Government Roles in Mitigating the Fraudulence of Hajj and Umrah

Travel Industry in Indonesia

Puji Handayati, Ridoni Fardeni Harahap, Aulia Herdiani

State University of Malang

Keywords: fraudulence, travel industry, government

Abstract: Numerous enthusiasts turn to the travel industry to play an important role in fulfilling the vast demands of

hajj and umrah. Travel agents for hajj and umrah have been growing rapidly in number, leading to

competitive circumstances. This issue obviously points out that travel agents attempt to improve their

business by rolling the investment to other sectors. This study aims to explore whether the investment made

by the travel industry is only an immaturity in maintaining the business or an intention to swindle, guising a

promotion of a cheap journey. Using a descriptive qualitative approach with content analysis of PT First

Travel (FT) case, this study revealed that FT was indicated for having an intention to commit fraud. This

has been proven by the existence of biased practices perpetuated by the main owner of FT. In this case, the

government has already reacted responsively by renewing the regulations for umrah pilgrimage. Moreover,

the government is also expected to firmly hold on to the policy and enhance coordination among

departments regularly to control travel agents for umrah, in terms of not to lose any requirement for Hajj

and Umrah to both the travel agents and customers. In addition, strengthening the policy of minimal costs as

the principal sufficiency standard for travel agents and strengthening requirements of free independent

agents is necessary and tends to play an important role as the controlling mechanism.

1 INTRODUCTION

The domination of Muslim residents in Indonesia

provides an opportunity to fulfill hajj and umrah

travels as one of their requirements of worship to be

filled. The hajj quota of Indonesia has increased in

the past two years to a number of 221,000, but this

number is no more than 10% of the annual total of

those interested in going on the hajj and umrah in

Indonesia each year. This imbalance between the

quota and interested hajj pilgrims causes an overload

in the number of Indonesian Muslims that cannot

immediately go on the hajj. As a result, people have

to wait approximately 17-18 years from when they

first register to the time they are to depart on the hajj

(Purnamasari, 2017).

This long waiting time to go on the hajj causes

many Indonesian Muslims to choose to go on the

umrah first, because it does not require a long

waiting period, nor the high costs of the hajj. With

many people interested in the umrah and hajj, there

has been an explosion in the number of Hajj and

Umrah pilgrimage agents that compete with each

other to obtain as many pilgrims as possible through

various methods from significant discounts on

umrah fares to even committing fraud.

This explosion of travel agents for Hajj and

Umrah pilgrimages, who wish to capture as many

pilgrims as possible, has caused cases of fraud by

travel agents for hajj and umrah pilgrimages to

become rampant in Indonesia. M. Arfi Hatim, the

chief of the Sub-Directorate of Umrah and Hajj

Supervision in the Directorate-General for

Organization of Hajj and Umrah, in Tribunjateng

(2017) mentioned that as of the end of August 2017,

the Ministry of Religion had revoked permits of 25

travel agents for hajj and umrah pilgrimages. The

permits of the companies were revoked because the

companies had committed three violations, namely

exceeding the applicability period of visas,

threatening the security of pilgrims, and failing to

send pilgrims on their journey (Tribunjateng, 2017).

One of the travel agent companies for umrah and

hajj that had its permit revoked and became a focus

of attention in Indonesia in 2017 is PT First

Anugerah Karya Wisata, commonly referred as First

Travel (FT). The permit for FT was officially

revoked on August 1, 2017, by the Ministry of

Handayati, P., Harahap, R. and Herdiani, A.

Government Roles in Mitigating the Fraudulence of Hajj and Umrah Travel Industry in Indonesia.

DOI: 10.5220/0008786200790089

In Proceedings of the 2nd International Research Conference on Economics and Business (IRCEB 2018), pages 79-89

ISBN: 978-989-758-428-2

Religion because the company had been proven to

violate Article 65 Letter an of Government

Regulation Number 79 of the Year 2012 on the

Execution of UU 13/2008 on the Organization of

Hajj and Umrah pilgrimages. FT had caused losses

to pilgrims, approximately 35,000 of them, with

nearly half of its total pilgrims unable to go to the

Holy Land (Arkhelaus, 2017). In addition, FT also

caused losses to many of its agents, who were paid

on commission, as well as to many of its business

partners, both in and out of the country. FT is owned

by a married couple who have the concurrent

positions of Executive Director and Director. Both

of the owners of FT, as well as the younger sister of

the owners who concurrently held the positions of

Financial Manager and Commissioner of First

Travel, have been named as suspects.

Overall, FT is suspected to have used a Ponzi

scheme in managing the hajj and umrah travel

business, causing the company to fail to send

pilgrims. A business that utilizes the Ponzi scheme

will collapse if funds from new investors can no

longer cover the funds to pay for old investors (Lau,

2005). In the case of FT, funds from new pilgrims

could not cover the funds to pay to send previous

pilgrims, causing FT to collapse and fail to send

umrah pilgrims (Tio, 2017). As such, it becomes

interesting to analyze in depth the case of fraudulent

investments that companies commit with the

promise of cheap pilgrimages, as well as the

mechanism of supervision and control conducted by

the government on this industry, with the

consideration of the eager needs of the people for

hajj and umrah pilgrimages.

