follow the money

THINKING beyond the canopy

"Follow the money"

Anna C. Sinaga, Sofi Mardiah

Wollongong, February 23, 2010

An integrated law enforcement approach to combat Illegal logging in Indonesia

THINKING beyond the canopy

Summary

Impacts of illegal logging The current law enforcement approach Proposed law enforcement approach: Follow the money Recommendations

THINKING beyond the canopy

Impacts of illegal logging High deforestation rate

During 2003 – 2006, the deforestation rate was 1.17 million ha/year, a total of 3.53 million (Indonesian MoF, 2008)

Deforestation Rates, 2000-2005• Total forest loss since 2000 : 5.447.800

haAnnual deforestation rate: 1.089.560 ha

Sources : Ministry of Forestry

Deforestation Rates, 2000-2005

Annual change in forest cover: 1,871,400 haAnnual deforestation rate: 2.0%Change in defor. rate since '90s: 19.1%Total forest loss since 1990: 28,072,000 haTotal forest loss since 1990: 24.1%

Sources : FAO (world forest 2007)

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The lost of forest revenue amounted to an estimated US$ 3.3 billion yearly (Indonesian MoF, 2006)

• Between 2003 and 2006, an average of US$2 billion was lost annually to illegal logging (Human Rights Watch)

• This loss were equal to the state’s entire spending on health (Human Rights Watch)

Impacts of illegal logging

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Current law enforcement approach

Mostly catches small players

Perpetrators Total PercentageHigh level(police officers, prosecutors, forestry officers, contractors)

49 23.90 %

Low level(operators, drivers, farmers)

156 76.10 %

Total 205 100 %Source : ICW, 2008

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Current law enforcement approach

Does not fully recover the state loss of forest revenue

- maximum fine is US$ 1 million Fails to address corruption associated with illegal logging

Jakarta, June 5 (ANTARA): Forestry Minister MS Kaban said judicial officials should treat illegal logging cases as corruption cases because the practice causes losses to the state. "I hope illegal logging will be classified as corruption because it causes losses to the state. So far, judges always link illegal logging to technical and administrative matters. This is not right because illegal logging causes losses to the state”. (2008)

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Integrated law enforcement approach

Research question:- In what way can non-forestry

legal instruments contribute to appropriate deployment of sanctions to combat illegal logging?

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Integrated law enforcement approach

Follow the money :

- integrates instruments other than forestry law

- targets the proceeds of crime

leads to the masterminds

- returns the proceeds of crime to the state

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Examples

•The use of Anti Corruption law in both cases•The state recovered US$ 35.4 million

H. Suwarna Abdul FatahGovernor of East Kalimantan(2005)• Issued a permit for an oil palm

plantation in Berau, East Kalimantan for 1 million ha, beyond the allowable amount.

• Received 4-year prison sentence• Fined of US$ 20,000

MarthiasPresident Director of Surya Dumai

Group (2005)• Received a timber utilization

permit for an oil palm plantation• Neglected to plant oil palm after

land clearing• Received 18-month sentence

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Examples

Tengku Azmun Jaafar (District Head of Pelalawan, Riau) • Issued 15 logging permits in Pelalawan

regency during 2001-2006 to 15 companies in Riau

• Seven of the companies were established by Jaafar’s relatives and did not meet the criteria necessary for forestry enterprises

• Jaafar received an 11.5 years imprisonment and was fined of US$ 54,000

• Restitution to the state amounted US$128 million

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Corruption & money launderingIllegal logging

Gatherinformation

Investigation

Indictment

Prosecution

Ruling

• the size of the illegal logging • the volume of the illegal logs • the location

•Collect evidence on illegal logging

• identify the perpetrator

Build a case

Imprisonment

• Suspicious transaction report (STR)

• Estimation of state loss

• Identify STR• Trace assets• Asset freezing

•Trace assets•Asset freezing

Asset freezing

Asset recovery

STEPS

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Information/data

Coordination

Investigation

Forestry agency

Civil society

Financial institutions

Law enforcement

Auditor agency

Financial intelligence unit

Law enforcement : Police, Attorney general, KPK, Forestry department investigator

ILEA scheme and actors

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Information/Data

coordination

investigation

Forestry agency

Civil society

Financial Institutions

Law Enforcement

Auditor agency

Financial Intelligence Unit

ILEA scheme and actors

Law enforcement : Police, Attorney general, KPK, Forestry department investigator

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Constraints

Conventional paradigm in tackling illegal logging problem

Little history of cooperation among relevant actors

Lack of capacity in using the “follow the money” approach

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Opportunities

Regulatory frameworks are available

Relevant institutional structures are available

- e.g. The anti-corruption commission (KPK), the financial intelligence unit

Existing international agreements could facilitate joint enforcement to address transnational crimes

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Achievement

- Central Bank of Indonesia adopted our recommendations in Circulation Letter Number No.11/31/DPNP on Implementing Anti Money Laundering Program:

Types of forestry documents required from customers

The use of GIS analysis in conducting Customer Due Diligence

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Recommendations

Enhance cooperation between law enforcement agencies, financial intelligence unit, financial institutions, forestry agencies, and audit agencies

Build international cooperation with countries with similar problems

Build capacity to use “follow the money” instruments

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Thank youTerima kasihThank you

Terima kasih

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