Reporting Requirements for Corporations in the Implementation of Know-Your-Beneficial-Owner Principle
Following the enactment of Presidential Regulation No. 13 of 2018 dated March 5, 2018 on Implementation of Know-Your-Beneficial-Owner Principle by Corporations for the Prevention and Eradication of the Criminal Acts of Money Laundering and Terrorism Funding (“PR 13/2018”), the Minister of Law and Human Rights (the “Minister”) issued his Regulation No. 21 of 2019 on Guidelines for the Supervision of the Implementation of Know-Your-Beneficial-Owner Principle (the “Regulation”). The Regulation will take effect as of December 27, 2019. The Regulation requires corporations to take certain further action based on the supervisory result and report the fulfillment such actions as its implementation of the Know-Your-Beneficial-Owner principle.
In the spirit of eradicating money laundering and terrorism funding as well as in the application of the Know-Your-Beneficial-Owner principle, the Regulation stipulates that the Minister through the Director General of General Law Administration (the “Director General”) to supervise the implementation of PR 13/2018. Further, the Regulation requires corporations to take further actions based on the recommendation of the supervisory result as well as to report the fulfilment of the recommendation to the Minister through the Director General.
Any failure to fulfill the recommendation will result in consequences such as (i) blocking of the corporations’ access to the Online General Law Administration (Administrasi Hukum Umum Online or the “Online AHU”); and/or (ii) the Minister’s recommendation to suspend, revoke, or cancel a corporations’ business license to the authorized agency (i.e., an agency, whether at the central or local level, that has the authority to register, authorize, approve, notify, issue business licenses to, or dissolve a corporation, or an agency that is vested with supervisory and regulatory powers in respect of a corporation’s business).
The Regulation defines Beneficial Owner as an individual who (i) may appoint or dismiss any of a corporation’s board of directors, board of commissioners, administrators, or supervisors of such corporation, (ii) possesses the authority to take control of such corporation, (iii) is entitled to receive, and/or does actually receive, benefits from such corporation, directly or indirectly, (iv) is the true owner of such corporation’s funds or shares, and/or (v) meets certain criteria of a beneficial owner under the laws and regulations.
More elaborated specifications of Beneficial Owners are stipulated in PR 13/2018. For example, one of the criteria for the Beneficial Owner of a limited liability company is any individual who owns at least 25% of corporations’ funds or shares. PR 13/2018 targets an individual as the Beneficial Owner of a corporation. However, in practice non-individuals, e.g., another corporation or a legal entity may be reported as a Beneficial Owner as well. On the other hand, a corporation is defined as an organized group of people or assets, whether or not established as a legal entity, which includes:
- limited liability companies;
- limited partnerships;
- firms; and
- other forms of corporations.
♦ Supervisory Implementation
The Director General can supervise the application of the know-Your-Beneficial-Owner by:
- enacting any regulation or any guideline as the implementation of laws and regulations concerning the application of the Know-Your-Beneficial Owner principle;
- conducting an audit on a corporation; and
- carrying out other administrative actions within its duties and responsibilities.
The supervision is implemented in four steps, as follows:
- corporations shall complete a questionnaire electronically through the Online AHU every December;
- a risk assessment of money laundering and terrorism financings on corporations;
- the implementation of supervision based on the result of the risk levels; and
- the implementation of the Minister’s recommendation by corporations as the result of the supervision.
Steps a and b are conducted only electronically through the Online AHU while steps c and d are conducted electronically and non-electronically through the Online AHU. The Regulation describes that this supervision procedure will be carried out through a process as specified in the Annex of the Regulation. However, to date, the Minister has not issued the Annex of the Regulation. We understand that the questionnaire mentioned in step a will be available in a soft copy form.
Corporations are first obligated to complete a questionnaire concerning information related to its Beneficiary Owner including the most updated data. This questionnaire shall then be submitted through the Online AHU every December each year. Even though the Regulation is silent about the procedure for this Online AHU submission, we understand that the submission will be conducted by a notary.
November 11, 2019
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- November 11, 2019