1.1 Cases of Travel Agents for Hajj

and Umrah in Indonesia

PT First Anugerah Karya Wisata (First Travel) is

one of the companies that serves as a travel agent for

hajj and umrah pilgrimages in Indonesia, which had

its permit revoked on August 1, 2017 by the

Ministry of Religion, having been proven to violate

Article 65 Letter a of Government Regulation

Number 79 of Year 2012 on the Execution of UU

13/2008 on the Organization of Hajj and Umrah

pilgrimages. The owners of First Travel (FT) are a

married couple serving as both Executive Director

and Director, who have been named suspects.

The fraud committed by FT is the most-

highlighted case in Indonesia in 2017. This is

because the case has caused losses to many pilgrims,

wherein 35,000 pilgrims failed to depart to the Holy

Land. This number is more than half of the total of

all FT pilgrims, numbering to 70,000 people

(Arkhelaus, 2017). In addition to the many deceived

pilgrims, this case is hotly discussed because FT is

known as a travel agent for hajj and umrah that

offered to send pilgrims for prices cheaper than what

other travel agents offer. Their prices were below the

established minimum price for umrah pilgrimage by

the Ministry of Religions and the Muslim

Association for Organization of Hajj and Umrah of

the Republic of Indonesia (Amphuri), which is $

1,700 or Rp. 22 million (Tio, 2017). This, of course,

attracted many pilgrims who wanted to invest their

money to FT in the hope of being sent on the Umrah

pilgrimage at a cheap price. Another reason that the

FT case became a highlight was because the wife of

the owner of FT was known as a national fashion

designer with international achievements, even

being named as one of the “Inspiring Women 2017”

by Forbes Indonesia magazine in the field of

fashion, on predicate with Sri Mulyani in the field of

governance (Indra, 2017). Moreover, the married

couple owning FT is also known for their rich

lifestyle and showing off photos of this lifestyle on

social media (Movanita, 2017).

FT stated that the cheap promotional packages

could be implemented through cross-subsidies from

other packages (Tio, 2017). Further, Tio (2017)

wrote that FT utilized a Ponzi scheme, which could

be said to be “robbing Peter to pay Paul”. FT sent

the first wave of pilgrims using funds from pilgrims

in the next wave and progressed similarly onwards

up to a point where money from new pilgrims could

not cover the fees to send older pilgrims. As such,

FT collapsed and failed to send pilgrims. Even in the

bank accounts belonging to FT, there was only Rp

1.5 million left at the time the company had its

permit revoked on August 2017, which belonged to

35,000 pilgrims (Arkhelaus, 2017). Losses of

pilgrims are valued at Rp. 848 billion, and when the

flow of funds was questioned, neither the

management nor the company attorneys could

inform (Mustaqim, 2017). Currently, the Center for

Reporting and Analysis of Financial Transactions

(PPATK) is still tracing where the funds went.

1.2 Fraudulence

Fraud constitutes various kinds of illegal acts, and its

discussion is limited to “occupational fraud”, which

is the fraud that occurs in companies in working

relations (Tuanakotta, 2010). Schematically, the

Association of Certified Fraud Examiners (ACFE)

describes occupational fraud in a “fraud tree”

IRCEB 2018 - 2nd INTERNATIONAL RESEARCH CONFERENCE ON ECONOMICS AND BUSINESS 2018

possessing the three branches of corruption, asset

misappropriation, and fraudulent statement.

Corruption is not the same as “korupsi” in legal

regulations in Indonesia. The term “korupsi” in

Indonesia covers 30 acts of corruption regulated by

Law Number 31 of the Year 1999 and not the four

forms included in the branches, which are a conflict

of interest, bribery, illegal gratuities, and economic

extortion. Asset misappropriation (embezzlement) is

conducted by a person given the authority to

supervise the assets. The fraudulent statement

describes fraud that is well known by auditors

conducting a general audit (opinion audit) because it

is related to financial reports.

According to Cressey (1953), the hypothesis that

explains how fraud occurs today is better known as

the fraud triangle (Tuanakotta, 2010). One corner of

the fraud triangle is pressure, another corner is

perceived opportunity, and the third corner is a

rationalization. Fraud usually occurs because of

financial pressure due to problems that are faced by

someone who commits the fraud. The financial

problems are personal and cannot be told to others

because of various issues, which leads to the

resolution of the problems in a secret and stealthy

manner. The second corner is perceived opportunity,

which means that when actors of fraud face the

pressure that cannot be told, the fraud actor has the

perception that there is an opportunity for the actor

to commit a crime without being known by others.

The third corner is rationalization, which is seeking

justification for the crime to be committed, and not

afterward. Rationalization is needed so that an actor

can accept the committed illegal acts to maintain the

image as a trusted person.

