Citibank Indonesia hit by corruption scandal

Indonesian authorities launched a money laundering investigation at Citibank on Monday 18th April, amid allegations that several public officials had accounts with suspiciously large balances at the bank.

This investigation is connected to another corruption scandal at Citibank, involving one of its of high value client managers. Inong Malinda, aka Malinda Dee, is alleged to have embezzled at least Indonesian Rp 17 billion (US$2 million) from Citibank customers and laundered the money through material purchases, such as luxury cars, and an investment company.

At the moment, three victims have filed a report with the police, but more are expected to come forward. It is believed that the scheme was carried out by a team, and a police spokesperson, Irein Anton Bachrul Alam said they have so far questioned ten Citibank employees.

Citibank has confirmed that all those involved have been fired and that the victims' money will be placed. “We will replace all the money lost by customers due to these illegal transactions in timely manner” Citibank's Country Head of Corporate Affairs Ditta Amahorseya said.

Indonesia's anti money laundering agency, the Financial Transaction Reports and Analysis Center (PPATK) is leading the investigation. Chairman Yunus Husein said on Friday 15th April, "The watchdog wants to verify indications that public officials are laundering their money at the bank. That's why, as of Monday, we will deploy our investigators to look into the bank's accounts."

Yunus said the PPATK would be investigating Citibank's compliance with the Money Laundering Law, which includes a requirement to exercise due diligence on “politically exposed” customers, such as public officials.

The PPATK found indications that public officials were among Malinda's clients in Citibank's Citigold programme, which requires customers to have a balance of at least Indonesian Rp 500 million (US $60,000).

“There are indications that there was a public official who had at least Rp 2 billion [US$230,000] at Citibank. We should be suspicious about the source of his money,” said a source at PPATK who declined to be named.

Under existing regulations, banks and financial institutions are required to tell the PPATK about suspicious transactions worth more than Rp 500 million, particularly those related to the accounts of public officials and their families.

Over 50 officials who were clients of Malinda are suspected of being linked wih the fraud case, according to PPATK officials.

Transparency International ranks Indonesia 110th in the world in terms of corruption, making it one of the most corrupt countries in the world. It is ranked 20th in the Asia Pacific region.

Sources: Jakarta Post, Jakarta Updates, Transparency International

For more information, see the Menas ACCS website, here.