New OJK Regulation on Anti-Money Laundering and Prevention of Terrorism Funding in Financial Services Sector
The Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) issued OJK Regulation No. 23/POJK.01/2019 on September 30, 2019 (“POJK 23/2019”) to amend several provisions of the previous OJK Regulation No. 12/POJK.01/2017 on the Implementation of Anti-Money Laundering and Prevention of Terrorism Funding in Financial Sector Programs (“POJK 12/2017”).
POJK 23/2019 does not provide significant change on the principles of POJK 12/2017, instead, POJK 23/2019 provides further clarification on several provisions and additional requirements to the existing provisions. For example, POJK 23/2019 now clearly (i) provides the types of organization considered as “corporations”, which had not been defined in POJK 12/2017, to include among others, company, foundation, cooperative, religious organization, political party, non-government organization or non-profit organization, and social organization; (ii) requires Financial Services Providers (“FSPs”) to do risk assessment, which previously did not specifically refer to any regulation, to currently refer to Indonesia’s Money Laundering Act and Terrorism Funding Act risk assessment both sectoral and nationally; and (iii) issuing new requirement for FSPs to take into account the materiality and risk level in updating obtained customer data.
Most importantly, POJK 23/2019 now includes prevention against Proliferation of Weapons of Mass Destruction (“PWMD”), allows face-to-face customer verification to be conducted by third parties, revoking customer due diligence exemption for low risk customers, as well as requires all FSPs (remitting, intermediary, and receiving banks) to conduct verification of transaction against a maintained blacklist of customers. Further elaborations are to be provided, as follows.
♦ Proliferation of Weapons of Mass Destruction
In addition to money laundering and terrorism funding, POJK 23/2019 now includes prevention against PWMD. PWMD means dissemination of nuclear, biology, and chemical weapons. This addition serves as a form of implementation of the Resolutions on the prevention of the Proliferation of Weapons of Mass Destruction of the United Nations Security Council, to which Indonesia has been elected, on 8 June 2018, as a non-permanent member for the period 2019-2020, along with Germany, South Africa, Belgium and the Dominican Republic. POJK 23/2019 was issued to follow up on the Joint Regulation issued by the Minister of Foreign Affairs of the Republic of Indonesia, the Chief of the Indonesian National Police, the Head of the Financial Transaction Reports and Analysis Center, and the Head of the Nuclear Power Supervisory Agency on Inclusion Identity of Person or Corporations in the List of Funding for the Proliferation of Weapons of Mass Destruction, to maintain world security and peace which is the national goal of Indonesia.
POJK 23/2019 obliges FSPs to have an adequate risk management system; refuse to establish any banking relationship; reject, and cancel any transaction with customers listed in the PWMD list. It also requires FSPs to maintain a list of PWMD funding, identify and verify periodically the PWMD funding list. Once a customer or any information is identified to be listed in the PMWD funding list, FSPs shall immediately block the transaction. FSPs are also prohibited from providing, giving, or lending any fund to or for the interest of a person or a corporation which identity is listed in the PWMD funding list. FSPs may obtain the PWMD list from the Center of Financial Transaction Reporting and Analysis (Pusat Pelaporan dan Analisis Transaksi Keuangan or “PPATK”); resolutions of the United Nations’ Security Council; as well as other commonly used sources.
♦ Face-to-face Verification by Third Parties
POJK 23/2019 now allows such face-to-face verification process (e.g., through video banking on the FSP’s equipment) to be conducted by electronic means owned by third parties. Initially, POJK 12/2017 allowed FSPs to conduct such face-to-face verification process to facilitate a live and online banking services between the potential customer and FSP officer only through the FSP’s own equipment. Nevertheless, such third parties shall first obtain OJK’s approval, which procedure will be further regulated under another OJK Regulation.
