Obligation to Report Beneficial Owners for Corporations in Indonesia

Currently, the Government of Indonesia sees various threats to the stability and integrity of the state’s economic and financial system, including by endangering the joints of social and state life based on Pancasila and the 1945 Constitution of the Republic of Indonesia. One of these threats is the crime of money laundering and the crime of financing terrorism. 

One of the efforts to prevent and eradicate money laundering and terrorism financing crimes which has also become an international standard is the existence of a mechanism to identify the Beneficial Owner of a company. The recognition of the Beneficial Owner is considered an effort to obtain current and accurate information about the company, and the unknown or inaccurate information of the Beneficial Owner is a matter that can be further examined.

Legal Basis for Reporting Beneficial Owner 

According to the Financial Action Task Force on Money Laundering (FATF) in Recommendation 24, it states that:

1. Countries should have mechanisms that identify and explain the different forms and basic characteristics of a legal entity in their country, the process for creating a legal entity and for obtaining and obtaining basic records and beneficiary information. This information must be publicly available;
2. Countries should use one or more of the following mechanisms to ensure that information on the beneficiary of a company is obtained from the company and is available in a certain place in their country, or otherwise can be determined at a certain time by the competent authority; and
3. Countries must ensure that beneficiary information is accurate.

The Indonesian government has enacted President Of The Republic Of Indonesia Regulation Number 13 Of 2018 On Implementation Of Know-Your-Beneficial-Owner Principle By Corporation For The Purpose Of Prevention And Eradication Of Money Laundering And Terrorism Financing (“Perpres 13/2018”). 

The purpose of making this regulation can be seen from 2 (two) sides, namely prevention and eradication. Prevention means that there is a need for protection for shareholders who invest in corporations to minimize money laundering or terrorism financing practices from the corporations that invest in them. In addition, the perpetrators of money laundering and corruption crimes will be complicated by this rule because corporations are required to provide transparent information about who the existing beneficial owner is. Meanwhile, in terms of eradication, it is an effort to protect corporations with good intentions and to make it easier for law enforcement officials to investigate criminal acts of money laundering and terrorism financing.

Regulation Of The Minister Of Law And Human Rights Of The Republic Of Indonesia Number 15 Of 2019 On Implementing Procedures For The Application Of Know-Your-Beneficial-Owner Principles By Corporations (“Permenkumham 15/2019”) provide a legal umbrella related to the delivery of information on the Beneficiary. Article 4 of the Permenkumham 15/2019 explains that:

1. Corporations must submit correct information regarding the Beneficial Owners of Corporations to the Minister.
2. Information regarding the Beneficial Owners of Corporations as referred to in paragraph (1) shall be submitted at: 
   • the application for Corporations’ establishment, registration and/or validation; or
   • the time the Corporations operate their business or activities.

Scope of Obligations and How to Report a Beneficial Owner in Indonesia

Corporations that have an obligation to apply the principle of recognizing Beneficial Owners in Indonesia are:

1. Limited Liability Companies;
2. Foundations;
3. Associations;
4. Cooperatives;
5. Limited Liability Partnerships; and
6. Firma Partnerships.

Submission of information on the Beneficiary at the time of application for establishment, registration, and/or approval of the Corporation as referred to in Article 4 (2) of the Permenkumham 15/2019 is carried out by a Notary. Therefore, at the time of establishment, it is important for the founders of the Corporation to provide a statement to the Notary regarding who the Beneficial Owners are.

Article 5 of the Permenkumham 15/2019 also explains that::

1. Submission of the information regarding the Beneficial Owners of Corporations at the application for Corporations’ establishment, registration and/or ratification as referred to in Article 4 paragraph (2) letter a shall be conducted through:
   1. submission of the Beneficial Owners of Corporations’ information in the event that the Corporations have already determined the Beneficial Owners of Corporations; or
   2. submission of the statement of willingness by Corporations to submit Beneficial Owners of Corporations’ information to the Minister in the event that the Corporations have not determined the Beneficial Owners of the Corporations. 
2. Corporations which have not submitted the information regarding the Beneficial Owners of Corporations as referred to in paragraph (1) letter b are obliged to determine and submit the information regarding the Beneficial Owners of Corporations in no later than 7 (seven) business days after the Corporations have obtained business licenses or registration certificate from the authorized institutions/agencies.

After the establishment is completed and the Corporation has run its business or activities, the method for submitting any changes or updates to information on the Beneficiary Owners is done by submitting any changes and/or updating of information on the Beneficiary Owners of the Corporation to the Minister. Later, the information will be submitted electronically through AHU Online, through the Beneficial Owner AHU website, which is located at https://bo.ahu.go.id/. 