1.3 Ponzi Scheme

A Ponzi scheme is a form of fraudulent investment

that is believed to have been first committed by an

Italian citizen who moved to the United States and

changed his name to Charles Ponzi. Charles Ponzi

was a person who highly desired to get rich quickly.

Over the course of his life, Charles Ponzi had been

imprisoned several times for fraud. While Ponzi was

in Boston, he often mailed letters to his family to

update his condition. In the 1890s, someone in the

United States could include a coupon in a mail to

save costs on buying stamps, and this coupon could

be sold to certain countries. From this, Ponzi

conceived the idea that coupons purchased in

countries with weak economies could be sold in the

United States with a number of benefits. With some

of his savings, he attempted to carry out, but he

found that the scheme could not succeed because it

turns out a majority of the profits of the postal

organization.

Though the idea failed, Ponzi saw that each time

he talked about the idea to other people, they

appeared interested and continued to query about the

investment. From then on, Ponzi began to carry out

the scheme by looking for investors. Ponzi claimed

that he could create profits of 100% within several

months, but because of the lack of capital to exploit

the weakness of the international postal system, he

did not mind to share profits with investors.

Ponzi succeeded in a presentation by giving the

example that a coupon he purchased in Spain at a

price of one cent could be exchanged to an

equivalent value of six cents in the United States.

Below is the outline of a Ponzi scheme:

a. The program creator uses funds from their own

investors to pay the interest in their “investment”

while convincing them to maintain their

investment.

b. The program creator seeks new investors and

uses their funds to pay off old investors.

With greater promised interest, the need of the

program creator to find new participants is also

larger. With faster-promised deadlines, the program

creator needs to find new investors quickly. The

Ponzi scheme cannot last for too long because of the

limited number of participants in any geographical

area. This scheme could last longer if the program

creator could create a source of revenue in another

region after the participants in a region have reached

the maximum (Lau, 2005).

1.4 Previous Study

Omanyo (2017) on her research found that Ponzi

schemes had continued to operate in Kenya.

Furthermore, Omayo (2017) identified that there are

various challenges faced by the regulator for Ponzi

schemes. She concluded that political interference

in investigations was the key challenge. Omayo also

found that lack of strict legal regulatory environment

was dealing with this sustainability of Ponzi

schemes. This study had also observed that

collaboration between the financial industry and

government is the key factor to reduce or even

eliminate Ponzi scheme practice. In this case, the

government has a very important role in mitigating

fraud in some countries as the regulator has more

power to give some regulation and punishment to

the Ponzi scheme perpetrator. On the other hand,

Schain (2011) described that the vulnerability of the

victims of the Ponzi scheme is due to information

Government Roles in Mitigating the Fraudulence of Hajj and Umrah Travel Industry in Indonesia

overload nowadays. People easily accept the

information without doing any further investigation.

So that, people should be more selective in choosing

investment and the government should make any

strict regulations on it.

2 METHOD

This research uses a descriptive qualitative approach

with content analysis method. The first stage had

been done by collecting some literature or study

documentation such as articles, video, and reports

related to the case of FT. Next, research concept was

selected and categorized into some theme or term

that would had been described and analyzed. The

Fraudulence committed by FT from Fraud Triangle

and Ponzi scheme point of view and the role of

government regarding FT case is the specific terms

that would had been analyzed and described from all

the documentation study that conducted before. Of

the 25 similar cases of fraud, this research used the

FT case as the limitation of the term of the subject

that had been analysed and described with the

consideration that the case had a significant number

of victims as well as the involvement of the

government in revealing the case.

Krippendorff (2004) defined content analysis as

a research technique to conclude the meaning of text

or procedure that is reliable, replicable, and valid.

Krippendorff (2004) did not restrict the text as a

written text, but it can be other meaningful matter

such as painting, picture, sound, video, or symbol.

Content analysis is conducted to provide

descriptions and analysis from the points of view of

the government, law enforcement, the people, and

the related actors so that the achieved conclusion is a

synthesis of the perspectives of the actors and

theoretical-empirical study. This research utilized

recorded interviews from television programs and

reviews of the FT case in mass media as the data

source. The selection of data sources or research

subjects was done in accordance with the aim, which

was to have informants who possess the scope of

knowledge and experience of the scandal committed

by FT.

This research used the data collection technique

of study of documents. The collected data were

analyzed using the qualitative data analysis

technique of Miles and Huberman (2009). There are

three steps in the qualitative data analysis: data

reduction, data display, and drawing conclusions.

Data reduction was conducted with the technique of

semiotic assertion (thematic analysis), by identifying

statements connected to the fraud committed by FT

such that it has a certain frequency, or how often the

fraud of FT was mentioned in various media and

documents. The results of this research were

validated by extended observation, triangulation,

audit trail, and expert opinion.

