Pacific money | Economie | Southeast Asia
An investigation by the news magazine Tempo highlights the importance of both a free media and strong financial oversight.
At the beginning of July, Tempo magazine, the leading investigative journalism industry in Indonesia, published a fascinating story called ACT of Betrayal. ACT (Aksi Cepat Tanggap, or Fast Action Response) is a major charity that raises millions of dollars in donations every month. According to the team at Tempo, it was clear that for many years a lot of that was being recycled into executives’ pockets through a variety of frauds. The story is comprehensive, well-reported, and well worth the subscription price.
From 2018 to 2020, ACT collected an average of IDR 540 billion in annual donations (about $36 million at the current exchange rate). Indonesian charities are supposed to use a maximum of 10% of donations to cover their operating expenses, but ACT has been taking nearly twice that to cover executives’ salaries and perks. This included 250 million Indonesian rupiah (more than $16,000) per month for the organization’s head, Ahidin, as well as three cars for his personal use. This is much more than the compensation that executives receive in similar organizations in Indonesia.
But the descent did not stop there. ACT-owned businesses were also making payments on homes and furniture to Ahy Deb and his family that amounted to hundreds of thousands of dollars. The scam was so brazen that Ahyudin agreed to sit down for an interview with Tempo where he defended his actions by saying, “If I don’t have the money, I’m allowed to borrow from the foundation, right?” Not.
Other scams involved building boarding schools and other facilities with inferior materials and substandard building quality. These projects are assumed to have been paid at a premium with the difference between the stated and actual costs taken up and collected. This scam extended to mismanagement of funds held with ACT by Boeing as part of the Lion Air JT-610 crash settlement. About 135 billion Indonesian rupiah ($9 million) was to be used to build schools and other facilities in accordance with the wishes of the victims’ families. But as mentioned by Tempo, ACT either didn’t build it or built it very poorly.
Immediately after the story spread, the government revoked ACT’s license and it could no longer receive donations. The executives were brought in for police questioning, and within days the Indonesian Financial Transaction Reporting and Analysis Center (known by its Indonesian acronym PPATK) announced that it was monitoring the organization for suspicious financial transfers to potential terrorist-linked groups. Bank accounts have been frozen, and investigations are ongoing. With a scandal of this scale and nature and where the perpetrators have incriminated themselves in the pages of Tempo, I can’t imagine that this wouldn’t lead to some serious legal consequences.
But the thing that jumps into all this mess is the critical importance of a free press that can do investigative journalism and hold powerful people and institutions to account. Freedom of the press has come under pressure in recent years, but I think it is fair to say that Indonesian media still have more leeway than some of their regional peers to do this type of journalism. This story underscores the importance of fighting to preserve that space, and makes it clear that doing so is ultimately in the public interest.
The other thing in this story is the role of PPATK, and the regulatory oversight of charitable organizations in general. According to follow-up reports by Tempo, PPATK claims to have been looking into patterns of suspicious financial activity in ACT for many years. However, it seemed they weren’t able to take any concrete action until Tempo broke the story and made the ball roll, at which point the authorities moved very quickly.
This is because, despite what could be a major role in regulating illicit financial activity, the PPATK currently lacks strong investigative powers. It can monitor and report, but it is ultimately up to the relevant law enforcement agencies to act. As Indonesia seeks to deepen its capital markets and attract more financial flows, the potential for illicit financial activity, both domestically and across borders, is also increasing, and requires a stronger supervisory body.
Scandals like these, where regulators and law enforcement have been slow to catch profligate financial deception (ACT’s financial statements are audited and signed off by an accounting firm every year), pose reputational risks in the long run. Aside from the immorality of misusing charitable donations for personal gain, there are larger systemic reasons why the role of media such as Tempo and regulators such as PPATK needs to be protected and strengthened in Indonesia. Hopefully this case will help get real support behind permanent repairs.