Indonesia’s charity laws in spotlight after Lion Air crash scam

Medan, Indonesia – Indonesia’s philanthropy laws are in the spotlight after the head of a Muslim charity was found guilty of misappropriating $7.8m from a fund set up by Boeing for victims of the 2018 Lion Air crash.

Ahyudin, the chairman of the charity Aksi Cepat Tanggap (ACT), was on Tuesday sentenced to three-and-a-half years in prison. Prosecutors had asked for a four-year prison term for Ahyudin, who like many Indonesians goes by one name.

Ahyudin had admitted in a media interview shortly after his arrest that the charity regularly took a cut of more than 13 percent of donations, rather than the 10 percent stipulated by Indonesian law. He also said he received a monthly salary of more than $16,000 and admitted to borrowing funds regularly from ACT to pay for property, cars and furniture.

Former ACT president Ibnu Khajar was sentenced to three years in prison, while former vice president of operations Hariyana Hermain received a three-and-a-half-year term.

The sentences drew a mixed reaction among victims and advocates.

Agung Sedayu, a journalist with independent Indonesian media outlet Tempo, who broke the story of ACT’s embezzlement following complaints from victims, said he believed the punishments do not go far enough.

“From the beginning, there were indications that Ahyudin would get a light sentence,” Sedayu told Al Jazeera.

“There were lots of irregularities with the legal process. Not all the cases of ACT’s alleged fraud were admitted in court and more serious charges related to money laundering were not pursued by the prosecution.”

After Lion Air flight 610 and Ethiopian Airlines flight 302 crashed in October 2018 and March 2019, respectively, killing 346 people combined, Boeing established a fund as part of its settlement with the families of the victims.

The flight manoeuvring systems on Boeing’s 737 Max planes, known as MCAS, were found to have malfunctioned in the case of both crashes.

The fund, which Boeing billed as a way to “empower families who lost loved ones to support charitable organisations in affected communities”, consisted of $50m, $9.2m of which was entrusted to ACT to carry out community works in Indonesia.

ACT’s misappropriation came to light after recipients of the fund started to suspect the charity of mishandling the money.

Neuis Marfuah, whose 23-year-old daughter Vivian Hasna Afifa died in the Lion Air crash, said she had trusted the charity to build a school in her daughter’s name.

But when Marfuah visited the site of the school, she found the construction work to be of poor quality and using cheap materials.

“I hope that this sentence will serve as a deterrent and will show that we all have to be responsible for our actions, not just in this life but also in the next,” Marfuah told Al Jazeera, adding that she hoped the scandal would serve as a learning experience for those involved.

Bambang, a former ACT employee who asked to be referred to by his first name, said he was unsurprised by the sentences meted out to the convicted staff.

“I think it was appropriate and normal,” he told Al Jazeera.

Bambang said he was not sure how Ahyudin is viewed by former members of ACT since the organisation has disbanded.

“But in my opinion, there will still be those who support him and those who don’t,” he said.

Hamid Abidin, a board member of the Indonesia Philanthropy Association, said while the convictions indicate that law enforcement takes the misuse of charitable funds seriously, the law should be updated to punish such crimes more severely.

“The legislation used to regulate philanthropic organisations is from 1961 and desperately needs to be revised and upgraded,” Abidin told Al Jazeera.

“We also need to push for donor education in Indonesia. Many donors do not know that they have the right to ask where their donations are going or ask for reports about how the money will be used.”

Garnadi Walanda Dharmaputra, a lawyer focusing on economic law and a founder of the “Smart Donating” campaign aimed at teaching the public how to better navigate charitable giving, described the ACT case as the “tip of the iceberg”.

“We know of thousands of other organisations that also misappropriate funds. They may not be as sophisticated as ACT, but the issues are the same,” Dharmaputra told Al Jazeera, citing transparency, accountability and good governance as some of the main challenges when regulating philanthropic organisations in Indonesia.

In its heyday, from 2018 to 2020, ACT was the largest charitable organisation of its kind in Indonesia, collecting $36m in public donations during those two years. In July last year, Indonesia’s Counter Terrorism Unit announced that it was investigating the transfer of funds by ACT to alleged members of the armed group al-Qaeda, which came to light following the Tempo investigation into the misappropriated Boeing funds.

Last year, the United States Department of the Treasury announced sanctions against the Indonesian charity World Human Care (WHC) for allegedly raising and providing funds to hardline groups in Syria under the guise of humanitarian aid.

In 2021, Indonesian authorities arrested dozens of members of a charitable foundation that police said was a front for the al-Qaeda-affiliated group that masterminded the Bali bombings in 2002.

Dharmaputra said he is now lobbying the government to update its decades-old legislation, which he believes is not fit for purpose due to the evolving nature of crimes.

“We are on the right path, but I am concerned about how serious we are in Indonesia about the problem of regulating philanthropic organisations,” he said.

“We seem to have come late to this issue, but the ACT case has proved that it is a real problem.”

A representative for Boeing declined to comment.