Scandal at Indonesian charity Aksi Cepat Tanggap (ACT) – The Diplomat

Pacific money | Economy | Southeast Asia

An investigation by the Tempo news magazine highlights the importance of both a free media and an authorized financial watchdog.

In early July, Tempo magazine, a longtime leader in Indonesian investigative journalism, published a blockbuster titled ACT of Betrayal in English. ACT (Aksi Cepat Tanggap, or Fast Action Response) is a major charity that raises millions of dollars in donations every month. As reports the Tempo team, over the years, many of them seem to have made their way back into the pockets of executives through various scams. The story is thorough and well-lit, and well worth the subscription price.

From 2018 to 2020, ACT has collected an average of IDR 540 billion in annual donations (that’s about US$36 million at current exchange rates). Indonesian charities are expected to use a maximum of 10% of donations to cover their operating expenses, but ACT has taken nearly double that for executive salaries and benefits. This included 250 million Indonesian rupiah (over US$16,000) per month for the chairman of the organization, Ahyudin, as well as three cars for his personal use. This is much more than the remuneration received by executives in comparable organizations in Indonesia.

But the fight didn’t stop there. Companies owned by ACT also made payments for houses and furniture for Ahjudin and his family, totaling hundreds of thousands of dollars. The scam was so blatant that Ahyudin agreed to give an interview with Tempo where he defended his actions by saying, “If I don’t have money, I’m allowed to borrow from the fund, right?” No, it’s not.

Other scams involve the construction of boarding schools and other facilities from low-grade materials and poor-quality construction. Presumably, these projects were billed at a surcharge, and the difference between reported and actual costs was withdrawn and appropriated. This scam has been extended to misappropriation of funds deposited with ACT by Boeing as part of the Lion Air JT-610 accident settlement. About 135 billion Indonesian rupiah ($9 million) was to be used to build schools and other facilities in accordance with the wishes of the victims’ families. But according to Tempo, ACT either didn’t build them or built them very poorly.

Immediately after this story became known, the government revoked ACT’s license and she can no longer accept donations. The executives were taken to police for questioning, and a few days later, the Indonesian Financial Transaction Reporting and Analysis Center (known by its Indonesian acronym PPATK) announced that it was monitoring the organization for suspicious financial transfers to groups with potential terrorist ties. Bank accounts have been frozen and an investigation is underway. I cannot imagine that with a scandal of this magnitude and nature, when the perpetrators exposed themselves on the pages of Tempo, this will not lead to serious legal consequences.

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But what stands out in all this confusion is the critical importance of a free press that can investigative journalism and hold powerful people and organizations accountable. Press freedom has come under pressure in recent years, but I think it’s fair to say that the Indonesian media still has more space than some of theirs. regional colleagues engage in such journalism. This story highlights the importance of fighting to preserve this space and demonstrates that it is ultimately in the public interest.

Another thing in this story is the role of PPATK and the regulatory oversight of charities in general. According to subsequent reporting by Tempo, PPATK says it has been looking into ACT’s suspicious financial activity schemes for years. However, it appears that they were unable to take any concrete action until Tempo broke the story and launched the case, at which point the authorities acted fairly quickly.

This is because while the PPATC can play a key role in regulating illicit financial activity, it currently lacks strong investigative powers. It can track and report, but it is ultimately up to the appropriate law enforcement to take action. As Indonesia seeks to deepen its capital markets and attract more financial flows, the potential for illicit financial activity both at home and abroad is also increasing and requires stronger controls.

Scandals like this, in which regulators and law enforcement have been slow to record wasteful financial harassment (ACT’s financial statements have been audited and signed off annually by an accounting firm), pose a long-term reputational risk. Beyond the immorality of misusing charitable donations for personal gain, there are more serious systemic reasons why the role of media outlets like Tempo and regulators like PPATK needs to be protected and strengthened in Indonesia. We hope that this case will help to get real support for long-term reforms.