reporting Suspicious... A. Introduction Once regarded as a pariah among countries that implemented recommendations by Financial Action Task Force (FATF) 1 in their respective anti money laundering regimes, Indonesia has managed to turn the tide. Today the country is among the most progressive members in anti money laundering organizations. 2 Under the aegis of anti money laundering law 3 Indonesia provides double immunity for banks and their respective personnel (from this point forward they will be referred to as banks ) from prosecution in the event of breaching the bank s secrecy laws. The first one is the immunity from other laws in which secrecy is imperative and the second one is the immunity from legal actions taken by their customers for divulging the latter accounts to the third parties (within the context of investigation and prosecution of money laundering related crimes). This paper attempts to expose the duty of banks and their personnel to keep the secrecy of their customers which become problematic in the event that money laundering is apparently being detected among the customers banking transactions. It argues that even while banks and their personnel are not necessarily weary of legal consequences of breaching bank secrecy obligations, they have to ensure that they doing so within the correct context, otherwise such immunity will be forfeited. The paper starts with the historic origin of the practice of bank secrecy through an English case law and centuries of practice by Swiss banks. While secrecy was paramount, there were notable exceptions. These exceptions are explored in the Indonesian legal system particularly under the banking and anti money laundering law. The paper finds such exceptions only apply under limited circumstances, otherwise banks and their personnel in Indonesia will be vulnerable to legal consequences from breach of the duty to maintain secrecy of their customers accounts. 1 See FATF website, accessed on 25 August Such as Asia/Pacific Group on Money Laundering (APG); Egmont Group. 3 Enforced in 2002 and amended in 2003 and was further amended in

3 Law Review Volume XI No. 2 - November 2011 B. The historic origin and justification of bank secrecy Several countries and economic entities 4 highly uphold the bank secrecy for various reasons. Take Switzerland for example, since the 19 th century Swiss banks had already implemented strict procedures on bank secrecy that made it almost impossible for the government, legal authorities or other third parties to access their customers accounts. The original purpose for the implementation of bank secrecy was actually to deter the local tax authority to gain access to Swiss citizen s bank account. When other European countries raised their property tax on their citizens who were considered as wealthy class, the Swiss banks saw it as an opportunity and accordingly seized it. Realizing that it was not quite possible to compete with major European financial centres such as London, Paris or Berlin, the Swiss banks tried to attract international customers (from Europe in particular) by offering guaranteed secure accounts. The Wealthy considered such guarantee as a legal leeway to circumvent their tax obligation but at the same time they still gain free access to their money. The strategy worked, the Swiss banks saw overseas influx of funds. By having a Swiss bank account, a customer was able to control who or what parties may or may not access their accounts. When Hitler ruled much of the Europe, many of the Jewish transferred their money to Swiss banks where the Nazi and its affiliates had no access to them. 5 In Post World War II, colonialism in Asia and Africa faded profile while new countries, with their own dictators, flourished, forever changing the customer of Swiss banks. Their customers were no longer dominated by European wealthy class and Jewish refugees. Corrupt officials, their families and cronies saw the Swiss three pronged banking strategy consisting of tight bank secrecy policy, politically neutrality and soft tax regime as a magnet. They flocked the Swiss banks with money plundered from their respective 4 Economic entities are not a state but has their own economic and legal system as well as independence to a certain degree. Examples of economic entities: Guernsey, Virgin Island. 5 Part of this writing is summarized from Sebastien Guex, The Origins of Swiss Secrecy Law and Its Repercussions for Swiss Federal Policy, The Business History Review, Vol. 74 No. 2 (Summer, 2000) pp