3 RESULTS AND DISCUSSION

3.1 Fraudulence

The fraudulent investment in the form of cheap

umrah pilgrimages conducted by First Travel (FT)

officials has been tried in court. The married couple

who own FT was proven to have conducted the

criminal act of fraud collectively as regulated and

charged with Article 378 of the Criminal Code

juncto Article 55 Paragraph 1 Number 1 of the

Criminal Code. The officials of FT were legally and

convincingly proven to have conducted the crime of

placing, transferring, switching, spending, paying

using, giving, storing, carrying internationally,

changing the form of, trading the currency of or to

negotiable instruments from, or committing other

actions to wealth which is known to be or suspected

as the result of fraud as regulated in Article 2

Paragraph 1 with the aim hiding or concealing

origins of wealth, conducted together and continuing

in the second charge of violating Article 3 of Law

Number 8 of Year 2010 on the Prevention and

Eradication of the Criminal Act of Money

Laundering juncto Article 55 Paragraph 1 Number 1

of the Criminal Code (Irawan, 2018). At the time

this article was composed, the officials of FT had

filed an appeal to the State Court of Depok. From

the results of sentencing in court, it can then be

perceived that the FT case is a form of fraud

committed by the officials of FT. However, there

needs to be an examination or review of how this

case occurred, whether the fraud that occurred with

FT was intentional or simply mismanagement within

the company.

According to the Indonesian Criminal Code, the

fraud committed by FT is an act of fraud as

regulated in Article 378 with the aim of benefiting

oneself or other people illegally, by a fake name or

reputation, tricks, a series of lies, having other

people transfer goods, or providing loans or

removing debts. Using the ACFE Fraud Tree as a

reference, the fraud of FT is classified as an act of

Corruption as well as Asset Misappropriation. FT is

a form of a family firm that possesses a unique

organizational structure, wherein a majority is

IRCEB 2018 - 2nd INTERNATIONAL RESEARCH CONFERENCE ON ECONOMICS AND BUSINESS 2018

possessed and controlled by parties with family

relationships, as the married couple who is

concurrent as Executive Director, Director, and

Commissioner. In other words, there is an indication

of CEO Duality in FT. Concurrent positions among

owners and board of directors in family firms is a

common occurrence. This is in line with research by

Stewart (1991) who found that CEO Duality can

accelerate the process of making decisions in a firm

because of more directed focus on company goals

and implementation of many decisions that are

operational in nature (Rahman and Haniffa, 2005).

On the other hand, as is the case with FT, CEO

Duality can also result in a lack of independence

because of a more dominant party in management

(Cadbury Report, 1992), and it becomes difficult to

supervise management, causing asymmetry of

information and lack of transparency in the flow of

funds of FT pilgrims, leading to embezzlement and

money laundering by those in concurrent positions.

3.2 Fraud Triangle

The scheme that causes the fraud committed by

owners of FT may be explained using the fraud

triangle (Cressey, 1953; Tuanakotta, 2010). The

fraud committed by FT occurred because of pressure

or financial problems faced by FT officials, in

particular, the married couple owning FT. These

financial problems are privy to the married couple

owning FT and cannot be told to other people (non-

sharable problems) because of certain issues, which

are forced to be resolved in secret. In his research,

Cressey (1953) outlined six situations of non-

sharable problems faced by fraud actors, which are

1) Violation of Ascribed Obligation, 2) Problems

Resulting from Personal Failure, 3) Business

Reversals, 4) Physical Isolation, 5) Status Gaining,

and 6) Employer-Employee Relations. In the FT

case, the married couple and owners of FT

experienced the situations of Problems Resulting

from Personal Failure, Business Reversals, and

Status Gaining.

Referring to their history, the owning couple of

FT possesses non-sharable problems, where they

faced a situation of Status Gaining starting from

2016. In this situation, the married couple attempted

to obtain a higher status and to maintain the status

they possessed at the time as rich entrepreneurs with

all the luxurious facilities that they often show off on

social media. The problems were realized from the

start, that the funds in their treasury could not send

the next wave of pilgrims because they had to pay

vendors and employee salaries (Putri, 2018). Even

so, the couple owning FT did not want to talk about

their problems because they were caught up in the

glamorous life they possessed and wished to

continue enjoying it by making promotions on all

online media, using celebrities for endorsement

opening new franchises, and recruiting new FT

agents. Because of their zeal to maintain their social

status, the money of thousands of pilgrims interested

by FT promotions was not invested well and instead

secretly stolen to finance the luxurious lifestyle of

the FT owners. Their background of early economic

difficulties in creating various kinds of small

businesses that eventually closed and almost

committing suicide because of losses after having

been deceived in business made them even more

determined not to get caught in poverty once again.

In addition to Status Gaining, the owners of FT

also experienced the situation of Problems Resulting

from Personal Failure that they did not tell other

people, causing them to secretly commit fraud. This

situation is the personal failure experienced by the

owners of FT who have the position of Executive

Director of FT who are well-respected and trusted

by thousands of pilgrims to invest their money to go

on the Umrah pilgrimage. In this situation, the

owner of FT continues to talk to his wife, and in the

end, they commit the fraud together by continuously

obtaining additional funds from the cheap umrah

promotion, although they understood that the

collected funds could not send all pilgrims on time.

