THINKING beyond the canopy "Follow the money" Anna C. Sinaga, Sofi Mardiah Wollongong, February 23, 2010 An integrated law enforcement approach to combat Illegal logging in Indonesia

THINKING beyond the canopy Summary  Impacts of illegal logging  The current law enforcement approach  Proposed law enforcement approach: Follow the money  Recommendations

THINKING beyond the canopy Impacts of illegal logging  High deforestation rate During 2003 – 2006, the deforestation rate was 1.17 million ha/year, a total of 3.53 million (Indonesian MoF, 2008) Deforestation Rates, Total forest loss since 2000 : ha Annual deforestation rate: ha Deforestation Rates, Total forest loss since 2000 : ha Annual deforestation rate: ha Sources : Ministry of Forestry Deforestation Rates, Annual change in forest cover: 1,871,400 ha Annual deforestation rate: 2.0% Change in defor. rate since '90s: 19.1% Total forest loss since 1990: 28,072,000 ha Total forest loss since 1990: 24.1% Deforestation Rates, Annual change in forest cover: 1,871,400 ha Annual deforestation rate: 2.0% Change in defor. rate since '90s: 19.1% Total forest loss since 1990: 28,072,000 ha Total forest loss since 1990: 24.1% Sources : FAO (world forest 2007)

THINKING beyond the canopy  The lost of forest revenue amounted to an estimated US$ 3.3 billion yearly (Indonesian MoF, 2006) Between 2003 and 2006, an average of US$2 billion was lost annually to illegal logging (Human Rights Watch) This loss were equal to the state’s entire spending on health (Human Rights Watch) Impacts of illegal logging

THINKING beyond the canopy Current law enforcement approach  Mostly catches small players PerpetratorsTotalPercentage High level (police officers, prosecutors, forestry officers, contractors) % Low level (operators, drivers, farmers) % Total % Source : ICW, 2008

THINKING beyond the canopy Current law enforcement approach  Does not fully recover the state loss of forest revenue - maximum fine is US$ 1 million  Fails to address corruption associated with illegal logging 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)

THINKING beyond the canopy Integrated law enforcement approach  Research question: - In what way can non-forestry legal instruments contribute to appropriate deployment of sanctions to combat illegal logging?

THINKING beyond the canopy Integrated law enforcement approach  Follow the money : - integrates instruments other than forestry law - targets the proceeds of crime  leads to the masterminds - returns the proceeds of crime to the state

THINKING beyond the canopy Examples The use of Anti Corruption law in both cases The state recovered US$ 35.4 million H. Suwarna Abdul Fatah Governor of East Kalimantan (2005) Issued a permit for an oil palm plantation in Berau, East Kalimantan for 1 million ha, beyond the allowable amount. Received 4-year prison sentence Fined of US$ 20,000 Marthias President Director of Surya Dumai Group (2005) Received a timber utilization permit for an oil palm plantation Neglected to plant oil palm after land clearing Received 18-month sentence

THINKING beyond the canopy Examples Tengku Azmun Jaafar (District Head of Pelalawan, Riau) Issued 15 logging permits in Pelalawan regency during to 15 companies in Riau Seven of the companies were established by Jaafar’s relatives and did not meet the criteria necessary for forestry enterprises Jaafar received an 11.5 years imprisonment and was fined of US$ 51, 55 million Restitution to the state amounted US$128 million

THINKING beyond the canopy Corruption & money laundering Illegal logging Gather information Investigation Indictment Prosecution Ruling the size of the illegal logging the volume of the illegal logs the location Collect evidence on illegal logging identify the perpetrator Build a case Imprisonment Suspicious transaction report (STR) Estimation of state loss Identify STR Trace assets Asset freezing Trace assets Asset freezing Asset recovery STEPS

THINKING beyond the canopy Information/data Coordination Investigation Forestry agency Civil society Financial institutions Law enforcement Auditor agency Financial intelligence unit Law enforcement : Police, Attorney general, KPK, Forestry department investigator ILEA scheme and actors

THINKING beyond the canopy Information/Data coordination investigation Forestry agency Civil society Financial Institutions Law Enforcement Auditor agency Financial Intelligence Unit ILEA scheme and actors Law enforcement : Police, Attorney general, KPK, Forestry department investigator

THINKING beyond the canopy Constraints  Conventional paradigm in tackling illegal logging problem  Little history of cooperation among relevant actors  Lack of capacity in using the “follow the money” approach

THINKING beyond the canopy Opportunities  Regulatory frameworks are available  Relevant institutional structures are available - e.g. The anti-corruption commission (KPK), the financial intelligence unit  Existing international agreements could facilitate joint enforcement to address transnational crimes

THINKING beyond the canopy Achievement - Central Bank of Indonesia adopted our recommendations in Circulation Letter Number No.11/31/DPNP on Implementing Anti Money Laundering Program: Types of forestry documents required from customers The use of GIS analysis in conducting Customer Due Diligence

THINKING beyond the canopy Recommendations  Enhance cooperation between law enforcement agencies, financial intelligence unit, financial institutions, forestry agencies, and audit agencies  Build international cooperation with countries with similar problems  Build capacity to use “follow the money” instruments

THINKING beyond the canopy Thank you Terima kasih