Financial Crime World

Indonesia Tightens Grip on Financial Sector with New AML and CFT Regulations

The Indonesian Financial Services Authority (OJK) has issued a new regulation aimed at strengthening the integrity of the country’s financial services sector by implementing anti-money laundering (AML), counter-terrorist financing (CFT), and counter-proliferation financing (CPF) programs.

Background

The OJK Regulation No. 8 of 2023 replaces earlier regulations and aims to mitigate emerging risks in money laundering, terrorist financing, and weapons mass destruction proliferation. The regulation is designed to align with international principles, including those issued by the Financial Action Task Force on Money Laundering (FATF), as well as Indonesian laws and regulations.

Key Provisions

The new regulation introduces several key provisions, including:

  • Extension of AML-CFT and CPF program implementation to new financial institutions, such as:
    • Trusts
    • Securities crowdfunding
    • Fintech companies
    • Other types of financial institutions under OJK jurisdiction
  • Mandatory assessments, policies, and procedures for proliferation financing risk mitigation
  • Reporting suspicious transactions related to PF
  • Requirement for supporting professionals providing services to have implemented AML-CFT and CPF programs and be registered in GoAML, an information system managed by PPATK (the Indonesian Financial Intelligence Unit)
  • Preparation and submission of individual risk assessments
  • Countermeasures against high-risk jurisdictions designated by FATF

Customer Due Diligence and Third-Party Engagement

The regulation reaffirms the requirement for customer due diligence, including simplified CDD for low-risk areas. It also introduces revised requirements for engagement between financial institutions and third parties, as well as compliance management functions, independent internal audits, and pre-employee screening procedures.

Administrative Sanctions

The regulation provides for administrative sanctions that are more effective, proportional, and dissuasive, including increased maximum fines for AML-CFT and CPF violations. It also aligns with Indonesia’s Law on Job Creation by recognizing a new entity, Single Partner Limited Company (Perusahaan Perseorangan).

Transition Period

Financial institutions have been given a six-month transition period to implement the necessary adjustments following the issuance of the regulation. The OJK has emphasized its commitment to supporting Indonesia’s financial sector and ensuring that it remains robust against money laundering, terrorist financing, and proliferation financing risks.

By implementing these new regulations, the OJK aims to strengthen the integrity of Indonesia’s financial services sector and align with international standards for combating money laundering, terrorist financing, and proliferation financing.