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Follow the money


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Presentation by Anna C. Sinaga, Sofi Mardiah,
Center for International Forestry Research,
Follow the money: An integrated law enforcement approach to combat Illegal logging in Indonesia,
International Conference,
Objective: Following the Proceeds of Environmental Crime: Fish, Forests and Filthy Lucre,
Wollongong, February 23, 2010

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Follow the money

  1. 1. "Follow the money"<br />An integrated law enforcement approach to combat Illegal logging in Indonesia<br />Anna C. Sinaga, Sofi Mardiah<br />Wollongong, February 23, 2010<br />
  2. 2. Summary <br />Impacts of illegal logging<br />The current law enforcement approach<br />Proposed law enforcement approach: Follow the money<br />Recommendations<br />
  3. 3. Impacts of illegal logging<br /><ul><li>High deforestation rate</li></ul> During 2003 – 2006, the deforestation rate was 1.17 million ha/year, a total of 3.53 million (Indonesian MoF, 2008)<br />Deforestation Rates, 2000-2005<br /><ul><li>Total forest loss since 2000 : 5.447.800 haAnnual deforestation rate: 1.089.560 ha</li></ul>Deforestation Rates, 2000-2005<br />Annual change in forest cover: 1,871,400 ha<br />Annual deforestation rate: 2.0%<br />Change in defor. rate since '90s: 19.1%<br />Total forest loss since 1990: 28,072,000 ha<br />Total forest losssince 1990: 24.1%<br />Sources : Ministry of Forestry<br />Sources : FAO (world forest 2007)<br />
  4. 4. Impacts of illegal logging<br />The lost of forest revenue amounted to an estimated US$ 3.3 billion yearly (Indonesian MoF, 2006)<br /><ul><li>Between 2003 and 2006, an average of US$2 billion was lost annually to illegal logging (Human Rights Watch)
  5. 5. This loss were equal to the state’s entire spending on health (Human Rights Watch)</li></li></ul><li>Current law enforcement approach<br />Mostly catches small players<br />
  6. 6. Current law enforcement approach<br />Does not fully recover the state loss of forest revenue<br /> - maximum fine is US$ 1 million<br />Fails to address corruption associated with illegal logging <br />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)<br />
  7. 7. Integrated law enforcement approach<br />Research question:<br /><ul><li>In what way can non-forestry legal instruments contribute to appropriate deployment of sanctions to combat illegal logging?</li></li></ul><li>Integrated law enforcement approach<br />Follow the money :<br /> - integrates instruments other than forestry law<br /> - targets the proceeds of crime <br />  leads to the masterminds<br /> - returns the proceeds of crime to the state<br />
  8. 8. Examples<br />Marthias<br />President Director of Surya Dumai Group (2005)<br /><ul><li>Received a timber utilization permit for an oil palm plantation
  9. 9. Neglected to plant oil palm after land clearing
  10. 10. Received 18-month sentence</li></ul>H. Suwarna Abdul Fatah<br />Governor of East Kalimantan<br />(2005)<br /><ul><li>Issued a permit for an oil palm plantation in Berau, East Kalimantan for 1 million ha, beyond the allowable amount.
  11. 11. Received 4-year prison sentence
  12. 12. Fined of US$ 20,000
  13. 13. The use of Anti Corruption law in both cases
  14. 14. The state recovered US$ 35.4 million</li></li></ul><li>Examples<br />TengkuAzmunJaafar (District Head of Pelalawan, Riau) <br /><ul><li>Issued 15 logging permits in Pelalawan regency during 2001-2006 to 15 companies in Riau
  15. 15. Seven of the companies were established by Jaafar’s relatives and did not meet the criteria necessary for forestry enterprises
  16. 16. Jaafar received an 11.5 years imprisonment and was fined of US$ 54,000
  17. 17. Restitution to the state amounted US$128 million</li></li></ul><li>STEPS<br />Corruption & money laundering<br />Illegal logging<br />Gather<br />information<br /><ul><li>the size of the illegal logging
  18. 18. the volume of the illegal logs
  19. 19. the location
  20. 20. Suspicious transaction report (STR)
  21. 21. Estimation of state loss</li></ul>Investigation<br /><ul><li>Collect evidence on illegal logging
  22. 22. identify the perpetrator
  23. 23. Identify STR
  24. 24. Trace assets
  25. 25. Asset freezing</li></ul>Indictment<br />Build a case<br /><ul><li>Trace assets
  26. 26. Asset freezing</li></ul>Prosecution<br />Asset freezing<br />Ruling<br />Imprisonment<br />Asset recovery<br />
  27. 27. ILEA scheme and actors<br />Financial institutions<br />Forestry agency<br />Civil society<br />Financial intelligence unit<br />Auditor agency<br />Law enforcement<br />Information/data<br />Law enforcement : Police, Attorney general, KPK, Forestry department investigator<br />Coordination<br />Investigation<br />
  28. 28. ILEA scheme and actors<br />Financial Institutions<br />Forestry agency<br />Civil society<br />Financial Intelligence Unit<br />Auditor agency<br />Law Enforcement<br />Information/Data<br />Law enforcement : Police, Attorney general, KPK, Forestry department investigator<br />coordination<br />investigation<br />
  29. 29. Constraints<br />Conventional paradigm in tackling illegal logging problem<br />Little history of cooperation among relevant actors<br />Lack of capacity in using the “follow the money” approach <br />
  30. 30. Opportunities<br />Regulatory frameworks are available<br />Relevant institutional structures are available<br /> - e.g. The anti-corruption commission (KPK), the financial intelligence unit<br /><ul><li>Existing international agreements could facilitate joint enforcement to address transnational crimes </li></li></ul><li>Achievement<br /><ul><li>Central Bank of Indonesia adopted our recommendations in Circulation Letter Number No.11/31/DPNP on Implementing Anti Money Laundering Program:
  31. 31. Types of forestry documents required from customers
  32. 32. The use of GIS analysis in conducting Customer Due Diligence</li></li></ul><li>Recommendations<br />Enhance cooperation between law enforcement agencies, financial intelligence unit, financial institutions, forestry agencies, and audit agencies<br />Build international cooperation with countries with similar problems<br />Build capacity to use “follow the money” instruments<br />
  33. 33. Thank youTerimakasih<br /><br />