December 2, 2009

Recommendations

To the Government of Indonesia

Authorities should press banks to enforce existing requirements that they identify their customers and monitor and report suspicious transactions, particularly those involving senior forestry and administration officials. Law enforcement officials should pursue legal avenues for asset forfeiture both domestically and internationally to recoup the proceeds of illegal logging and corruption.
Prosecutors, including the KPK, should use anti-money laundering and anti-corruption laws to hold accountable those trafficking in illegal logging funds or engaging in graft to further illegal logging. Law enforcement officials should actively coordinate across national boundaries to request legal assistance from law enforcement and financial authorities in countries where fugitives reside or where proceeds of crime are deposited.
The minister of forestry should end flawed interpretations of forestry law that shield forest license holders from prosecution.

The minister of forestry should renew the government’s commitment to quickly establish mechanisms for timber and revenue tracking through the European Union’s Forest Law Enforcement, Governance, and Trade (FLEGT) initiative, including completing negotiations for a Voluntary Partnership Agreement (VPA) that would prohibit the importation of illegal wood into the EU.
The ministry should institute a mandatory, sector-wide system for timber and revenue tracking to include all timber, including that produced from land-clearing and plantations. Tracking systems should extend all the way to the point of export, and not stop at the mill gate. A formal system of independent monitoring to ensure tracking mechanisms are functional is also essential. Such monitoring should include all elements in the commodity and revenue chain, but efforts should be proportional to the risks of non-compliance. The monitoring should be undertaken at regular intervals but allow frequent, unannounced checks, and should also include an assessment of the effectiveness of corrective action taken to address non-compliance. A summary of monitoring findings should be made publicly available.
All relevant ministries should delay new carbon-financing projects until adequate tracking systems are in place. They should also insist that any new such projects undergo public procurement and a rigorous, internationally recognized certification process.

The Ministry of Forestry should enforce the Freedom of Information Act and live up to its own commitments to transparency. Ministry officials should devise and implement systems that guarantee timely public access to timber and revenue data and enforce sanctions against agencies that do not comply with transparency regulations. Data compiled by the Forest Monitoring and Assessment System (FOMAS) should be made publicly available.

The new national parliament should amend the recently passed Anti-Corruption Court law to repeal the expansion of the court to the district and provincial levels until adequate capacity and resources are available, as well as rigorous oversight to ensure the independence of the court. Amendments should also be made to reinstate the role of ad-hoc judges on the panel. The selection process for the judges should be specified in law and be transparent in order to safeguard judicial independence in the court.
National and local parliaments should pass legislation to remove conflicts of interest by prohibiting the ownership of forestry sector businesses by government officials, including those in forestry agencies, other civilian administration agencies, parliament, police, and the military.

The Ministry of Health should improve the transparency of health budgets and collection of health outcome data at the district level so that citizens can hold their government accountable for public service spending.

To ensure that they are not complicit in illegal logging, countries that purchase significant quantities of Indonesian wood products should pass laws prohibiting trafficking in illegal timber. The EU should immediately pass the regulation currently being debated that would require documentation of legality to ensure illegal timber does not enter European markets.

Governments should ensure that their private financial institutions are not receiving funds from illegal logging and corruption and assess penalties for non-compliance. A key step is enforcing existing banking laws requiring enhanced due diligence and monitoring of suspicious transactions for accounts held by senior government officials or their close family members and business associates. Particular attention should be given to individuals who pose a heightened risk, such as key officials in natural resource ministries and regional offices, parliamentarians, provincial governors and district heads, military and police officers, and judges and prosecutors.
Governments should use anti-money laundering and anti-corruption laws to assist in asset forfeiture for crimes committed in foreign jurisdictions.

Donors should avoid shortcuts on carbon-finance “readiness” criteria and instead ensure that rigorous, transparent and enforceable procedures for timber and revenue tracking from pre-harvest to point of export for all forms of timber, as well as safeguards for performance-based payment systems, are in place before financing carbon projects.
Consumer countries should assist in building internationally recognized certification entities for such projects, and insist on independent third-party verification of performance.