“Indonesia Government regulates beneficial ownership principle in some regulations to create legal certainty. The regulations mentioned about the definition, limitation, also sanction for incompliance.”
According to The Financial Action Task Force (FATF), beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement. Reference to “ultimately owns or controls” and “ultimate effective control” refer to situations in which ownership/control is exercised through a chain of ownership or by means of control other than direct control.
Beneficial Owner Principle in Indonesia
Regulation regarding Beneficial Owner in Indonesia is often related with anti-money-laundering and prevention of terrorism financing. The principle was introduced in financial sector by the Bank of Indonesia back in 2010 in Bank of Indonesia Regulation (PBI) No. 12/20/PBI/2010 on The Implementation of Anti-Money-Laundering and Prevention of Terrorism Financing Programs for Rural Bank and Sharia Financing Bank (“PBI 12/2010”). Along the years it was amended until the latest amendment from Indonesian Financing Authority (OJK) in OJK Regulation No. 23/POJK.01/2019 on The Implementation of Anti-Money-Laundering and Prevention of Terrorism Financing Programs within the Financial Services Sector (“POJK 23/2019”). According to OJK, Beneficial Owner is anyone who:
a. is entitled to and/or receives certain benefits in relation to the account of the Customer;
b. is the ultimate owner of the funds and/or securities which are placed at PJK (ultimately own account);
c. controls the transactions of the Customer;
d. gives authority to perform transactions;
e. controls Corporation or other legal arrangements; and/or
f. is the ultimate controller of the transaction that is performed through a legal person or based on an agreement.
However, outside the financial scope, the Government also regulate the Beneficial Owner for Corporation, notwithstanding the specific sectors, by issuing President Regulation No. 13 of 2018 (“Perpres 13/2018”) on Implementation of Know-Your-Beneficial-Owner Principle by Corporation for the Purpose of Prevention and Eradication of Money Laundering and Terrorism Financing. In general, Beneficial Owner according to this regulations is an individual who may appoint or dismiss board of directors, board of commissioners, management, advisor, or supervisor in a Corporation, has the ability to control Corporation, is entitled for and/or obtain benefit from Corporation either directly or indirectly, is the actual owner of fund or Corporation shares and/or complies with the criteria as referred to in this Regulation. However, this regulation further stipulates the applicability of know-your-beneficial-owner principle in Limited Liability Company, foundation, association, cooperative, limited partnership, commercial partnership, and other forms of Corporation.
Determination of Beneficial Owner
According to Perpres 13/2018, Corporation must determine and disclose its Beneficial Owner. Such disclosure must be done upon the establishment of the Corporation or when there’s a change of beneficial owner in the Corporation. This could be done during submitting application for establishment, registration, validation, approval, or business licensing of Corporation; and/or even when the Corporation operates its business in general. Even if there are no changes in the beneficial owner, the Corporation is obligated to update their information annually. There are multiple criteria to determine a beneficial owner. For a limited liability company, Beneficial Owner refers to individual who satisfies any of these following criteria:
a. owns shares for more than 25% (twenty five percent) in the limited liability company as listed in the articles of association;
b. owns the voting rights for more than 25% (twenty five percent) in the limited liability company as listed in the articles of association;
c. receives profit for more than 25% (twenty five percent) of profit which is generated by limited liability company per year;
d. has the authority to appoint, displace or dismiss members of board of directors and members of board of commissioners;
e. has the authority or power to influence or control limited liability company without obtaining authorization from any party;
f. receives benefit from limited liability company; and/or
g. is the actual owner of fund for shares ownership of limited liability company.
For foundation, association, cooperative, limited partnership, commercial partnership, and other forms of Corporation, the criteria are more or less similar, which are:
a. owns assets/funding source/paid-up capital/value of goods for more than 25%;
b. receives profits or dividends for more than 25% per year;
c. has the authority to appoint or dismiss advisor, administrator, and supervisor;
d. has the authority or power to influence or control the foundation without obtaining authorization from any party;
e. receives benefit from the entity; and/or
f. is the actual owner of fund for funding sources of the entity.
Sanction for Incompliance
Perpres 13/2018 requires Corporation to verify and disclose information regarding the beneficial owner of their Corporation. However, based on the assessment of the submitted information, the authorized agency is also allowed to determine additional beneficial owner. The application of this principle is supervised by the authorized agency, namely:
a. Ministry whose duties and responsibilities are concerned with law sector for limited liability company, foundation, and association;
b. Ministry whose duties and responsibilities are concerned with cooperative and small and medium business sector for cooperative;
c. Ministry whose duties and responsibilities are concerned with trade sector for limited partnership, commercial partnership and other form of Corporation; and
d. Institution which has the authority for supervision and regulation in Corporation’s business sector.
The abovementioned authorized agency has the authority to do the followings:
a. determine implementing regulation or guidelines of this Presidential Regulation in accordance with its authority;
b. conduct audit to Corporation; and
c. organize other administrative activities within the scope of duty and responsibility in accordance with the provisions of this Presidential Regulation.
If the authorized agency during their supervision found out that the Corporation has not apply the know-your-beneficial-owner principle properly as stipulated by President Regulation No. 13 of 2018, the said company could be imposed with sanctions in accordance with the prevailing laws and regulations. However, this president regulation does not give any further explanation on the sanctions it is referring to. In 2019, The Minister of Law and Human Rights also issued a newer regulation to implement Perpres 13/2018, which is the Regulation of the Minister of Law and Human Rights No. 15 of 2019 on Implementing Procedures for the Application of Know-Your-Beneficial-Owner principles by Corporations (“Permenkumham 15/2019”) and Regulation of the Minister of Law and Human Rights No. 21 of 2019 on Surveillance Guidance on Implementing Procedures for the Application of Know-Your-Beneficial-Owner principles by Corporations (“Permenkumham 21/2019”). These regulations are meant to regulate further details on the implementation of Perpres 13/2018. The sanctions for incompliance of Know-Your-Beneficial-Owner Principles are stipulated in Permenkumham 21/2019. The sanctions include:
a. blocking the Corporation’s access to AHU online system; and
b. Suspension or revocation of business license.
Author: Benedictus Giovanni
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas e.g. Investment Regulatory.
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