TPPU: Business Risks Often Considered Not the Company’s Concern

Many directors and business owners, especially in non-financial sectors, believe that Money Laundering Crimes (TPPU) are the concern of banks or financial institutions.

They assume, “We only buy and sell goods, provide services, and don’t deal with illegal cash.” This perception is precisely the biggest risk gap.

In practice, money laundering crimes rarely appear in the form of clearly illegal cash. The risk enters through seemingly normal vendor invoices, service transactions that are difficult to verify, or long-standing business relationships that have never been reviewed.

Often, money laundering cases uncovered through audits, investigations, or examinations by the Corruption Eradication Commission (KPK) and law enforcement agencies have already grown in scale, and their impact is no longer easy to control.

What Is TPPU?

In Article 1 point 1 of the TPPU Law, money laundering is defined as:

Money Laundering is any act that fulfills the elements of a criminal offense in accordance with the provisions of this Law.

In practical business language, TPPU is not just the activity of storing illegal money.

TPPU is a process to make assets originating from criminal activities (such as corruption, fraud, narcotics trafficking, tax evasion) appear legitimate in the eyes of the law and the banking system.

The focus lies on the word “process.” This process requires intermediaries, and this is where private businesses that are not vigilant can become involved, either intentionally or unintentionally.

The point is, when your company receives payments, channels funds, or receives investments from sources that turn out to be proceeds of crime, the company can be exposed to TPPU.

Those transactions indirectly function to “cleanse” the origin of those illegal funds. This includes relations with vendors, joint venture partners, even buyers of company assets.

Legal Basis of TPPU

The main legal basis in Indonesia is Law Number 8 of 2010 on the Prevention and Eradication of the Crime of Money Laundering.

This law is reinforced by implementing regulations from the Financial Services Authority (OJK) for the financial sector and PPATK for the reporting of suspicious financial transactions.

The most crucial provisions for corporations to understand are Articles 6 and 7 of the TPPU Law. These articles firmly state that corporations can be criminally liable for Money Laundering Crimes.

Sanctions may take the form of fines amounting to hundreds of billions of rupiah up to revocation of business licenses. Furthermore, directors and management can be held personally criminally liable.

In practice, ignorance or claims of “unintentional conduct” are very difficult to use as a defense if the company is proven to have failed to apply the principle of prudence (due diligence).

From this, it is clear that compliance with TPPU and Anti-Money Laundering (AML) regulations is no longer optional. It is a basic prerequisite for business continuity.

From this, it is clear that compliance with TPPU and Anti-Money Laundering (AML or APU) regulations is no longer an option. It is a basic prerequisite for the sustainability of company operations.

Stages of the Money Laundering Process

According to Hukum Online, the money laundering process consists of three main stages: placement, layering, and integration. In business practice, these three stages often do not appear separately.

1. Placement

Illegal money is first introduced into the financial system.

In the business world, this may appear as large cash deposits into the company’s account for “working capital,” payments for orders far above market prices, or investments from parties with unclear backgrounds. Companies that are in urgent need of funds often ignore due diligence on the source of these funds.

2. Layering

Funds are transferred through various accounts and transactions to obscure their origin.

Here, companies are often used as tools. Activities may include transfers between group companies for fictitious transactions, purchases of assets with inflated prices, or complex international trade transactions.

Treasury or finance divisions that only execute instructions without critically questioning the origin of funds become the weak point.

3. Integration

The now “clean” money is returned to the main perpetrator in a legal form.

This could be in the form of dividends from the company used as a vehicle, payment of fees for fictitious consultancy contracts, or purchase of company shares. At this stage, the money is already difficult to distinguish from legitimate business income.

What management often fails to realize is that when their company is used for the integration stage, the financial statements will show profitability from fictitious activities, which poses risks during audits and in tax obligations.

Examples of TPPU

The most common examples of TPPU encountered in practice are not complex schemes, but administrative practices that appear ordinary. For example:

1. Over-Invoicing and Under-Invoicing

A subsidiary in Indonesia sells raw materials to its parent company overseas at prices far below market value. The difference is stored in the parent company’s overseas account.

Illegal funds are then used to “pay” the remainder, so that it appears as if the transaction was conducted at a fair price.

The company appears to be at a loss in Indonesia, but dirty funds have been disguised within a common international trade mechanism.

2. Fictitious Project Financing

A property developer receives an injection of investment funds from a third party to build a shopping center. Project documents are complete, but in reality, the project budget is inflated.

The excess funds are then disbursed and returned to the original investor, while the physical project proceeds using the actual budget.

The developer company believes it is merely receiving project financing, but in fact has been used to integrate illegal funds into property assets with real value.

3. Other Suspicious Transactions and Patterns

Unusual transactions also frequently occur, such as repeated payments to the same party with different descriptions, or accelerated payments without a strong business basis.

Other suspicious patterns include requests to split invoices, use of third-party accounts, and sudden changes in payment methods. The risk arises not from a single indicator, but from the accumulation of ignored red flags.

Can Private Companies Be Charged Under TPPU Articles?

The answer: Yes, they can.

