Protecting Indonesian P2P Lending From Money Laundering
The financial technology (fin-tech) industry has increased for the past few years in Indonesia. It is shown by Morgan Stanley’s research which stated that the amount of transaction in fin-tech was estimated to reach up to US $ 50 billion in 2027. The current rising sector in fin-tech is Peer to Peer (P2P) Lending, its transaction alone is estimated to reach 40T rupiah this year according to the Indonesian Joint Funding Fintech Association (Asosiasi Fintech Pendanaan Bersama Indonesia/AFPI).
However, behind the skyrocketing growth, there is a risk of ‘dirty’ funds entering through P2P Lending. P2P Lending has the potential to become a ‘washing machine’ for illicit money because the process tends to demand easy requirements for prospective customers. Also, does P2P Lending track the source of funds of potential customers like conventional lending processes? Such concessions tend to encourage financial inclusion to increase transactions, but they carry along with them the inherent risk of money laundering.
To mitigate risks and be compliant to Bank Indonesia’s Regulation No.14 / 27 / PBI / 2012 concerning the Implementation of the Anti-Money Laundering and the Prevention of Terrorism Financing Program (APU PPT), the OJK as a supervisor and regulator of financial service activities in the banking and non-banking sectors have released the OJK Regulation Number 12/2017 regarding the application of Anti-Money Laundering and Prevention of Terrorism Funding (APU PPT) program in the financial services sector.
In the regulation, the OJK requires Financial Service Actors (Pelaku Jasa Keuangan/PJK), including P2P Lending, to conduct due diligence on potential customers or Customer Due Diligence (CDD). CDD is carried out by identifying, verifying, and monitoring potential customers or/and customers to ensure that transactions are following their profiles. In practice, P2P Lending can use the services of third parties who understand the principles of due diligence. To regulate in more detail the application of CDD, OJK released SEOJK Number 18 /SEOJK.02/2017 regarding Information Technology Risk Management and Management in Information Technology-Based Lending and Borrowing Services.
In addition to conducting CDD, P2P Lending is also required to report financial transactions to the OJK regularly, as stated in the OJK Regulation Number 77/2016 and Number 37/2018.
The implementation of PPU APU aims to protect P2P Lending and customers from money laundering while still encouraging public financial inclusion. This program will be mandatory in 2021.