Comprehensive AML Laws and Regulations: Indonesia

Indonesia has developed a comprehensive framework to combat money laundering (ML) and terrorist financing (TF), aligning with international standards. These regulations cover various sectors, including banking, insurance, asset management, wealth management, payment processors, fintech, lending, and crypto, ensuring the integrity of its financial system.

Key Laws and Guidelines

• Law No. 8 of 2010 on the Prevention and Eradication of Money Laundering: Law No. 8 of 2010 is the principal legislation for combating money laundering in Indonesia. The law mandates financial institutions to implement customer due diligence, maintain records, and report suspicious transactions. It also outlines the procedures for the confiscation of proceeds derived from money laundering activities.
• Law No. 9 of 2013 on the Prevention and Eradication of Terrorist Financing: This law criminalizes the financing of terrorism and mandates financial institutions to report transactions suspected to be linked to terrorist activities. It complements Law No. 8 of 2010 by addressing the specific issue of terrorist financing.
• Bank Indonesia Regulations: Bank Indonesia, the central bank, issues regulations to support compliance with AML/CFT laws. These regulations provide specific instructions for various sectors, including banking, insurance, and fintech, on implementing effective AML/CFT measures. They also outline the responsibilities of financial institutions in conducting customer due diligence and reporting suspicious activities.
• Financial Services Authority (OJK) Regulations: The OJK issues regulations for non-bank financial institutions, including asset management and insurance companies, to ensure compliance with AML/CFT standards. These regulations mandate the implementation of robust AML programs, customer due diligence, transaction monitoring, and reporting of suspicious activities.
• Ministry of Finance Regulations: The Ministry of Finance issues guidelines for sectors such as real estate, dealers in precious metals, and other non-financial businesses and professions. These guidelines require entities to implement AML measures, conduct customer due diligence, and report suspicious transactions.

Regulatory Bodies

• Indonesian Financial Transaction Reports and Analysis Center (PPATK): The PPATK is the central agency responsible for receiving, analyzing, and disseminating reports on suspicious transactions. It coordinates AML efforts across various sectors and collaborates with international counterparts to enhance AML/CFT frameworks.
• Bank Indonesia: Bank Indonesia oversees the implementation of AML regulations within the banking and financial sectors. It issues directives and guidelines to ensure compliance with AML/CFT standards and conducts regular inspections to enforce these regulations.
• Financial Services Authority (OJK): The OJK regulates non-bank financial institutions, ensuring that they implement effective AML measures. It issues guidelines for customer due diligence, transaction monitoring, and reporting of suspicious activities within the non-bank financial sector.
• Ministry of Finance: The Ministry of Finance oversees the implementation of AML regulations for non-financial businesses and professions, including real estate and precious metals. It issues guidelines and conducts inspections to ensure compliance with AML/CFT standards.
• Indonesian Police: The Indonesian Police are responsible for investigating and prosecuting money laundering offenses. They collaborate with other Regulatory Bodies and law enforcement agencies to enforce AML laws and prevent financial crimes.

History of Regulations

• 2010: Enactment of Law No. 8 on the Prevention and Eradication of Money Laundering.
• 2013: Enactment of Law No. 9 on the Prevention and Eradication of Terrorist Financing.
• 2014: Establishment of the Financial Transaction Reports and Analysis Center (PPATK).
• 2016: Introduction of regulations by Bank Indonesia for banking institutions to enhance AML compliance.
• 2017: Issuance of detailed AML guidelines for non-bank financial institutions by the Financial Services Authority (OJK).
• 2019: Implementation of AML guidelines for non-financial businesses and professions by the Ministry of Finance.

Sector-specific Regulations

• Banking and Financial Institutions: Regulated by Bank Indonesia, the banking and financial institutions sector is required to implement robust AML/CFT programs, including strict KYC protocols, continuous monitoring of transactions, and the reporting of suspicious activities. Banks and financial institutions must also maintain records for a minimum of five years.
• Insurance: The insurance sector, overseen by the Financial Services Authority (OJK), mandates companies to implement effective AML measures. This includes customer due diligence, transaction monitoring, and the reporting of suspicious activities to the PPATK.
• Asset Management and Wealth Management: Regulated by the Financial Services Authority (OJK), asset management and wealth management firms must adhere to stringent AML regulations. These firms are required to implement robust AML programs, conduct thorough customer due diligence, and monitor transactions for suspicious activities. They must also report any suspicious transactions and maintain detailed records.
• Payment Processors and Fintech: Payment processors and fintech companies are subject to regulations issued by Bank Indonesia. These entities must implement comprehensive AML measures, including customer verification, real-time transaction monitoring, and the reporting of suspicious transactions. They must also comply with guidelines issued by the OJK for non-bank financial activities.
• Lending: Lending institutions, both traditional and fintech-based, must adhere to AML regulations set by Bank Indonesia. These institutions are required to conduct customer due diligence, monitor transactions for suspicious activities, and report any suspicious transactions to the PPATK. They must also maintain records of all transactions and customer information.
• Crypto: The crypto sector is regulated under guidelines issued by Bank Indonesia. Virtual asset service providers (VASPs) are required to implement robust AML measures, including customer verification, transaction monitoring, and the reporting of suspicious activities. VASPs must also maintain detailed records of all transactions.