Established business entities in Indonesia must identify the information on their beneficial owner and make it publicly accessible.
The president of Indonesia on March 1 enacted the Presidential Regulation No. 13 of 2018 on Implementation of Principles for Identifying the Beneficial Owner of Corporation in the Framework of Preventing and Combating Money Laundering and Financing of Terrorism Criminal Offence (PR No. 13 of 2018), which came into effect on 5 March 2018.
The enactment of PR No. 13 of 2018 demonstrates Indonesia’s commitment to combating money laundering and terrorist financing and is a further step taken by Indonesia to push for membership in the Financial Action Task Force (FATF or Group d’action financiere (GAFI)), an intergovernmental body established in 1989 which sets international standards of regulatory and operational measures for combating money laundering and terrorist financing crimes. The latter purpose is evident when looking at the substance of PR No. 13 of 2018 which is in line with the FATF/GAFI recommendations, particularly with respect to transparency and disclosures of beneficial ownership of legal persons or legal arrangements.
PR No. 13 of 2018 contains provisions empowering the relevant competent authorities in Indonesia to obtain and enforce adequate transparency as to the beneficial owner information of any types or forms of business entities in Indonesia. In summary, PR No. 13 of 2018 deals with the following matters.
BENEFICIAL OWNER IS A NATURAL PERSON
PR No. 13 of 2018 stipulates that the beneficial owner must be the natural person(s), either Indonesian or non-Indonesian citizen, who ultimately owns and controls business entities (of any form) in Indonesia including
- limited liability company;
- limited partnership;
- firm; and
- other forms of business entities applicable in Indonesia.
MEASURES OF BENEFICIAL OWNER
In identifying the beneficial owner(s), PR No. 13 of 2018 implements measures, which are, among others, based on (i) a specific shareholding percentage threshold (i.e., any natural person owning more than 25% of shares in a limited liability company or more than 25% of ownership over a business entity in Indonesia); (ii) ultimate authority and power to change the management of the business entities; or (iii) ultimate owner of the capital in the business entities.
For instance, in a limited liability company (Perseroan Terbatas – PT), the beneficial owner is a natural person who falls within the following criteria:
- Being a shareholder representing more than 25% of total shares in a PT as documented in the articles of association and recorded in the shareholders’ register
- Being the shareholder representing more than 25% of valid voting rights in a PT as documented in the articles of association and recorded in the shareholders’ register
- Being the natural person receiving more than 25% of total annual profits of a PT
- Being the natural person authorized to appoint, replace, or remove a member of the board of directors or the board of commissioners of a PT
- Being the natural person authorized to control or manage a PT without prior approval from any other parties
- Being the natural person receiving the benefits from a PT
- Being the ultimate owner of the funds or capital of a PT
PR No. 13 of 2018 applies a mandatory compliance approach in requiring compliance with the principles for identifying the beneficial owner(s). Every business entity in Indonesia must determine at least one natural person as the beneficial owner. The management of the business entity or its representatives (e.g., notary) must then submit such beneficial owner information, including supporting documents and a statement letter on the truth of the beneficial owner information, to the competent authorities.
The beneficial owner information must contain, at a minimum, (i) full name; (ii) identity or passport number; (iii) birth place and date; (iv) citizenship; (v) address as stated in the identity card; (vi) overseas address where the beneficial owner is a non-Indonesian citizen; (vii) taxpayer identification number; and (viii) a description of the connection between the business entity and the beneficial owner.
MECHANISM TO DETERMINE THE BENEFICIAL OWNER
- The appointed officer of the business entity is required to carry out appropriate identification and verification checks to determine who the beneficial owner is. The competent authorities may also determine if there are other beneficial owners
- The identification process is to be carried out by collecting the requisite beneficial owner information during the business entity’s period of establishment, its registration as a business entity, and during business activities of the business entity
- Following the verification by the appointed officer, the beneficial owner information and the supporting documents will be submitted to the competent authorities through the business entity administration system
- For a newly established business entity, an initial submission of the beneficial owner information should be made no later than seven working days after such business entity obtains its relevant business license or registration certificate
- Any changes to the beneficial owner information must be submitted no later than three working days from the effective change of the beneficial owner information
- Every business entity must maintain and update its beneficial owner information on an annual basis
- Business entities already established before PR No. 13 of 2018 came into effect must comply with the obligations to identify the beneficial owner no later than one year after the effective date of PR No. 13 of 2018
- Any person may submit a request for beneficial owner information to the competent authorities, subject to relevant conditions as stipulated in the prevailing regulations relating to the disclosure of public information
- In order to prevent and combat money laundering and financing of terrorism, the competent authorities may also enter into information exchange and cooperation arrangements with local and international parties. For international parties, these arrangements will be implemented based on foreign affairs regulations and pursuant to relevant international agreements
SANCTIONS AND SUPERVISION
- The competent authorities will supervise the implementation of PR No. 13 of 2018 by providing implementing regulations and, where necessary, through the conduct of audits on compliance by the business entity of PR No. 13 of 2018
- Supervision may also be carried out through cooperation with the Indonesian Financial Transactions Reports and Analysis Centre, a government agency responsible for financial intelligence
- Noncompliance with PR No. 13 of 2018 could result in sanctions as stipulated in the prevailing laws and regulations
Only time will tell how PR No. 13 of 2018 will be successful in preventing the money laundering and terrorist financing crimes in Indonesia.