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Compliance Regulations for Financial Institutions in Indonesia Take Effect

Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or OJK) has issued Regulation No. 3 of 2024 on the Implementation of Technological Innovation in the Financial Sector, which came into effect on February 19, 2024, and replaces OJK Regulation No. 13/POJK.02/2018 regarding Digital Financial Innovation.

Objectives

The regulation aims to enhance OJK’s regulatory and supervisory roles in overseeing financial technology (FinTech) innovation by implementing the prudential principle to uphold financial system stability, market integrity, and consumer protection.

Requirements for Financial Technology Innovation Providers (FIPs)

  • FIPs must operate as financial services institutions or other entities involved in financial activities.
  • FIPs must be legally established as limited liability companies or other appropriate legal entities.
  • FIPs are required to be actively involved in technology-driven innovation affecting products, services, activities, and business models within the digital financial ecosystem.

Framework for Regulation and Supervision

The regulation sets out a framework for the regulation and supervision of FinTech implementation, including:

  • Creating a testing and development environment
  • Licensing
  • Monitoring
  • Evaluation
  • Financial education
  • Consumer protection
  • Personal data protection
  • Institutional aspects
  • FinTech activities conducted by third-party supporters

Responsibilities of Registered FIPs or Those with a Valid Business License

  • Join the designated association of FIPs appointed by OJK.
  • Independently conduct evaluations.
  • Have human resources with expertise in both information technology and finance.
  • Use tools to streamline OJK’s supervisory processes.
  • Submit regular reports.
  • Develop strategic plans for electronic systems.
  • Establish data centers and disaster recovery facilities within Indonesia.
  • Uphold personal data integrity.
  • Maintain confidentiality of consumer data.
  • Prioritize good institutional governance principles.
  • Implement programs to combat money laundering, terrorist financing, and the proliferation of weapons of mass destruction.

Conclusion

The regulation aims to promote a robust FinTech ecosystem while ensuring compliance with regulatory requirements and protecting consumers’ interests. Financial institutions operating in Indonesia are advised to familiarize themselves with the new regulations to ensure continued compliance and stability in the financial sector.