In many cases, private companies are entangled in TPPU not because of an initial intent to commit a crime, but because they become tools for money laundering. Common scenarios include:

• Becoming a Tool
  A company is intentionally established or utilized by perpetrators to mix illegal funds with legitimate income. For example, a business with high cash flow and large transaction volume.
• Becoming an Unaware Intermediary
  Due to weak Know Your Customer (KYC) and Due Diligence procedures, the company receives payments from clients or partners who turn out to be using illegal funds. When those funds are transferred to pay suppliers or for investment, the company has become a link in the layering chain.
• Becoming a Party “Deemed to Know”
  The law can ensnare if the company party “should have known” that the transaction was related to proceeds of crime. If the control system is poor, financial reporting is irregular, and business partners are never verified, the argument of “not knowing” in court will be very weak. Such negligence mayb be considered a form of involvement.

Directors and management have a responsibility to protect the company from TPPU risks. Their negligence can lead to personal criminal liability.

Risks for the Business Sector

TPPU risks for companies are multidimensional.

• Legal risk: From a legal perspective, the company and its management can face criminal proceedings, civil lawsuits, and administrative sanctions. However, in many cases, reputational risk becomes the most damaging impact.
• Reputational risk: This risk emerges long before a court verdict. When a company’s name is associated with TPPU, the trust of business partners, financial institutions, and investors can vanish in a short time.
• Operational risk: The operational impact of being involved in TPPU is no less significant. Account freezes or prolonged investigations can paralyze business activities even before any court decision is issued.

Impact on the National Economy

At a macro level, TPPU practices involving corporations cause:

• Market Distortion and Unfair Competition: Companies used as money laundering tools can sell goods/services at very low prices because margin is not the main goal. They can flood the market and eliminate competitors who operate healthily. This damages the investment climate and innovation.
• Weakening of Economic System Credibility: When TPPU cases are widespread, the trust of foreign and domestic investors in the stability of Indonesia’s financial system will decline. They will see high regulatory and reputational risks, leading to capital flight or increased cost of capital.
• Fiscal Losses to the State: Money that is “laundered” is usually not reported accurately, causing the state to lose potential significant tax revenue. Meanwhile, proceeds of crime actually drive inflation in certain sectors like property.

TPPU Prevention & Detection Strategies

Preventing TPPU is an investment in good governance to protect the company in the long term. The following practical approaches can be implemented:

1. Tone from the Top & Governance

Commitment must start from the Board of Commissioners and Directors. They must establish clear AML policies and socialize them.

The establishment of an internal AML or APU/PPT (Anti-Money Laundering and Terrorism Financing Prevention) Work Unit is a concrete step that can be taken, even for medium-sized companies.

2. Know Your Customer (KYC) & Enhanced Due Diligence (EDD)

The process of identifying and verifying business partners must not be neglected, especially for high-value, complex, or unusual transactions. Background checks on new vendors, clients, and investors are a must.

3. Ongoing Transaction Monitoring

Accounting and financial systems must have red flags for suspicious transactions, such as transactions inconsistent with business profiles, large cash deposits without clear basis, or transaction patterns that suddenly change.

4. Training and Awareness

Regular training for all employees (especially those working in finance, procurement, sales, and compliance departments) is crucial to build the ability to recognize signs of money laundering. They are the company’s first line of defense.

5. Proactive Internal Audit Role

The internal audit function must go beyond ordinary financial compliance checks. The effectiveness of AML or APU/PPT procedures needs to be tested periodically, with the courage to question anomalous transactions, regardless of the parties involved.

6. Reconciliation and Documentation Management

Complete documentation for every transaction is the key to proof. If an investigation occurs someday, the company can show that it has taken reasonable steps to ensure the validity of the transaction.

Remember, the cost of this prevention is far cheaper than the cost of handling one TPPU case, both in terms of fines, lawyer fees, and business losses from halted operations.

Conclusion

TPPU is not an exclusive issue for the banking or financial services sector. It is a governance risk inherent in almost all business models in Indonesia.

In practice, TPPU problems rarely start from malicious intent, but rather from lax processes, untested assumptions, and oversight that is not prioritized.

Remember! Vigilance against TPPU is not about distrust, but about maturity in risk management.

In an increasingly interconnected and transparent economy, building a strong compliance fortress becomes a competitive advantage that strengthens corporate resilience and credibility.

FAQ: TPPU and Its Risks for the Business World

1. “Our company operates in the real sector, not financial services. Are we at risk of being targeted by money launderers?”

Very much at risk. In fact, the real sector (contractors, trade, manufacturing, property, commodities) is the main target for the layering and integration stages. Perpetrators look for companies with plausible transaction flows and large volumes to “launder” their funds.

Activities such as material purchases, payments for consultant services, or export-import transactions whose value is easily inflated (over/under invoicing) are gaps often exploited. If a company has weak financial controls and is eager for new projects or investments, the risk of being exploited increases.

2. Can a company be charged with TPPU even if it is not the predicate offender?

Yes, it can. A company does not have to be the perpetrator of the predicate crime to be charged under TPPU articles. In law enforcement practice, a company can be viewed as a party that assists, facilitates, or allows money laundering to occur.

3. What business activities most often become entry points for TPPU risk?

TPPU risk most often arises in transactions with third parties, especially services and vendors. Transactions with large values, complex payment structures, use of intermediaries, and services whose economic benefit is difficult to measure become the most vulnerable areas.

Risk increases when such transactions are approved without adequate analysis of reasonableness