4 Ferdinand T. Andi Lolo: Between Keeping Bank Secrecy and Reporting Suspicious... state coffer in the high hope to avoid the long arms of law either from their own countries or from international jurisdiction. Ferdinand Marcos of the Phillippines, Mobutu Sese Seko of Congo (now Zaire), Sani Abacha of Nigeria, Doc Duvalier junior of Haiti as well as dictators from South America were examples of the Swiss banks customers. In a landmark English case law 6 the Court of Appeal of England and Wales in 1923 ruled that banks must observe bank secrecy rule since it was an implied term of the contract between the banker and its customer. In that case, appelant Tournier lost his job at Kenyon & Co because the company s director learned from the bank where Tournier maintened his account that Tournier had financial problems. Checks written by Tournier for bookmakers bounced since his account was overdrawn. The subsequent the bank investigation it was found that Tournier had a chronic gambling habit which information was shared with Tournier s company director. With this, the company came to the conclusion that Tournier could not be trusted with the company s money and his contract was not renewed. As he lost his job, he filed a lawsuit against the bank. The Court of Appeal of England and Wales ruled in his favour of Tournier. The court in its consideration ruled that (page 461):...It is an implied term of the contract between a banker and his customer that the banker will not divulge to third persons, without the consent of the customer express or implied, either the state of the customer s account, or any of his transactions with the bank, or any information relating to the customer acquired through the keeping of his account... Judge Bankes and Atkins were in the opinion that the bank secrecy was inherent to the contract between the bank and the customer in relation to the account and corresponding transactions even though this condition was not expressly stated in writing or affirmed by the bank. The judges vantage point was understandable if from a banking business perspective. By its very nature, a Bank is a business of trust and the rise and fall of a bank depends on the trust from its customers. If we may take a flash back to 1997, the fi- 6 Tournier v. National Provincial and Union Bank of England, [1924] 1 KB

5 Law Review Volume XI No. 2 - November 2011 nancial crisis had triggered a rush on Indonesian banks which did not practice good and responsible banking. For example some bank disbursed loans to debtors which happened to be companies under the same group as the bank themselves without proper guarantee and collateral. When they collapsed, the customers were unable to withdraw their money. Even if customers could recover their doposits the process was long and tying since it had to go through verification by the Indonesian Bank Recovery Agency 7, and to make things worse, the money refunded was only in small fraction of the whole account. Afraid of such failure, customers from other Indonesian banks rushed to their banks for money withdrawal. Consequently, due to the hasty withdrawal of large amounts of money, many banks, even the strongest one, collapsed under such enormous pressures. C. Exceptions for bank secrecy in the Indonesian legal context Even though bank secrecy is highly upheld, such right however is not absolute. Banks are still be able to divulge information or to provide data to third parties under certain circumstances. In Tournier case, the court identified four exceptions: (1) There is consent, expressly or implied, by customer; (2) It is the bank s legal obligation, for example by court s order to open access to a the third party to the customer s account; (3) There is public duty for the bank to reveal the customer s account, for example by subpoena from parliament to a bank to provide explanation before the legislators in regard to its customer s account; (4) There is a need for bank to protect its interest. 8 The Indonesian banking law defines bank secrecy as anything that relates to the information about the customer and his account. 9 This law makes 7 Badan Penyehatan Perbankan Nasional (BPPN) in Indonesian. 8...unless the banker is compelled to do so by order of a Court, or the circumstances give rise to a public duty of disclosure, or the protection of the banker s own interests requires it... See Tournier v. National Provincial and Union Bank of England. 9 Law Number 10 of 1998 concerning the Amendment of Law Number 7 of 1992 concerning Banking, article 1 point

6 Ferdinand T. Andi Lolo: Between Keeping Bank Secrecy and Reporting Suspicious... it compulsory for a bank to maintain bank secrecy. However as in the English law this obligation may be set aside under the following circumstances: 10 (1) For tax purpose (article 41); (2) For settlement of bank s loan that was turned over to the Agency for State Loan settlement and auction or the Committee for State Loan Settlement 11 (article 41 a); (3) For the judicial purposes in criminal case (article 42); (4) By request, permission or letters of attorney from the customer or his/her heir (article 44a). The previous law, which in part is still in force (Law Number 7 of 1992 regarding Banking) also sets aside the secrecy under two circumstances: (1) In the civil case between the bank and its customer, bank may provide information of the customer s account to the court (article 43); (2) Within the context of inter-bank information exchange (article 44). The implementation on these exceptions however is slightly different in Indonesian context. In the English law it is the concerned bank itself that is in a position to determine whether or not to set aside its obligation to keep bank secrecy, while in the Indonesian law abstaining the bank does not have such power. The bank may set aside its obligation only after getting permission from Bank Indonesia, the central bank. Bank Indonesia therefore acts as a filter for bank in divulging its customer s data or information. This procedure makes it longer for the third party to access bank customer s account. D. The role of the bank in Anti Money Laundering Drive One of most influential international anti money authority is the Financial Action Task Force (FATF). It is an inter state organization with the objective to develop and to promote policies on the anti money laundering and terrorist finance at the national level as well as at the international level. This task force is a policy making institution that promotes the necessary 10 Law Number 10 of 1998 concerning the Amendment of Law Number 7 of 1992 concerning Banking, article Badan Urusan Piutang dan Lelang Negara/Panitia Urusan Piutang Negara. 80