The married couple owning FT is afraid of losing

their status as trusted people in the field of finances,

reinforced by a statement in mass media:

“…our business grew quickly because of the

trust of the people in us”,

As such, they are afraid to admit their failure in

investing the money from pilgrims. Yet, if they had

actually informed about the problems from the start

and fixed their existing promotions, the problems

might not have grown larger and could be resolved

in a better way. However, they continued to swindle

money from pilgrims in order to maintain their self-

dignity.

The married couple also experienced the

situation of Business Reversals. In contrast to the

situation of Problems Resulting from Personal

Failure, the couple owning FT felt that the condition

was not a personal failure but was due to external

conditions beyond them, which are inflation and the

exchange rate of the rupiah to other currencies,

which had continued to rise. The business of umrah

travel is very much influenced by the exchange rates

Government Roles in Mitigating the Fraudulence of Hajj and Umrah Travel Industry in Indonesia

of foreign currencies toward the rupiah because it

involves transactions between countries. In facing

the situation, FT officials chose not to inform

pilgrims and the greater public, yet continued to

maintain the unreasonable promotional packages

while continuing to hope that the situation would

improve and that each passing day would bring new

hope. This faith was also indicated with the

statement made by Andika while arrested by the

police; he wanted to be freed to seek new investment

to send off pilgrims and pay off vendors. When

asked how he was going to do so, he responded by

collecting more money from pilgrims using the

existing promotional packages. This is quite

unreasonable that instead of being able to obtain

funds by investing in other businesses, the owner of

FT only keeps and manages funds collected from

new pilgrims to send off pilgrims that had earlier

registered. The cheap umrah fee is incomparable in

value to the fee needed to even send one pilgrim.

This faith was also strengthened by the FT legal

team, who wanted the owner to be freed to be able to

seek new investment to send off pilgrims and pay off

vendors. This was merely done to give the

impression to other people that he was still

successful though he in actuality had failed.

The situations faced by the FT owners pushed

them to solve their problems in secret. The existence

of non-sharable financial problems means that the

pressure to FT owners did not directly cause them to

commit the fraudulent acts. In reference to the fraud

triangle, non-sharable financial problems,

concerning Problems Resulting from Personal

Failure, Business Reversals, and Gaining Status, is

the motive of the occurrence of the fraud,

constituting the first corner of the fraud triangle,

which is pressure. In the second corner of the fraud

triangle, actors of fraud must possess the perception

that there is an opportunity or chance to commit

fraud without being known by other people, as the

perceived opportunity. According to Cressey, there

are two components of the perception of

opportunity, which are General Information and

Technical Skill. General Information constitutes

information that is known by FT owners that they

have seen or heard experiences with similar cases,

but these were not punished or given sanctions; even

if there were punishments or sanctions, they were

neither heavy nor discouraging. In this case, the

owners of FT saw that there were several other cases

of travel agent frauds that resulted in only two years

of jail theme (Rosi, 2017); it may even be possible to

pay for a good cell the same way Indonesian

corruptors get theirs. With respect to Technical Skill,

the owner of FT was convinced that he possessed

good abilities in the field of umrah travel that he was

in for more or less six years, and he felt that he

possessed a great ability in seeking investment funds

and send off umrah pilgrims.

The third corner of the fraud triangle is a

rationalization or seeking justification before

committing an act of fraud. This rationalization is

needed as part of the motivation to commit fraud.

The rationalization is also needed for the actor to be

able to digest and accept the illegal act, to be able to

maintain the image as a person possessing a high

social status and trusted by many people to handle

finances. In their fraud, FT owners rationalized the

actions they conducted with the justification that

they could, later on, pay off the vendors and send off

the rest of the pilgrims by collecting funds from new

pilgrims. In the defense that was read during the

trial, the owner of FT objected the accusations of the

public prosecutor, being too heavy because it

exaggerated the losses of the pilgrims, which is

incomparable to the number of pilgrims which have

been sent previously by FT. In the defense, he also

blamed the Ministry of Religion for revoking the

permit of PT FT, causing the FT owners to no longer

be able to seek new investment to pay off debts to

vendors and send off pilgrims. In addition, vendors

who trusted the couple owning FT because of their

appearance and luxurious lifestyle also became their

rationalization as justification that FT could always

borrow and incur debt in order to continue to send

off pilgrims. The owners of FT felt that this was

always successful, leading them to irrationally and

unjustifiably take money to cover expenses, causing

FT to fail and losses to many pilgrims. Next, it was

always believed that the fraud committed could

always be covered up with new investment from

obscure sources. Thus, the three corners of the fraud

triangle are complete, with the owners of FT

doubling up management and having family

relationships with one another, causing fraud within

the operations of FT.