Article 8 paragraphs (1) and (2) of the Permenkumham 15/2019 explain that:

1. Submission of information regarding the Beneficial Owners of Corporations at the time the Corporations operate their business or activities shall be conducted by:
   1. Notary;
   2. Founder or Executives of the Corporations; or
   3. Other parties who are granted authority by the Founder or Executives of the Corporations.
2. Submission of information regarding the Beneficial Owners of Corporations as referred to in paragraph (1) shall be conducted electronically via Online AHU.

Beneficial Owner Definition and Criteria

After knowing which Corporations are required to report a Beneficial Owner, it is important to understand what the definition of a Beneficial Owner is and the criteria that are met, for a party to be declared and reported as a Corporate Beneficial Owner.

Article 1 paragraph (2) of Perpres 13/2018 defines a Beneficial Owner as 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 Presidential Regulation.

For example, for a corporation in the form of a Limited Liability Company (PT), the beneficial owner is an individual who meets the criteria:

1. Owns shares for more than 25% (twenty five percent) in the limited liability company as listed in the articles of association; 
2. Owns the voting rights for more than 25% (twenty five percent) in the limited liability company as listed in the articles of association;
3. Receives profit for more than 25% (twenty five percent) of profit which is generated by limited liability company per year;
4. Has the authority to appoint, displace or dismiss members of board of directors and members of board of commissioners;
5. Has the authority or power to influence or control limited liability company without obtaining authorization from any party;
6. Receives benefit from limited liability company; and/or
7. Is the actual owner of fund for shares ownership of limited liability company

Individual who satisfies the criteria as referred to in paragraph (1) letter e, letter f, and letter g is an individual who does not comply with the criteria as referred to in paragraph (1) letter a, letter b, letter c and letter d.

Consequences of the Corporate Beneficial Owner Reporting

In the event that the Corporation reports the Beneficial Owner, there are several consequences that must be borne, one of which is the exchange of information regarding the Beneficial Owner. Articles 25, 26, and 27 of Perpres 13/2018 describe the exchange of information as follows:

1. Article 25
   1. Authorized Agency shall manage information on Beneficial Owner which is submitted by Corporation in Corporation Administration Services System.
2. Article 26 
   1. For the purposes of prevention and eradication of the criminal acts of money laundering and terrorism financing by Corporation, Authorized Agency may implement cooperation for exchanging information of Beneficial Owner with the requesting agency, either within national or international scope.
   2. Implementation of cooperation for exchanging information as referred to in paragraph (1) within national scope is conducted in accordance with laws and regulations.
   3. Implementation of cooperation for exchanging information as referred to in paragraph (1) within international scope is conducted by Authorized Agency in accordance with laws and regulations in foreign relation and international agreement sector.
3. Article 27
   1. Cooperation for exchanging information of Beneficial Owner between Authorized Agency and requesting agency as referred to in Article 26 paragraph (1) is in a form of requesting or providing information of Beneficial Owner in electronic or non-electronic manner. 
   2. Requesting agency as referred to in paragraph (1) consists of: 
      1. Law Enforcement Agency;
      2. Governmental Agency; and
      3. State or Other Jurisdiction Authority. 
   3. Providing information of Beneficial Owner in electronic manner by Authorized Agency as referred to in paragraph (1) is conducted through granting of access rights to the requesting agency. 
   4. Granting of access rights as referred to in paragraph (3) is based on the cooperation between Authorized Agency and requesting agency.

In addition to the agencies as mentioned above, the authorized agency can also carry out cooperation in exchanging information on the Beneficial Owner with the reporting party. The reporting party itself means any person who, according to the laws and regulations concerning the Prevention and Eradication of the Crime of Money Laundering, is required to submit a report to the Financial Transaction Reports and Analysis Center. The provision of such information must be in accordance with the provisions of the legislation. In addition, any request for information on the Beneficiary of the Beneficiary may request information on the Beneficiary from the competent authority as long as it is in line with the provisions of the laws and regulations regarding the disclosure of public information. This is also in line with Articles 11-14 of the Permenkumham 15/2019. In the event of a violation in the implementation of the principle of recognizing the beneficial owner of a corporation, the Minister through the Director General may impose sanctions in accordance with the provisions of the legislation.

To find out more about how to report Beneficial Owners for the company, you can consult us via ask@bplawyers.co.id or 082112341235.