7 Law Review Volume XI No. 2 - November 2011 political will to reform law and regulations in relation to money laundering terrorist finance. 12 Any country or entity included by the FATF in its blacklist due to inaction or reluctance to support the global effort to fight money laundering will be compelled to consider the impact of such inclusion on its finance and economy. On 22 June 2001 Indonesia was included cited as one of the uncooperative countries with 27 other countries, 13 did not consider as it had no legislation in regard to anti money laundering and money laundering as a crime. FATF further noted that Indonesia imposed no obligation to report suspicious financial transaction to a financial intelligence unit, 14 and that its customer identification methods which were newly introduced applied only for bank and not for non-bank financial institutions. 15 After three years on the list, on 11 February 2005 Indonesia finally managed to be delisted. The FATF observers visiting Indonesia found that Indonesia had significantly improved its anti money laundering regime, as it had among others, passed Law Number 15 of 2002 on money laundering with its subsequent amendments on 2003; establishment the PPATK as the Indonesian Financial Intelligence Unit which as accepted as member of Egmont Group in 2004; and expanded the implementation of the Know Your Customer (KYC) and Suspicious Transaction Reporting (STR). Not only banks were under obligation to observe these practices but also insurance companies, pension funds and other financial institutions had the similar ob- 12 Website FATF, accessed on 12 August FATF: Review to Idetify Non-Cooperative Countries or Territories: Increasing the Worldwide Effectiveness of Anti Money Laundering Measures, can be read fatf-gafi.org/dataoecd/56/41/ pdf, page 15, accessed on 12 August Pusat Pelaporan dan Analisis Transaksi Keuangan or PPATK is a Financial Intelligence Unit as mentioned by the said FATF report. PPATK however was established after the enforcement of Law Number 15 of 2002 concerning the Anti Money Laundering Law, see PPATK site accessed on 12 August FATF: Review to Identify Non-Cooperative Countries or Territories: Increasing the Worldwide Effectiveness of Anti Money Laundering Measures, can be read on accessed on 12 August Other ASEAN countries that were included in the list were the Philippines and Myanmar. 81

8 Ferdinand T. Andi Lolo: Between Keeping Bank Secrecy and Reporting Suspicious... ligations. 16 Indonesia never looked back ever since. On 22 October 2010 the government further enforced a new law, Law Number 8 of 2010 in place of the previous anti-money laundering laws. Under the 2010 law, the bank is not independent and is subordinated to PPATK. As a provider of financial service, 17 it must disclose the PPATK 18 transaction which may categorized as: 19 (1) Suspicious financial transaction; 20 (2) Cash transaction with minimum amount of 500 million Rupiah; (3) Inter state transfer financial transactions. Another evidence of bank subordination to PPPATK is in relation to the temporarily suspension of a transaction. In the event that PPATK find an indication of suspicious financial transaction, the agency has authority to request the bank as financial provider to temporary suspend part or all of the concerned transaction. 21 Even though the law does not expressly stipulate whether or not there is a punitive measure against the financial provider that dishonour the request, the banks must consider the indication of suspicious financial transaction is justified and a crime has occurred, otherwise these face the risk of legal action for aiding and or abetting a crime. The PPATK s right to make a request is inherently setting aside the bank secrecy as cooperation with PPATK is not optional. Arguments on the bank secrecy that is used to avoid the reporting obligation to PPATK can be easily repelled. The lawmaker has anticipated such arguments by granting immunity for banks in their capacity as reporting parties. 16 FATF: Annual and Overall Review of Non-Cooperative Countries or Territories, 10 June 2005, point 29- point 33, p. 7, can be read on: dataoecd/41/26/ pdf, accessed on 12 August See also Kompas Daily 12 February 2005, Indonesia Keluar dari Daftar Hitam FATF [Indonesia Out of FATF Blacklist]. 17 Article 17 paragraph (1) letter a point 1 Law Number 8 of 2010 concerning Prevention and Eradication of Money Laundering. 18 Article 1 point 11 Law Number 8 of 2010: The reporting party is everyone that under this law has obligation to submit report to PPATK. 19 Article 23 paragraph (1) Law Number 8 of Financial Transactions are transactions as defined on article 1 point 5 Law Number 8 of Article 65 paragraph (1) Law Number 8 of

