Settlement Mechanism of Banking Fraud and the Role of the Financial Services Authority in Indonesia

Abstract

The development of technology and digitalization in Indonesia in recent years has been very rapid. In the era of technology disruption, every industry must be ready to adapt to face dynamic changes. The banking industry inevitably has to adapt to existing technological developments. Unfortunately, the developments are also followed by the growth of various frauds in banking. In response to this, Indonesian Financial Services Authority namely Otoritas Jasa Keuangan (OJK) demand banking industry to improve the reliability of Information Technology infrastructure. Several recent cases of mislaid customer funds show several loopholes in the existing banking security system. Customarily, customers who experience similar cases have reported the matter directly to the police authority, which in turn having extensive investigation process. In this paper, authors try to explain the role of OJK in improving the issues settlement, including by improving the banking system. Data is collected from a series of major cases of embezzlement in Indonesian banking and also from Financial Services Regulations to see the role that could be improved. The main conclusions are to report any irregularities to OJK in the first place instead to the police because Financial Services in Indonesia already has its own supervisory agency, and there needs to be massive socialization to customers regarding the reporting mechanism.