A bank account can be frozen in minutes, but the damage to trust in the financial system can last much longer. The controversial freezing of an account belonging to the coordinator of a planned demonstration in Jakarta raises a question that goes well beyond the Rp 80.9 million (US$4,500) involved: How should banks balance law-enforcement requests against due process and customer protection, particularly when the legal basis for restricting access to a customer’s money is contested?

Soon after Supriyono, coordinator of the United Pati Community Alliance (AMPB), announced that his Rp 80.9 million account at Bank Mandiri, the country’s largest bank, had been frozen seven days before the scheduled demonstration, the news went viral. People sympathetic to the demonstrations against the current administration immediately launched a movement to withdraw their money from Bank Mandiri, prompting the bank to issue a public apology.

The account freeze has sparked controversy for several reasons. Bank Mandiri said it froze the account following an instruction from the National Police. The police, meanwhile, said they had asked the bank to delay transactions for five working days. The police cited Article 26 of the Money Laundering Law and Article 237 of the Financial Sector Development and Strengthening (P2SK) Law as the legal basis for delaying the transactions.

However, questions have emerged over whether either provision applies to Supriyono’s account, given that the funds were intended to finance the demonstration. Under Article 26, financial institutions are allowed to delay transactions under certain circumstances. First, a transaction may be delayed if it is suspected of involving assets derived from a predicate offense, such as corruption, fraud or drug-related crimes. Second, an account may be subject to restrictions if it is suspected of being used to hold proceeds from criminal activity. Third, a transaction may also be suspended if it is suspected of involving forged documents.

Questions have also been raised over the applicability of Article 237, as the fundraising was intended to finance the operational costs of the demonstration rather than to collect and distribute funds to the public in the manner of a financial institution.

The dispute therefore goes beyond the legal basis of the police request itself. It also raises questions over how banks should respond to law-enforcement instructions when the grounds for restricting a customer’s access to funds remain contested. Consumer protection should remain a priority for banks. In this regard, regulations on consumer and public protection in the financial services sector mandate principles of transparency, fair treatment, responsible business conduct and the protection of consumer assets in the provision of financial services.

The bank therefore cannot simply shield itself behind the argument that an action was taken solely at the request of the authorities. Customers interact directly with banks and entrust them with both their money and sensitive financial information. When the legal basis and procedures behind an account freeze are unclear to customers, such actions could create broader reputational risks for the financial system if regulators fail to address them carefully.

This issue is particularly important as the government moves forward with the Indonesian International Financial Center (PFII). The government intends to seize opportunities arising from geopolitical tensions around the Strait of Hormuz. However, establishing the PFII will be a long-term undertaking that requires more than legislation, zero income tax and a 50-year tax holiday, as the government has proposed.

The PFII will require strong rule of law, good governance, investor protection, credible dispute-resolution mechanisms and policy certainty to ensure its stability. Without such safeguards, the PFII risks becoming little more than a tax haven attracting shell companies, resulting in limited spillover benefits for the domestic economy.

The Bank Mandiri case should therefore be viewed as more than a dispute over one blocked account. It provides a test of whether Indonesia’s financial regulatory framework can balance legitimate law-enforcement needs with due process, customer protection and banking secrecy.

Striking that balance will become increasingly important as Indonesia seeks to attract international financial activity through the PFII. Ultimately, a credible financial center is built not only on capital and infrastructure, but also on confidence that the rules governing money, information and state intervention are clear and consistently applied.