3.3 Ponzi Scheme

PT First Travel managed its overall business using a

Ponzi scheme, causing the company to fail to send

people on pilgrimages. A Ponzi scheme in simple

terms is a fake method of investment that provides

benefits for prior investors with funds from later

investors. This business will collapse if funds from

new investors can no longer cover the funds to pay

off old investors because of population limits of a

region (Lau, 2005). FT offered very cheap umrah

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promotional packages. The price of the cheap umrah

promotional packages, being Rp. 14.3 million and

could be paid in installments, was far below the

established minimal umrah fee by the Ministry of

Religion, being $ 1,700 or Rp. 21-22 million. To be

able to run their enterprise with such low fees, First

Travel implemented a “robbing Peter to pay Paul”

schematic by covering up the lack of funds for

sending off the first wave of pilgrims using funds

from the next wave of pilgrims, which must be

greater than the first wave of pilgrims, and so on and

so forth.

The many pilgrims of PT FT were obtained

through thousands of freelance agents from all over

Indonesia, who were called “Smart Agents” and

rewarded by the commission based on the number of

pilgrims that signed up and stored money.

Eventually, the number of funds from new pilgrims

could not equal the funds needed to send older

pilgrims, causing FT to collapse and fail to send off

umrah pilgrims (Tio, 2017). Next, there were delays

of payments to vendors as well as in sending off

pilgrims from 2016 to 2017 (Rosi, 2017). At that

time, there were often delays in sending off pilgrims

due to various reasons, as well as delays of

payments to vendors because existing funds were

insufficient. Eventually, the owners of FT tried to

lobby vendors to give loans and made various

excuses to pilgrims who were late to depart, even

requesting additional money for pilgrims for

immediate departure. Many believed them and paid

additional money, but were never able to depart.

Eventually, from November 2016 to June 2017, the

number of Umrah pilgrims sent by First Travel was

only 29,985 people. The rest, 63,310 people, who

had already fully paid with departures scheduled for

November 2016 - May 2017, was not sent off, and

their money was not returned (Putri, 2018).

In fact, a Ponzi scheme could last longer if there

were other real investment activities by the owners

of PT FT to cover up the lack of funds from the

cheap promotional umrah packages. This could be

from profit sharing from a restaurant where Andika

is a part owner as well as from the fashion business

and boutique of Anniesa. However, the Ponzi

scheme conducted by PT FT did not last long, only

for six years after the cheap umrah promotional

program priced at Rp. 11- 12 million in 2012, then

increased to Rp. 14.3 million in 2015, and collapsing

in 2017. This is because pilgrims who first registered

was paid by funds from new pilgrims, which had to

be greater than the previous batch of pilgrims. In

addition, their umrah funds were spent by the

owners of FT to go on vacations abroad with VIP

facilities, use expensive branded items, and create an

image of luxury to bolster the success of PT FT to

keep vendors and pilgrims believing that FT did not

have financial difficulties, and could pay off vendors

and send off new pilgrims. This proved to be

successful because the partners of Andika in Saudi

Arabia and several victims of PT FT claimed to be

interested in and trusting of FT because they thought

that the owners of FT are very rich people and

possessed other businesses to support the travel

business (Rosi, 2017).

3.4 Role of The Government in The

FT Case

3.4.1 Ministry of Religion

On August 1, 2017, the Ministry of Religion

revoked the operational permit of First Travel (FT)

due to violation of Ministry regulations (Article 65

Letter a Government Regulation Number 79 of Year

2012 on the Execution of Law No. 13 of Year 2008

on the Organization of Hajj Pilgrimage) because of

not being able to send off pilgrims. According to

Mastuki (Chief of Public Relations of the Ministry

of Religion), in an interview with CNN Indonesia

(2017), the Ministry under Commission VIII

conducts supervision and control of hajj and umrah

bureaus based on regulations. According to Law No.

13 of the Year 2018 on the Organization of Hajj

(Articles 45 and 46) as well as Government

Regulation Number 79 of the Year 2012 (Articles

50, 60, and 65-69), Organizers of Umrah Pilgrimage

(PPIU) could be private or from the government. FT

is a private umrah bureau and not of the government,

and thus its organization must fulfill certain

requirements, including guidance and other similar

requirements in Article 65. Article 65 Letter a states

that private umrah bureaus are forbidden not to send

off pilgrims. If Article 65 Letter a is violated, the

Ministry of Religion by Law No. 13 of the Year

2008 46, has the right to:

1. Mediate with a warning letter (Summoning and

mediation had been done 3-4 times, in March,

April, May, and June, and a report was

requested on the number of pilgrims to be sent

off during November 2017, but FT did not

respond)

2. Suspension of organization permit (FT was

summoned again in July, but FT did not have

the good intent to show up)

3. Termination of organization permit (On August

1 FT was summoned but did not come, and the

Ministry revoked the permit of FT).

