Financial Crime World

Indonesia’s Financial Regulatory Landscape: A Complex Web of Laws and Requirements

Overview

The financial regulatory landscape in Indonesia is a complex web of laws and requirements that can be daunting for both domestic and international financial institutions operating in the country.

At the heart of Indonesia’s financial regulatory framework are two main authorities:

Bank Indonesia (BI) and Otoritas Jasa Keuangan (OJK)

  • Bank Indonesia (BI): The country’s central bank, responsible for regulating banks and maintaining monetary stability.
  • Otoritas Jasa Keuangan (OJK): The Financial Services Authority, overseeing all financial institutions, including banks, insurance companies, and securities firms.

Licensing and Registration

To operate in Indonesia, financial institutions must obtain various licenses and approvals from both BI and OJK. For instance:

Examples of Licenses and Approvals

  • Mutual Fund Agent Sales Representative License: Required for individuals representing securities companies in performing their services.
  • Recordation Regime: Fintech companies are subject to this regime, allowing them to operate before obtaining specific licenses.

Regulatory Requirements

The regulatory requirements for financial institutions are numerous and stringent. These include:

Key Requirements

  • Capitalization and shareholding requirements
  • Licensing and registration
  • Good corporate governance
  • Level of soundness
  • Fit and proper test requirements
  • Data privacy and protection
  • Risk management
  • Consumer protection
  • Anti-money laundering and combating the financing of terrorism, among others.

Self-Regulatory Bodies and Designated Professional Bodies

In addition to these regulatory requirements, financial institutions must also comply with rules and regulations set by:

Examples of Self-Regulatory Bodies and Designated Professional Bodies

  • Indonesian Joint Funding Fintech Association: Peer-to-peer lending companies must adhere to its code of conduct.
  • Indonesian Stock Exchange: Securities trading is governed by its policies, rules, and procedures.

Conclusion

The complexity of Indonesia’s financial regulatory landscape can be overwhelming for foreign financial institutions entering the market. However, with a thorough understanding of the laws and requirements, they can navigate the system successfully and operate effectively in this growing economy.

Correct as of: January 21, 2021