Implementation of the Know-Your-Beneficial-Owner Principle by Corporations for the Prevention and Eradication of the Criminal Acts of Money Laundering and Terrorism Financing

The government is currently discussing the Draft Presidential Regulation on the Implementation of Know-Your-Beneficial-Owner Principle by Corporations for the Prevention and Eradication of the Criminal Acts of Money Laundering and Terrorism Financing (“Draft Regulation”), which is aiming to establish a mechanism whereby corporations can implement the know-your-beneficial-owner principle, with the ultimate goal of eradicating and preventing any activities which relate to money laundering and/or terrorism financing.[1]
 
In order to achieve said objective, the Draft Regulation stipulates a number of provisions which relate to the following matters:
 

1.	The obligation for corporations to have knowledge of their beneficiary owners, which is known as the know-your-beneficiary-owner principle;
2.	Identification and verification;
3.	The implementation of said principle;
4.	Supervision measures; and
5.	Exchanges of information.

 
Due to the broad scope of the Draft Regulation, this edition of Indonesian Legal Brief will not discuss the topic outlined in point (4) above.
 
The Know-Your-Beneficial-Owner Principle

The Draft Regulation basically mandates that all corporations should implement the know-your-beneficial-owner principle (“Principle”).[2] Corporations themselves may take any of the following forms (collectively referred to as “Corporations”):[3]
 

1.	Limited-liability companies;
2.	Foundations;
3.	Associations;
4.	Cooperatives;
5.	Limited partnerships;
6.	Firmapartnerships; or
7.	Other forms of corporation.

 
For the purpose of implementing the abovementioned principle, all Corporations must determine at least one beneficial owner, specifically a person that: 1) May appoint or terminate any of the Corporation’s directors or administrators; 2) Possesses the authority to take control of the Corporation; 3) Is entitled to and/or does receive benefits from the Corporation; 4) Is the real owner of the Corporation’s funds or shares; and/or 5) Meets the criteria of a beneficial owner, according to the Draft Regulation.[4]  
 
Moreover, central or regional government institutions which have the authority to register, validate, dissolve or supervise Corporations (“Authorized Officials”) are also allowed to determine other beneficial owners aside from the ones which are determined by the relevant Corporations, based on assessments of the following:[5]
 

1.	The results of any auditing activities undertaken by Authorized Officials, based on the Draft Regulation;
2.	Information from any other government/private institutions which: a. Have the responsibility to manage data and/or information pertaining to  beneficial owners; and/or b. Receive reports containing information pertaining to beneficial owners from certain professions;
3.	Other information supplied by credible sources.

 
Identification and Verification
 
The Draft Regulation requires all Corporations to appoint a person-in-charge who will be responsible for implementing the Principle, as well as for providing information which relates to the relevant Corporation and beneficial owners upon a request being filed by either Authorized Officials and/or law-enforcement agencies.[6]
 
The Principle’s implementation process consists of two stages, specifically the identification and verification stages.[7] The identification stage is to be undertaken through the collection of information pertaining to the relevant beneficial owner. Any such information should at least address the following matters:[8]
 

1.	Full name;
2.	Identity numbers, as found on a residential card, driving license or passport;
3.	Date and place of birth;
4.	Nationality;
5.	Address, as written on the relevant identity card;
6.	Address in the relevant country of origin (for foreigners);
7.	Taxpayer-identification number; and
8.	Relationship with the Corporation in question.

 
Note that the abovementioned information must be complemented by relevant supporting documents.[9]
 
The Corporation is then required to pass on this information to the relevant Authorized Officials, along with a letter affirming the accuracy of the information which is being submitted. In it is deemed necessary, Authorized Officials may undertake a verification process in order to assess the conformity between the submitted information and the data which is set out in any supporting documents.[10]
 
Implementation of the Principle
 
The Draft Regulation requires Corporations to implement the Principle from the earliest possible stages (i.e. from the time of their establishment, registration and/or validation) and that the Principle should continue to be implemented during the entire period of their operations.[11] During a Corporation’s early stages, it is required to provide information which pertains to its beneficial owners, if the Corporation in question has already determined the relevant beneficial owners.[12]
 
However, if a Corporation has not yet determined said beneficial owners, then it must submit a letter stating its willingness to provide information which pertains to its beneficial owners to the relevant Authorized Officials as soon as it becomes available. All Corporations, however, are required to provide the relevant beneficial-owner information to Authorized Officials within seven business days of them securing a business license/registration certificate from the relevant authorities.[13]
 
Note that the abovementioned information or statement letter is to be submitted via the Corporation Administration Services System (“Administration System”).[14]
 
Meanwhile, the implementation of the Principle during a Corporation’s day-to-day operations is to be undertaken through the reporting of any single changes which are made to any information which pertains to beneficial ownership (if any occur) to the relevant Authorized Officials via the Administration System. Such reports must be submitted within three business days of said changes occurring.[15]
 
Corporations are also required to update any information which relates to their beneficial owners on an annual basis.[16] Moreover, Corporations as well as their notaries or proxies, are required to administer any documents which relate to their beneficial ownership for at least five years from their date of establishment or validation. Meanwhile, if a Corporation is dissolved, then the liquidator in question is required to administer such documents for a period of at least five years from the relevant date of dissolution.[17]
 
Exchanges of Information
 
The Draft Regulation allows Authorized Officials to cooperate with each other and to exchange any information which pertains to a Corporation’s beneficial owners with any domestic or international institutions which request such information, if the Corporation in question is alleged to have engaged in criminal activity relating to money laundering and/or terrorism financing. Such institutions may include the following parties:[18]
 

1.	Law-enforcement institutions;
2.	Governmental institutions;
3.	Any parties which are empowered under the relevant laws and regulations relating to the crimes of money laundering and/or terrorism financing to submit reports to the Indonesian Financial Transaction and Analysis Centre (i.e. reporting parties);[19] and
4.	Authorized officials from other countries.

 
Moreover, the Draft Regulation also authorizes any parties to request information which relates to beneficial owners from the relevant Authorized Officials, in accordance with the various procedures stipulated under the relevant laws and regulations on the transparency of public information (e.g. Law No. 14 of 2008 on the Freedom of Information).[20]
 
The Draft Regulation is currently being deliberated by the government and may become subject to further changes. _AP