9 Law Review Volume XI No. 2 - November 2011 This immunity is granted to banks, their officials and employees as long as they act in ultimate good faith when carrying out their obligation. This means such report is carried out professionally and, most importantly, there is no abuse of authority in doing so. What banks enjoy are double immunity. 22 Firstly: immunity from sanctions generated by other laws be they civil, criminal or administrative laws. For example the immunity from article 322 of the Indonesian Criminal Code on revealing secret that is supposed to be kept by someone because of his office or profession. The anti money laundering law shows that by giving immunity from other laws the anti money laundering law is superior. Secondly: the immunity also applies to the banks from the beneficiary of their service or other concerned parties. 23 With such extended legal protection it is hoped that banks enjoy a peace of mind in performing their duties because they are protected from legal actions (criminal, civil or administrative) by their customers. D. Limitation on Immunity from Prosecution As discussed above the immunity can be forfeited when there is credible evidence that banks have abuse their authority in performing their reporting obligations. Article 29 of Law Number 8 of 2010 stipulates that: Unless abuse of authority factor is present, the reporting party [in this context is the bank], its official, and employees can not be held responsible either by civil or criminal action, for the execution of its reporting obligation under this law. In this context, the abuse of authority can be determined by two parameters. Firstly, whether or not the execution of the reporting obligation is carried out within the scope of the concerned officials fiduciary duty and secondly whether in doing so such officials is still not beyond the scope of their authority (ultra vires). When the action is still within those two parameters 22 Article 28 and article 29 Law Number 8 of The elucidation of article 29, Law Number 8 of 2010 provides example of the possibility of civil action such as claim of compensation or criminal action as defamation. The aggrieved party on the event of bank reporting to PPATK can also use article 322 of the Indonesian Criminal Law (KUHP) by filing criminal complaint to the Police investigator. 83

10 Ferdinand T. Andi Lolo: Between Keeping Bank Secrecy and Reporting Suspicious... legal immunity can be afforded to them. 84 The principle of fiduciary duty is illustrated in Tournier case when the judges ruled that impliedly when a contract was made between the bank and its customer, the previous is under obligation not to divulge any information in regard to the latter account to the third party. The bank secrecy as stipulated in the Indonesian banking law is also another illustration of the implementation of the principle of fiduciary duty. When there is a legal challenge to the banks that by making report to PPATK they have abused their authority and therefore they violate their fiduciary duty toward their customers, the bank has the burden to prove otherwise. In Smith & Fawcett Ltd, Re (1942), Judge Lord Greene mentioned several aspects that can be used as parameter to gauge whether an action is still within the scope of fiduciary duty. 24 The revelant aspects in regard to the discussion here are: (1) Good faith Although good faith is an abstract concept its implementation can be identified from the action of the banks. When bank making a report to PPATK in regard to its customers transaction observation has to be made on the context of the report. For example, a walk in customer (customer that has no account with the bank) requests a bank officer to open an account and deposit a large sum of cash. The customer s profiling (using the principle of Know Your Customer or KYC) shows that for this type of customer, depositing such amount is unlikely. For this irregularity the officer fills in the report to PPATK while maintaining the bank secrecy (means only legally relevant parties can access the report). This example shows that in executing its reporting obligation, the bank does not breach its fiduciary duty. It is difficult to argue that the bank action is based on bad faith and violation of the customer s 24 Sri Dewi Tambunan, Dilema Tanggung Jawab Direksi PT BUMN atas Kerugian Perusahaan, Studi Kasus PT Cipta Graha Nusantara and PT. Kiani Kertas [The Dilemma on the Responsibility of the Directors of State-owned Company to the Company s Loss. Case Study: PT Cipta Graha Nusantara and PT. Kiani Kertas], Magister of Notary thesis, Faculty of Law the University of Indonesia, Depok, 2009, pp.15, 16.

11 Law Review Volume XI No. 2 - November 2011 trust (mala fide) since in its action to report a suspicious transaction bank act is in accordance to law (observe the law and support the effort to prevent and fight money laundering) (2) Protection of the company s interest. The interest of the company in the context of Smith & Fawcett ltd case also similar to that of the bank. In executing their duties banks have the right to protect their own interest. Furthermore, a bank can be catagorized as a corporation under the Indonesian anti money laundering law. 25 If a bank, as a corporation, fails to perform its duties under anti money laundering law, it is subject to criminal sanction since a corporation is considered as a legal subject under the law. 26 Judges Bankes and Atkins in Tournier case which was decided several years ahead of Smith & Fawcet specifically set aside the duty to keep the bank secrecy if the bank s interest require it. Judge Lord Greene who has a similar view, he pointed out that by protecting its own interest a corporation is fulfilling its fiduciary duty. Law Number 7 of 1992 regarding banking law impliedly concurs with English caselaw. Article 44 makes it possible for banks to exchange information on their customer, therefore a customer with dubious or bad record may be deterred to open account at another bank. (3) Using authority for proper purpose The proper purpose in this context is the action by bank and its personnel is based on the sole motivation to protect the interest of the bank and at the same time to show legal obedience and commitment to fight money laundering. Aside from duty to act within the scope of fiduciary duty, the banks must ensure that their action is still within the scope of duty and function and not categorized as ultra vires. Black s Law Dictionary defines ultra vires 25 Article 1 point 10 Law Number 8 of 2010: Corporation is an organized group of natural persons and or wealth in the form of legal or non legal entity. 26 Article 6 and article 7 Law Number 8 of 2010 stipulate the criminal action committed by a corporation and its punishment. 85

