The central banks of Indonesia and the United Arab Emirates (UAE) have signed an agreement to boost co-operation on digital financial innovation and payment systems.
Bank Indonesia and the Central Bank of the UAE (CBUAE) agreed a Memorandum of Understanding (MoU) to work closely together across three main areas: digital innovation in payments and financial services to enable more efficient and secure transactions; cross-border payment systems including retail payments; and frameworks of anti-money laundering (AML) and combatting the financing of terrorism (CFT).
The MoU focuses on boosting co-operation in payment systems and fintech innovation, ‘including conventional and Islamic finance based on trust, mutual understanding and the principle of reciprocity’, according to a press release.
The central banks are looking to pursue joint initiatives to examine cross-border payment systems – an increasingly hot topic among central banks worldwide – and encourage the development of fintech companies and structures in both nations.
Tackling money laundering
The announcement puts emphasis on tackling money laundering – the practice of legitimising the proceeds of crime by filtering them into the regular economy to disguise their illegal origin.
Bank Indonesia (BI) governor Perry Warjiyo said the MoU demonstrated his authority’s support for government efforts as a member of the Paris-headquartered Financial Action Task Force on Money Laundering (FATF) and BI’s ‘commitment to combat money laundering and terrorism financing, while fulfilling FATF recommendations and guidelines’.
CBUAE governor H.E. Khaled Mohamed Balama, meanwhile, said the MoU “reflects the CBUAE’s strategy of developing the most efficient payment systems, and working with partners to enforce global regulations to enhance confidence in the UAE financial market.” He said it also “demonstrates the clear objective of bringing together like minds to find new financial solutions and to strengthen the joint efforts against illicit financial activity.”
Other international payments initiatives that the countries are involved in include, for Indonesia, a pilot cross-border QR payment linkage launched with Bank of Thailand (BOT) in August; and, for the UAE, its central bank and China’s central bank joined forces with the equivalent authorities in Hong Kong and Thailand earlier this year to investigate the potential for central bank digital currency (CBDC) use in cross-border foreign currency payments (the second phase of ‘Project Inthanon-LionRock’, a CBDC project initiated by the Hong Kong Monetary Authority and Bank of Thailand).
‘BI-FAST’ payments infrastructure to launch
BI, meanwhile, is gearing up for the launch next month of ‘BI-FAST’, a national retail payment infrastructure to facilitate retail payments in ‘real time, securely, efficiently and operating 24-7’.
The central bank announced last month that BI-FAST would begin operations in December, with its preliminary stage focusing on individual credit transfer services before expanding to bulk credit, direct debit and request-for-payment services in subsequent stages.
BI-FAST has been developed to support ‘industry consolidation’ as well as ‘national-driven, end-to-end integration of the digital economy and finance’ in line with the Indonesia Payment Systems Blueprint (BSPI) 2025. The central bank published the 72-page strategy, which includes 23 ‘key deliverables’, a couple of years ago.
During its preliminary stage, maximum transaction value is set at Rp250 million (about £13,000), a cap that will be evaluated ‘periodically’.
Indonesia’s current clearing system, SKNBI, is unable to meet demand, the central bank acknowledges.
*** The Committee on Payments and Market Infrastructures (CPMI) on 18 November invited comments (deadline for responses: 14 January 2022) on a report into extending and aligning payment system operating hours for cross-border payments. ‘Extending and aligning payment system operating hours for cross-border payments’ focuses on the operating hours of real-time gross settlement (RTGS) systems, which are considered crucial to improving international payments. The 49-page report outlines three potential improvements: an incremental increase in opening hours on current operating days; an extension to current non-operating days; and an increase to 24/7 provision.
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