Government Roles in Mitigating the Fraudulence of Hajj and Umrah Travel Industry in Indonesia

The Ministry of Religion conducts investigations

with the Financial Services Authority (OJK) and the

Agency of Detectives through the Investment Alert

Task Force. The OJK and the Task Force are

involved because the case is not only related to

pilgrimages but also the collection of funds from

thousands of pilgrims in relation to fake investment

with a Ponzi scheme.

By regulation, the Ministry of Religion had

performed its role well in connection to internal

control and supervision (through the Directorate-

General for Organization of Hajj and Umrah) and

externally with the OJK, Agency of Detectives, and

Investment Alert Task Force. Additionally, the

Ministry issues permit for umrah pilgrimage

services, and the Ministry had issued an

accreditation of B

to FT, and thus FT had no

problems with permits. However, the Ministry and

OJK only acted toward FT after having received

many reports from FT pilgrims, not because it was

detected early that FT offered umrah promotions that

were unreasonable, with operations that are

abnormal and not well planned.

Even so, the Ministry is considered responsive to

the deficiencies of existing regulations by quickly

revising the regulations on umrah. The Ministry of

Religion had issued new regulations on the

organization of umrah pilgrimages, as Ministry of

Religion Regulation Number 8 of the Year 2018 on

the Organization of Umrah Pilgrimages, replacing

the previous Regulation Number 18 of the Year

2015 on the Organization of Umrah Pilgrimages. In

the new umrah regulations, there are a number of

changes. Regarding the business model, there is a

requirement for organizers to manage umrah based

on sharia or halal practices; this is because the

organization of umrah pilgrimages is not “business”,

but worship. Packages of umrah pilgrimage may no

longer be sold using Ponzi schemes, fake

investments, tiered systems, or any other method

that may potentially cause losses to pilgrims. As

such, permits for the organization of umrah will be

more strictly regulated. In addition, permits to

become organizers will only be given to tourist

agencies that have healthy management and

finances, have never been involved in legal cases

regarding umrah, follow tax regulations, and are

certified. Organizers will be regularly accredited by

an agency appointed by the Ministry. The most

In accordance with Ministry of Religion regulations, KBIH (Hajj

Counseling Groups) will evaluate travel agents for hajj and umrah

pilgrimages through accreditation with grades A, B, C, and D. If a

PPIU or travel agent obtains an accreditation of D, its permit will

be revoked.

important change is a standard Price for Umrah

Pilgrimage (BPIU) or a reference price,

accompanied by a Minimum Service Standard

(SPM) that the people can refer to in consideration

of Umrah packages from organizers. Another issue

that is managed is the mechanism of pilgrim

registration. Previously, pilgrim recruitment was

conducted freely without reporting to the Ministry as

a regulator, but now registrations must be done

through an electronic reporting system with a

departure limit of no later than six months after

registration and no later than three months after full

payment. Through this centralized system, the

Ministry is expected to be more effective in

supervising the organization of umrah pilgrimages.

The Ministry has implemented many revisions of

the previous regulation issued in 2015, which had

many shortcomings. This is a reflection that the

Ministry has accommodated all feedback. As it

should be, the Ministry must conduct control and

supervision in a realistic manner. The central

Ministry of Religion should also empower and

coordinate with the provincial, regency, and city

branches of the Ministry to conduct supervision of

regional umrah pilgrimage bureaus, and to regularly

supervise and control them to immediately detect

fraud of umrah pilgrimage, which may cause losses

to pilgrims. In addition, the provincial, regency, and

city branches of the Ministry could maximize

supervision and control umrah pilgrimage agents.

Further, these agents must also be detected and

registered in the integrated system of the Ministry in

order to make supervision of the umrah pilgrimage

agents easier.

3.4.2 OJK through the Investment Alert

Task Force

According to results of interviews with the OJK,

based on Law Number 21 of the Year 2011 on the

Financial Services Authority (OJK), specifically

Articles 4, 28, 29, 30, and 31, there is a mandate for

the OJK to provide protection to consumers and

people in the financial services sector. These articles

clearly indicate the necessity of the aspects of

consumer education and protection as inseparable

parts of regulation and supervision, which

previously had not been regulated in other laws of

the financial services sector. As such, to increase

consumer protection in the financial services sector

as well as to increase the trust of the people in the

finance industry, the OJK needs to conduct good

preventive, curative, or repressive actions through

the formation of the Task Force for Handling of

IRCEB 2018 - 2nd INTERNATIONAL RESEARCH CONFERENCE ON ECONOMICS AND BUSINESS 2018

Suspected Illegal Acts in Collection of Funds from

People and Investment Management (the Investment

Alert Task Force) which was formed since 2007

according to the Decree of the Chief of the

Supervisory Agency for Financial Markets and

Institutions Number Kep-208/BL/2007 dated June

20, 2007 and is renewed each year, the last

according to the Decree of The OJK Board of

Commissioners Number 01/KDK.01/2016 on the

Formation of the Task Force for Handling of

Suspected Illegal Acts in Collection of Funds from

People and Investment Management, established on

January 1, 2016. On this basis, the Investment Alert

Task Force, currently composed of the OJK, the

National Police of Indonesia, the Attorney General

of Indonesia, the Ministry of Trade of Indonesia, the

Ministry of Cooperatives and Small and Medium

Scale Enterprises of Indonesia, the Ministry of

Communication and Informatics of Indonesia, and

the Coordinating Agency for Capital Investment,

conducts prevention and management of suspected

illegal acts through formulation of recommendations

for case handling to associated Ministers and/or

Agencies, or conducting investigations together.

