An Effort of Indonesian Government’s To Eradicate Money Laundering and Terrorism Financing

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According to the 2015 Global Financial Integrity report, the average annual flow of illicit funds out of Indonesia reached 18.071 million US dollars or around 240 trillion rupiah during 2004-2013. In order to tackle the issue, Indonesia’s government is committed to prevent and eradicate money laundering and terrorism financing by releasing a regulation regarding beneficial owners of corporations.

On 1 March 2018, the President of the Republic of Indonesia Joko Widodo issued the Presidential Regulation No.13 of 2018 on the Implementation of the Principle of Knowing Beneficial Owners of Corporations in Relation to the Prevention and Eradication of Money Laundering and Terrorism Financing Crimes (Perpres 13/2018). The Presidential Regulation was then enacted by the Ministry of Law and Human Rights on 5 March 2018.

The regulation is also useful to prevent and eradicate tax crimes and can be used to eliminate the practice of nominee arrangement structures and strengthen the regulation that was previously issued by the Capital Investment Coordinating Board (BKPM).

The issuance of the regulation is also required in order to comply with international standards such as the standard set by the Extractive Industries Transparency Initiative (EITI) of 2016, recommendations 24 and 25 by Financial Action Task Force (FATF) on money laundering, Assessment on Exchange of Information by Request (EOIR) by Global Forum on Transparency and Exchange of Information 2017, and the implementation of the G20 Principles.

Drafting of the regulation was coordinated by the Center for Financial Transaction Reporting and Analysis (PPATK) involving Ministry of Finance, Ministry of Trade, Ministry of Cooperatives and SME, Bank Indonesia, and the Financial Services Authority (OJK). The drafting was based on various scientific studies about the transparency of beneficial owner that was conducted by both the Corruption Eradication Commission (KPK) and PPATK.

 

How beneficial ownership be implemented

According to the regulation, a corporation is defined as limited liability companies, foundations, associations, cooperatives, limited partnerships (CV), general partnerships (firms), and other corporate forms. Meanwhile, beneficial owner is an individual in a corporation that has the power to appoint and dismiss the board of directors, board of commissioners, administrators, supervisors or advisors of the corporation; influence and control the corporation; receive profit and / or benefit from the corporation either directly or indirectly; and is the real owner of funds or shares of the corporation. More specific criteria of a beneficial owner are set differently depending on the type of corporation.

Under this regulation, a corporation shall assess, assign and report to the authorities information of the beneficial owner of the corporation. The beneficial owner information must include at least the full name, number of identity or passport, place and date of birth, nationality, address listed on identity card, address in country of origin (for foreign citizens), taxpayer identification number (NPWP), and the type of relation between the corporation and the beneficial owner. All of the aforementioned information must be accompanied by supporting documents.

Moreover, if required, the authorities also have the power to determine the beneficial owner other than those reported by the corporation. The basis of the determination can be sourced from the audit results conducted by the authorities, information provided by government institutions, database owned by private institutions, reports from certain professions, as well as other reliable sources.

 

How to report beneficial owners

The regulation also requires a corporation to appoint an employee who is in charge of applying the principle of knowing the beneficial owner, providing and updating the beneficial owner data, and regularly reporting such information to the authorities.

Reporting the beneficial owner information can be done through the online administration system owned by The Ministry of Law and Human Rights (MOLHR System). However, it was found that the MOLHR system can only be accessed by notary.

Not only does it prevent money laundry, the implementation of the principles of knowing beneficial owners also strengthens corporate integrity and protects its assets.

Presidential Regulation No.13/2018 is applied equally to domestic corporates as well as to foreign investment corporation. A corporation that does not comply with the regulation can be subjected to sanction in accordance with applicable laws and regulations. However, the regulation does not clearly mention the reference of the laws and regulations in question. Thus, it seems that authorities may use various laws and regulations to ensnare violators of this rule.


 

 

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