♦ Customer Due Diligence and Enhanced Due Diligence
POJK 23/2019 no longer allows low risk Beneficial Owner to be exempted from the Customer Due Diligence (“CDD”) requirement, as previously was provided by POJK 12/2017. Further, instead of treating relevant authority’s confirmation and clarification as a source of information in conducting an Enhanced Due Diligence (“EDD”) for high risk customers, POJK 23/2019 now requires FSPs to obtain confirmation and clarification from the relevant authority in addition to the result of their EDD.
While imposing more stringent requirement upon the obligation of FSPs to conduct CDD and EDD, POJK 23/2019 relaxes the identification and verification requirement for government-related institutions.
For Corporate Beneficial Owners, POJK 12/2017 requires FSPs to identify and verify, among others, the legal relationship between the customer or potential customer and the Corporate Beneficial Owner evidenced by an appointment letter, an agreement, a power of attorney, or another form. Government institutions, state-owned enterprises, or public companies acting as Beneficial Owners are exempted from this requirement. However, under the current POJK 23/2019 this exemption applies not only for Corporate Beneficial Owners, but also to all types of Beneficial Owners, including trust and other legal arrangements.
♦ Fund Transfer and Management of Information
POJK 23/2019 requires FSPs to maintain a blacklist of alleged terrorist, terrorist organizations, as well as a blacklist of PWMD funding. FSPs are to periodically conduct identification and ensure names of customers that have similarities to names and other information listed in the blacklist. Any similarity of name found will oblige the FSP to verify the identity of the customer with other relevant information. This obligation now applies equally to all FSPs, including Remitting Bank, Intermediary Bank, as well as Recipient Bank.
For fund transfer, POJK 23/2019 requires Intermediary Banks to manage the information received from the Transmitting Bank or another Intermediary Bank for at least 5 (five) years after the receipt of the fund transfer order. Recipient Banks are also required to verify the identity of the recipient customer if such identity had not been previously verified.
In the event that any bank receives an offshore fund transfer order without the required information, in addition to refusing to conduct the fund transfer, under POJK 23/2019, not only the Remitting Bank but also the Intermediary Bank are required to take adequate measures, in line with straight-through processing, to identify such fund transfer. In such case, a Recipient Bank is also obliged to take adequate measures to identify the fund transfer, including by monitoring on or after the fund transfer is conducted. Moreover, FSPs shall now manage and submit any data, information and/or documents demanded by the OJK or other relevant authority as soon as possible, within 3 (three) business days at the latest upon receiving such demand from the OJK or other relevant authority.
♦ Reporting and Sanctions
POJK 12/2017 determines that FSPs shall submit to the OJK various documentations with regard to their anti-money laundering and prevention of terrorism funding effort, including implementation action plan; policy adjustments and implementation procedures of the anti-money laundering and prevention of terrorism funding programs; data update plan report; as well as data update realization report. In POJK 23/2019, OJK requires that the data update realization report shall be submitted annually, within 1 (one) month at the latest after the end of the reporting period.
POJK 23/2019 also rearranges the classification of FSPs to be imposed by fines in case of late report submission. In light of this, now insurance brokers and pawn companies are classified together with rural banks, sharia rural financing banks, multi-finance companies, and venture capital companies which may be exposed by a sanction of Rp50,000 (fifty thousand Indonesian Rupiah) per day to a maximum of Rp5,000,000 (five million Indonesian Rupiah) in case of late submission.
In addition to the above, POJK 23/2019 imposes sanction up to Rp5,000,000,000 (five billion Indonesian Rupiah) for individuals or up to Rp15,000,000,000 (fifteen billion Indonesian Rupiah) for corporations violating the provisions of POJK 23/2019 aside from late report submission, such as failure to maintain and update a blacklist of terrorist, terrorist organizations, and PWMD funding or failure to conduct appropriate CDD and EDD. Finally, POJK 23/2019 provides that this sanction would also be applicable for any violation towards the implementation of anti-money laundering and prevention of terrorism funding programs in the financial services sector prior to the enactment of POJK 12/2017 applicable when the violation were conducted.
October 31, 2019
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- October 31, 2019