Proceedings of the 3rd International Conference of Islamic Finance and Business, ICIFEB 2022, 19-20 July 2022, Jakarta, Indonesia

Research Article

Money Laundering/Financing of Terrorism Risks in the Indonesian Islamic Banking System

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  • @INPROCEEDINGS{10.4108/eai.19-7-2022.2328202,
        author={Kartini Laras Makmur and Ahsanul  Minan},
        title={Money Laundering/Financing of Terrorism Risks in the Indonesian Islamic Banking System},
        proceedings={Proceedings of the 3rd International Conference of Islamic Finance and Business, ICIFEB 2022, 19-20 July 2022, Jakarta, Indonesia},
        publisher={EAI},
        proceedings_a={ICIFEB},
        year={2023},
        month={4},
        keywords={financing of terrorism; islamic banking system; money laundering},
        doi={10.4108/eai.19-7-2022.2328202}
    }
    
  • Kartini Laras Makmur
    Ahsanul Minan
    Year: 2023
    Money Laundering/Financing of Terrorism Risks in the Indonesian Islamic Banking System
    ICIFEB
    EAI
    DOI: 10.4108/eai.19-7-2022.2328202
Kartini Laras Makmur1,*, Ahsanul Minan1
  • 1: Universitas Nahdlatul Ulama Indonesia
*Contact email: laras.makmur@unusia.ac.id

Abstract

The Anti-money laundering/counter financing of terrorism (AML/CFT) rules of several jurisdictions with a robust Islamic finance existence, like Indonesia, are relatively weak, and international standards of AML/CFT measures make no unique arrangement for the Islamic banking system. Moreover, there are still limited parallel studies on the Islamic banking system. This paper aims to present the actual money laundering/financing of terrorism risks of the Islamic banking system's specific features, namely (i) the principle of fully care, not speculative and not manipulative; (ii) the relationship between customers and financial institutions; (iii) the complexity of Islamic banking products. Such research objective will be achieved by performing a descriptive-analytical utilizing document and content analysis from Indonesian experience to examine whether the existing international standards are applicable and adequate for the Islamic banking system. This paper found that a more comprehensive awareness of the money laundering/financing of terrorism risks in the Islamic banking system should be developed to customize reassuring efforts to cultivate the integrity of Islamic banks and ensure the industry against money laundering/financing of terrorism. Furthermore, the Islamic banks should build additional mechanism in determining the money laundering/financing of terrorism risks and implement precautionary standards customized to the nature of their products and services.