Though permits for umrah pilgrimage services

are not within the scope of the OJK – but with the

Ministry of Religion – this issue, however, is related

to one of the duties of the OJK, which is to protect

the interests of consumers and the public by

preventing and handling of suspected illegal acts in

the field of collection of funds from the people and

management of investment, through the Investment

Alert Task Force. Thus, the OJK ordered PT First

Travel to terminate the sales of promotional cheap

umrah packages on July 21, 2017, because FT was

judged to have collected funds from the people

through illegal investment. The Investment Alert

Task Force had actually suspected fake investment

in the management of FT since 2015, but there were

not many reports until 2017 when there were many

reports of abandoned umrah pilgrims who were not

sent off. In this case, the OJK had already performed

its duties well because of having conducted

supervision and detection of fraud in the collection

of funds from people using promotional packages

for cheap umrah. However, it would be better for the

OJK, through the Investment Alert Task Force in

cooperation with the Ministry of Religion, to

conduct stricter supervision of umrah pilgrimage

bureaus through annual audits of financial reports.

This is to avoid manipulation of financial reports

and to encourage umrah pilgrimage bureaus,

especially those that are incorporated, to manage

organization and finances better and in a more

orderly manner.

4 CONCLUSION

The initial intent and aim of establishing PT First

Travel by the married couple Andika Surachman and

Anniesa Hasibuan, as mentioned previously, is to

improve their economic status after having failed in

several small enterprises and having been deceived.

Their efforts were based on the intent to achieve

success for financially supporting their siblings and

their children. Along with the success of FT, a

change in behavior occurred in the married couple,

who lived more luxuriously. By promoting

promotional umrah packages, FT was able to attract

many pilgrims, even tens of thousands of them, into

a Ponzi scheme that would collapse when the funds

from new pilgrims could not cover the lack of funds

to send off older pilgrims. This great number of

pilgrims should have given greater cash flow and

profits for FT, but in reality, FT failed to send off its

tens of thousands of pilgrims. Considering the fraud

triangle, the owners of FT were pressured to

maintain their social status, having been elevated as

wealthy entrepreneurs, as well as to maintain a good

image of their business although their finances had

worsened. This pressure could not be told to anyone

else. After the pressure, the owners of FT saw that

there was a chance to commit fraud, with many

pilgrims who eagerly signed up and perpetrators of

similar fraud on average not given heavy sentences;

as owners who doubled as managers in FT, they

possessed the capability to commit fraud with

money from pilgrims. After seeing the opportunity,

the owners of FT then rationalized the fraud the

committed by believing that they would surely be

able to cover up all deficiencies in the investment of

pilgrims in order to support their siblings and their

children.

Due to this fraud, many pilgrims failed to go on

umrah pilgrimages, with a total loss of almost Rp. 1

trillion. Considering this massive loss by pilgrims,

the government should have stepped in. The

government here refers to the Ministry of Religion

as the regulator of hajj and Umrah pilgrimages, and

the OJK as the regulator in the field of protection of

consumers from fake investments. The Ministry of

Religion has been responsive in revising the 2015

regulations of hajj and Umrah pilgrimages and

replaced them in 2018. All aspects of supervision

and control have been strictly regulated and the

branches of the Ministry in provinces, cities, and

Government Roles in Mitigating the Fraudulence of Hajj and Umrah Travel Industry in Indonesia

regencies are involved in supervision as well.

However, the regulation and documentation of

freelance agents of umrah pilgrimage bureaus have

not been carried out, and yet FT could obtain so

many pilgrims due to thousands of these agents. In

addition, there should be enforcement on the field of

existing regulations, through sufficient supervision

and control regarding the minimal fee for umrah

promotions as well as other regulations. OJK had

also carried out its function of supervision through

the Investment Alert Task Force. However, the

supervision of umrah pilgrimage bureaus is expected

and required to be a cooperation between the

Ministry of Religion and the OJK in a harmonious,

regular, and consistent manner, so that malicious

umrah travel bureaus can be immediately detected

and regulated. In addition, hajj and Umrah pilgrims

are expected to be more cautious in selecting a

provider of umrah pilgrimages by not only looking

at the image of the relevant bureaus, but also the

management of their business, regarding its wellness

and reasonableness of the fares stated for umrah

pilgrimage. In this case, the management of hajj and

umrah pilgrimage agents should be considered in

concluding the truth from the scandal that involves

FT.

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Government Roles in Mitigating the Fraudulence of Hajj and Umrah Travel Industry in Indonesia