12 Ferdinand T. Andi Lolo: Between Keeping Bank Secrecy and Reporting Suspicious... as an act beyond the scope of the powers of a corporation as defined by its charter or laws of state of incorporation. 27 Parameter to determine whether the ultra vires can be categorized as criminal act is by seeing whether the factor of criminal intention (mens rea) and the realization of such intention (actus reus) are present. 28 E. Conclusion Banking is a business of trust. In the past bank customers, for various reasons, enjoyed the privilege of having sole access to their account without fear of scrutiny from third parties. Banks jealously guarded the bank secrecy principle that allowed them to win the trusts of their customer and in turn to make their business thrive. The global fight against money laundering, however, has somewhat changed the landscape of the bank business. The creed of bank secrecy can no longer be used as shield to protect the customer s transactions that are dubious or suspicious. In Indonesia, where the government through PPATK takes a proactive approach in the fight against money laundering, bank secrecy has to give way to the legal obligation to report suspicious financial transactions. As a protection for banks that have to set aside their duty customers to keep information on their accounts secret, the anti money laundering law provides double immunity for the banks as reporting parties to the PPATK. First immunity is for protection against legal sanctions from other laws and secondly for protection against legal action from customers. The immunity however only applies under limited circumstances. The immunity is afforded to the bank only if in executing its reporting obligation it acts within the scope of fiduciary duty and the action is in line with its authority and function, not beyond it (ultra vires). 27 Henry Campbell, Black s Law Dictionary (St. Paul Minnesota: West Publishing, 1979) p Jerome Hall, General Principles of Criminal Law, 2 nd ed., (Indianapolis: the bobs Merril Company, 1960) pp. 3,

13 Law Review Volume XI No. 2 - November 2011 Bibliography Books and Journals Campbell, Henry, Black s Law Dictionary, West Publishing, St. Paul Minnesota, 1979 Guex, Sebastien The Origins of Swiss Secrecy Law and Its Repercussions for Swiss Federal Policy, The Business History Review, Vol. 74, No. 2 - Summer, 2000 Hall, Jerome, General Principles of Criminal Law, 2 nd ed., the Bobs Merril Company, Indianapolis, 1960 Tambunan, Sri Dewi, Dilema Tanggung Jawab Direksi PT BUMN atas Kerugian Perusahaan, Studi Kasus PT Cipta Graha Nusantara and PT. Kiani Kertas [The Dilemma on the Responsibility of the Directors of State-owned Company to the Company s Loss. Case Study: PT Cipta Graha Nusantara and PT. Kiani Kertas], Magister of Notary thesis, Faculty of Law the University of Indonesia, Depok, 2009 Websites last accessed on 25 August FATF: Annual and Overal Review of Non-Cooperative Countries or Territories, last accessed on 12 August FATF: Review to Idetify Non-Cooperative Countries or Territories: Increasing the Worldwide Effectiveness of Anti Money Laundering Measures, last accessed on 12 August FATF: Review to Idetify Non-Cooperative Countries or Territories: Increasing the Worldwide Effectiveness of Anti Money Laundering Measures, last accessed on 12 August 2011 Regulations Law Number 10 of 1998 concerning the Amendment of Law Number 7 of 1992 concerning Banking Law Number 7 of 1992 concerning Banking 87

14 Ferdinand T. Andi Lolo: Between Keeping Bank Secrecy and Reporting Suspicious... Law Number 8 of 2010 concerning Prevention and Eradication of Money Laundering. Mass Media Kompas Daily 12 February 2005, Indonesia Keluar dari Daftar Hitam FATF [Indonesia Out of FATF Blacklist] English Caselaw Smith & Fawcett Ltd, Re (1942) Tournier v. National Provincial and Union Bank of England, [1924] 1 KB